StoneX Group Inc.

Good day, and thank you for standing by. Welcome to the StoneX Group Incorporated Q3 FY26 earnings conference call. At this time, all participants are in a listen-only mode. After this speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 1-1 on your telephone, and you will hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Bill Dunaway, CFO. Please go ahead, Bill.

Good morning and welcome to our earnings conference call for our quarter ended June 30th, 2026, our third quarter of fiscal 2026. After the market closed yesterday, we issued a press release reporting our results for the quarter and this press release is available on our website at www.stonex.com as well as a slide presentation which we will refer to during this call. The presentation and an archive of the webcast will also be available on our website after the call's conclusion. Before getting underway, we are required to advise you, and all participants should note, that the following discussion should be considered in conjunction with the most recent financial statements and notes thereto, as well as the Form 10Q file with the SEC. This discussion may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. These forward-looking statements involve known and unknown risks and uncertainties, which are detailed in our filings with the SEC. Although the company believes that its forward-looking statements are based upon reasonable assumptions regarding its business and future market conditions, there can be no assurances that the company's actual results will not differ materially from any results expressed or implied by the company's forward-looking statements. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Readers are cautioned that any forward-looking statements are not guarantees of future performance. With that, I'll now turn the call over to Philip Smith, the company's Chief Executive Officer, for a brief introduction.

Thank you, Bill. Good morning, everyone, and thank you for joining our third quarter earnings call for fiscal year 2026. Whilst there's been a moderation in volatility this quarter, I'm pleased to report that Our third quarter results. Total net operating revenues of $719.7 million were up 47% versus a prior year, alongside net income of $127.9 million, up 102% year on year. We also recorded a diluted EPS of $1 per share and a 85% increase versus the previous year, taking our year-to-date EPS to $3.49 per share, up 82% against prior year. This quarter was driven by strong performance across our commercial and institutional segments, which reported a 90% and 56% increase, respectively, in net operating revenue year on year, underscoring our increasing relevance to a diverse set of clients. In the commercial segment, strong performance in our global hedging business helped drive this quarter's results, and pleasingly, net operating revenue across all our products recorded double-digit growth, partly driven by the impact of the RGO and benchmark acquisitions as well as organic growth. This included listed derivatives up 62% to $68.6 million, OTC derivatives up 73% to $101.9 million, and Physical Contracts up 162% to $87.4 million. In the institutional segment, we recorded our highest ever volumes in securities with average daily volume up 33% versus last year, driven by the exceptional performances in our equities market making business. A segment which we had highlighted last quarter with growth in both ADRs as well as US listed equities. Also bolstering our institutional segment The acquired business of the benchmark company contributed $29.5 million in net operating revenues for the quarter, their best quarterly performance to date. In the payment segment, we reported a 12% increase in net operating revenue and a 20% increase in ADV year on year to a record $96 million. In addition, We recorded the highest number of transactions going through the platform this quarter, validating our continued investment in proprietary technology and reinforcing our belief that the platform can support significantly higher volumes without material increases to our expense base. This scalability positions us to support large financial institutions like Shinhan Bank, where we recently announced a strategic partnership with one of South Korea's oldest and systemically important banks to leverage our global network for complex cross-border payments. Lastly, I wanted to give an update on the progress of RJ O'Brien. The USFCM consolidation work remains on track to be substantially completed later this fiscal year, We completed the vast majority of RGO's remaining US-based client migration this quarter, and as of the end of the quarter, hold nearly $13 billion in required client assets, further strengthening our position as the number one non-bank FCM in the United States. More broadly, and as anticipated, volatility moderated from the exceptional levels of the second quarter. Even so, client activity remained strong Thank you, Philip.

I'll start with slide number five in the deck. Just a reminder, in July, we completed a three-for-two split of our common stock, and our shares began to trade on a split-adjusted basis at the market open on July 20, 2026. Because the stock split was effective prior to our release of the Q3 financial statements, all per share metrics on this call will be on a split-adjusted basis. As Philip noted, we delivered strong third-quarter results Generating net income of $127.9 million, an increase of 102% compared with the prior year. This performance translated into a return on equity of 18.4%, significantly above our 15% ROE target, despite a 77% increase in book value over the last two years. On a tangible book value basis, we achieved a return on tangible equity of 25% for the quarter. While third quarter net income was 27% lower than the record earnings reported in the immediately preceding second quarter, our results continue to reflect the strength, scale, and diversity of our business. We had operating revenues of approximately $1.47 billion, up 43% versus the prior year. As a reminder, our operating revenues include not only interest and fees earned on our client balances, but also carry interest that is related to our fixed income trading activities. Net operating revenues, which nets off interest expense, including that which is associated with our fixed income trading activities, as well as introducing broker commissions and clearing fees, were up 231.4 million, or 47% versus a year ago, while down 13% versus the immediately preceding quarter. Total fixed compensation and other expenses were up 58.1 million, or 22% versus the prior year quarter. with $48.5 million of this attributable to the acquisitions made over the last 12 months, most notably R.J. O'Brien and Benchmark. This increase was partially offset by an $18 million decrease in professional fees, largely due to the recovery of legal fees through insurance and reduced legal defense costs related to the BTIG matter. Total fixed compensation and other expenses, excluding bad debt expense, were down 7% or $23.2 million versus the immediately preceding quarter. Fixed compensation and benefits were up 21% versus a year ago, primarily as a result of the acquisitions noted and include $4.2 million in severance and retention costs. Fixed compensation and benefits were down 6% or $8.9 million versus the immediately preceding quarter. Moving on, I've mentioned the acquisitions over the last 12 months and wanted to touch on the revenue contribution for two of them, R.G. O'Brien and Benchmark. The acquisition of R.G. O'Brien contributed $78.8 million in net operating revenues for the quarter, net of unrealized negative mark-to-market adjustment on their investment portfolio and exchange common stock of $9.8 million, while Benchmark contributed $29.5 million for the third quarter, as Philip noted their best performance to date. Looking at it from a longer standpoint, our trailing 12-month results show operating revenues were up 48% to nearly $5.7 billion, Net income was a record $526.9 million, up 77%, with diluted earnings per share of $4.19 and an ROE of 20.8% for the trailing 12-month period. For the third quarter, our average client equity and FDIC suite balances were $16.2 billion, up 108% versus the prior year and up 7% versus the immediately preceding quarter. Finally, we ended the third quarter of fiscal 2026 with a book value per share of $23.70. Turning to slide number six in the earnings deck, which compares quarterly operating revenues by product, as well as key operating metrics versus a year ago, we experienced operating revenue growth across all products versus the prior year, with the exception of FX and CFDs down 19%. Transactional volumes were up across all of our product offerings, with the exception of FX CFDs down 12%, and the spread and rate capture increased in listed derivatives securities, while OTC derivatives, payments, and FX CFDs declined. Just touching on a few key highlights for the third quarter, we saw operating revenues derived from listed derivatives increased 157.9 million, or 125%, versus the prior year. Primarily due to the acquisition of RJO, which contributed $132.3 million, as well as a $10.4 million increase in base metals listed derivative revenues on L&E markets versus the prior year. Listed derivative operating revenues decreased 11% versus the immediately preceding quarter. Operating revenues derived from OTC derivatives increased 73% versus the prior year, driven by an 89% increase in OTC derivative contract volumes. This significant increase in client activity was most prevalent in agricultural, renewable fuel, and soft commodity markets, as well as continued increasing volumes associated with our automated trading platforms, which have allowed for more efficient processing and hedging of OTC transactions. OTC derivative operating revenues declined 15% versus the immediately preceding quarter, which had benefited from the widening of spreads in the immediately preceding quarter due to the onset of the U.S.-Iran conflict. We had another strong performance in our physical business with operating revenues derived from physical contracts increasing 106% versus the prior year, primarily driven by a $40.5 million increase in precious metals operating revenues, as well as an $18.7 million increase in physical supply and trading operating revenues. Operating revenues derived from physical contracts declined 39% versus an immediately preceding record second quarter, which was highlighted by extremely strong performance in precious metals. Securities operating revenues were up 24% as average daily volumes increased 33% versus the prior year and the average rate per million increased 9%. The increase in ADV was driven by strong performance in equities, both in ADRs and U.S. lifted markets, while the increase in rate per million was driven by improved spread capture in fixed income markets. Securities operating revenues were up 3% versus the immediately preceding quarter. Payment revenues increased 13% versus the prior year quarter due to a strong 20% increase in ADV, partially offset by lower RPM. Payments revenues were up 6% versus the immediately preceding quarter. FX CFD revenues were down 19% versus a strong prior year quarter, which had benefited from heightened client activity Most notably in FX markets following Liberation Day tariff announcements, with ADV and rate per million declining 12% and 8% respectively. FX CFD revenues declined 9% versus the immediately preceding quarter. Our interest and fee income earned on our aggregate client float, including both listed derivative client equity and money market and FDIC suite balances, increased 66.1 million, or 64% versus the prior year, with the acquisition of RJO contributing $56.9 million. Average client equity increased 129% as RJO contributed $6.6 million in average client equity for the quarter and the average money market FDIC sweep client balances declined 2%. Moving on to slide number seven, I'll do a quick review of our segment performance. Our commercial segment increased net operating revenue 90% versus the prior year. primarily resulting for the performance in our physical businesses, which increased 54.1 million, and OTC derivatives, which added 43.1 million. In addition, as a result of the increase in legacy client activity, as well as the acquisition of RJO, listed derivatives and net interest income increased 26.3 million and 31.7 million, respectively, versus the prior year. Segment income increased 119% versus the prior year, While on a sequential basis, net operating revenues were down 20% and segment income was down 26% off the record second quarter performance. Our institutional segment also saw strong growth in net operating revenues and segment income, up 56% and 49% respectively. The growth in net operating revenues was principally driven by a $45 million increase in securities revenues. In addition, listed derivatives and interest and fee income increased $38 million and $6.2 million, respectively, primarily driven by the acquisition of RJO. Also, other net operating revenues increased $24.6 million, with the acquisition of Benchmark contributing $29.5 million, which was partially offset by declines in legacy activities. On a sequential basis, net operating revenues declined 1%, however, segment income increased 7%. In our self-directed retail segment, net operating revenues decreased 17% and segment income was down 36%. These decreases were driven by a 27% decrease in average daily volumes in FX CFD contracts, which was partially offset by an 11% increase in rate per million captured. On a sequential basis, net operating revenues declined 11% and segment income decreased 18% in this segment. Our payment segment net operating revenues were up 12% and segment income increased 22%. Average daily volume was up 20% versus the prior year, while rate per million was down 7%. Versus the immediate preceding quarter, payment net operating revenues increased 7% and segment income increased 8%. Moving on to slide number eight, looking at segment performance for the trailing 12 months, we saw strong growth in our commercial and institutional segments with net operating revenues up 74% and 68% respectively and segment income increasing 92% and 59% respectively. Our payment segment added 6% in net operating revenues and 17% in segment income. Our self-directed retail segment reported a 20% decline in net operating revenues and a 39% decline in segment income. Finally, moving on to slide number nine, which depicts our interest and fee earned on client balances by quarter, as well as a table which shows the annualized interest rate sensitivity for a change in short-term interest rates. The interest and fee income, net of interest paid to clients, and the effect of interest rate swaps increased $38 million to $111.9 million in the current period, with the acquisition of R.J. O'Brien contributing $30 million in net interest in the current quarter. On a sequential basis, interest and fee income, net of interest paid to clients, and the effect of interest rate swaps increased $4.2 million as the average client equity and FDIC suite client balances increased 7%. During the third quarter of fiscal 26, we entered into an additional $750 million in fixed rate SOFR swaps to hedge our aggregate interest rate exposure, which brings our aggregate swap position to $2.55 billion with an average duration of approximately one and a half years, and an average rate of 3.51%. These swaps are reflected in the interest rate sensitivity table on this slide. As shown, we now estimate a 100 basis point change in short-term interest rates, either up or down, would result in a change to net income by 46.9 million or 38 cents per share on an annualized basis. With that, I will hand you back to Philip for a product spotlight on our global prime services business. Thank you, Bill.

As we do each quarter, returning to slide 11, We'd like to spotlight one of the business lines driving our growth, and this quarter I'll turn to our global prime services. Our prime services is a global, fully integrated prime brokerage platform operating from London, Singapore, Atlanta, New York, and Park City, Utah. From essentially a standing start in 2018, we now serve more than 700 accounts globally. with over $16 billion in client balances on the platform, generating nearly $140 million in net operating revenue in the last 12 months. Prime has become one of the strongest growth stories in the firm, having grown over 60% plus CAGR over the last seven years and is one of the clearest examples of our ecosystem at work. The thesis was straightforward and is the same thesis that runs to everything Stoenix does, We serve mid-market clients who need institutional-grade capabilities but have been historically underserved by the large global banks and broker-dealers. As bulge-bracket firms imposed return on capital and revenue minimums, we stepped in as the partner of choice offering flexible, cost-effective, and scalable solutions combined with the risk discipline and balance sheet strength that institutional clients expect. Turning to the next slide, slide 12. We have built a modular platform designed specifically around the mid-market segment, drawing on the core infrastructure StoneX has developed across execution, clearing, custody and finance, and of course backed by the StoneX balance sheet. Clients access the capabilities they need, supported by the scale and stability of the broader franchise. In the United States, our platform covers trading and financing across equities, fixed income and options through both fully self-clearing and introducing clearing models. Our hedge fund segment has grown steadily. With recent volatility driving increased engagement in options and future strategies, our investment in automation leave us well positioned for the rapid expansion in the ETF space, and our multi-custodian, multi-asset capabilities have gained meaningful traction with both single and multi-family offices. Securities financing and lending are also central to our U.S. offerings. We help clients finance and margin their positions and cover short sales, drawing on our own inventory and an extensive lending network to source hard-to-borrow securities. Our matchbook securities lending activities earns a spread-based return on over $2 billion in balances, and we help clients earn incremental income via our securities lending desk. Outside the U.S., we have seen rapid growth since launching three years ago. For hedge funds, institutional managers and digital asset participants, we provide execution, custody, financing and hedging across both equities and fixed income. A key differentiator is in fixed income where we offer repo financing at an individual security level rather than a blended portfolio rate that is underpinned by a UK custody solution that gives clients confidence their assets are held securely within a fully regulated framework. For digital asset funds, We provide institutional grade execution and custody across both crypto and traditional assets, along with collateralized lending within the digital asset ecosystem. Managers can hold fiat or fixed income collateral separately from their crypto exposure while financing their traditional assets on the same platform. Today, in addition to the digital assets we custody, Prime holds nearly $1.5 billion in traditional assets on behalf of those clients. Lastly, Stenex's existing relationships provide a natural cross-selling opportunity for global crime. This includes clients in our commercial segment whose treasury function can leverage Prime's custody capabilities and earn a return on excess cash balances. On slide 13, you can see the results of these efforts. Since 2019, client balances have grown from less than $1 billion to more than $16 billion today. generating nearly $140 million of net operating revenue on a trailing 12-month basis. The growth since inception has been rapid, with much of the growth coming in the last three years, with client assets growing at a CAGR of over 65% since 2023. This growth has been broad-based across the clients we serve, including hedge funds, ETF and mutual fund providers, and family offices. Despite this growth, Our share of the addressable market remains relatively modest. We believe the combination of a large market opportunity, increasing demand for multi-asset Prime service providers, and our disciplined approach to execution provides a substantial runway for growth. On the next slide, I will go through Prime's priorities and outlook. A core priority for Stonex is to remain relevant to our clients through the products we offer, The markets we operate in and the depth of relationships we build. For Global Prime, this means the following. First, we are extending our financing suite to include U.S. equity swaps, fixed income total return swaps, and fixed income prime brokerage, capabilities we've always proven in EMEA and are now bringing to the United States. We're also investing in capabilities that span global markets. Our outsourced trading business where we provide clients with a fully embedded trading desk has recently expanded into Asia where early momentum is being built. Second, we are growing the client base organically, inorganically through M&A and by engaging funds earlier in their life cycle. Our prime consultancy business which includes capital introductions, helped us build relationships with emerging managers as they launch and scale their funds, creating an early entry point into the relationship. Lastly, as we finalize the integration of Benchmark and R.J. O'Brien, we expect significant cross-sell opportunities through clients who are beginning their relationship with Sonex. Finally, we are focused on making the platform more valuable for clients who choose to do more business with Sonex. Thank you for joining us today. and create a compounding opportunity to deepen relationships over time. Turning to the last slide of the section, slide 15, the most important point I want to leave with you is that global prime services does not sit in isolation. It is the connective tissue of the StoneX ecosystem. Prime brings together custody, financing, execution, hedging capabilities that often form the foundation of a client relationship. From there, those same clients can access a broader range of products and capabilities across our ecosystem, whether through FX, payments, clearing, market making, and other products and services. As clients engage more, relationships deepen, wallet share expands, and the client becomes stickier. In that sense, Prime is not only a growing business in its own right, but also a driver of growth across the broader Sternix platform, with the value of the ecosystem compounding as clients do more business with us over time. Now to close, this was another strong quarter in spite of the moderation in volatility with net income of $127.9 million and diluted EPS of $1. Trading 12 months, net income was $526.9 million, up 77% versus the prior year. Our return on equity for the quarter was 18.4%, and on the trading 12 months, 20.8%, both well above our 15% target. On a tangible book value basis, return on tangible equity was 25% for the third quarter and 28.7% on a trading 12 months basis, with book value per share of $23.70 up 576 or 32% versus the prior year. Our performance to date reflects the power and scale of the ecosystem we have built at Cenex and the compounding effect of the investments we have made in technology, people and products. We continue to see a significant total addressable market ahead of us and we remain excited about the growth prospects of the company and the continued expansion of that ecosystem. With that operator, would you kindly open the line for questions?

Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again.

Please stand by while we compile the Q&A roster. Our first question comes from Dan Fannin from Jefferies.

Please go ahead, Jan. Hi.

Thanks. Good morning. Good morning, Dan. Phil, I wanted to just follow up on the comments around just the physical market, which has been so strong for you year to date. Just wanting to get a little bit more color around the underlying activity, what's driving that. We've also read about Project Vault. We're curious if that is something which the government's doing is having an impact on kind of the growth of that business.

Yeah, sure, Dan. So, Our physical business, as you know, separates between metals and non-metals, and it's very much precious metals versus non-precious metals, more of the commodities, agricultural and such. So we've seen over the last, I guess, the last two quarters where the... The precious metals physical business has just outperformed and done incredibly well and exceeded expectations and although it was driven by dislocations in various markets between location A and location B and I think I went into that in quite a lot of detail in the last two earnings calls. With regards to domestic and non-metals business. That physical business continues to grow. We continue to build up market share and very much as we set out when we made certain acquisitions such as CDI which put us into the physical cotton business and very much into the expansion to physical coffee and physical cocoa. These are areas where Our financial business is very strong and our client base is very deep and when we look to expand into those areas we do take a certain level of comfort in the fact that we are then extending the product offering, extending the ecosystem within that space but from a very strong position within our financial space and where we had continued success in building out those businesses is where we've been able to work very closely Thank you for joining us today. Thank you very much. Bringing those together, I think, makes a very formidable product line for us and something we want to highlight in a couple of quarters time, where we've brought together various parts of the business that we've acquired, we've built out organically, new initiatives, and we want to highlight that as a separate division, which is increasingly becoming part of a more and more relevant business line for us.

I understand that that's helpful. And so then wanted to follow up on some of the comments around the RJO integration. I think the commentary obviously is that it's going well. Curious if you could put some numbers around where you are on the cost energy side. And then at the time of the deal, you announced multiple or greater revenue synergy potential over time versus the expense synergies outlined. So curious if there's been any early attribution you could attribute to revenue synergies.

Sure. Thanks, Dan. I'll take the first one on the hand side. Philip Handel, the second one. So on the cost energy side, as I mentioned on the last call, we kind of were exiting Q2 with about a $32 million-ish run rate on an annualized basis of the cost savings. We expect to be, or we're exiting Q3 here with something closer to $37, $38 million, still targeting kind of what we talked about last quarter by the end of the fiscal year, so end of next quarter to be Mid 40s, 45, 46 run rate and by probably end of first quarter be at the 50 we originally announced. So tracking well from where we were last quarter to see that grow here in Q3.

And I think when we last spoke, last quarter, we were saying this Q3 was a very important quarter with regards to the integration. This was when the large integration process of the USFCM was going to happen. And that did happen. That has been completed. And we We are now able to start looking at the business more holistically, looking at the clients, being able to really go deeper into the cross-selling capability. Now, from the moment we announced the deal, even before closing, there was a lot of interaction Thank you very much. Thank you. Now, as I said in previous conversations, there are certain products that we can offer to customers on day one. Increased capability, access to platforms, access to physical products, physical programs that will assist our clients immediately. And there are others where it does involve increased level of engagements in education and also awareness to make sure that products that we are now able to offer legacy R.J. O'Brien clients Thank you very much. because of that suitability and ensuring that we're not moving too quickly for the sake of achieving a timeline that we set out to the market. But that momentum continues and as the clients are now very much embedded in the Stonix system, we're able to leverage that at a greater rate and we continue to mark lots of cards of wins along the way.

I hope that answers your question. and then, Bill, just a follow-up on the quarter's results and if there were any one-timer or where any kind of some of the income statement, like professional fees looked low, if there were any benefits or things that we think about from a normalized basis going forward we should be aware of as we think about your fiscal fourth quarter.

Sure. And we tried to point that out a bit. There's about a $12.5 million recovery, insurance recovery and professional fees. Net of some settlements, it's about eight and a half million, I would say, on a net basis for the quarter. So, that would have been one. You know, we did talk about synergies. There were also about four, a little over four million of severance of retention in the quarter. So, kind of netting those out versus synergies. I think those are probably the only two I would call out, Dan.

Okay, thanks. I'll get back to you.

One moment for our next question.

Our next question comes from Jeff Schmidt from William Blair.

Please go ahead, Jeff.

Hi, good morning. On the revenue synergies, I know you spend a lot of time getting to know RJO's derivative capabilities and going through their client list, but what are some of the takeaways you have from going through their books and I think it just started your cross-selling efforts, but for your OTC derivatives, so maybe if you can you give us a sense on how long you think that could take?

That does seem to be the question everyone wants to know, isn't it? As I said, we've been able to achieve a lot of interaction between existing parts of R.J. O'Brien and Stonex even before the integration has been completed. Very much increasing that awareness of what we have to offer. A lot of our, and I would say one of the Originally, what I said before is that we've had some very easy wins with regards to offering platforms and capabilities that perhaps sit in our physical business. Now, those are already being utilized across legacy R.J. O'Brien clients. because they see it as an opportunity and some of them would have liked to have been able to do that in-house at R.J. O'Brien. They didn't have the capability and in some cases didn't know there was an alternative or didn't know there was a product of such that would help them. That's been crucial in just increasing the awareness. Now you must remember R.J. O'Brien have 350 IBs. who themselves have underlying clients. So reaching out to the end client has been a process of integration, a process of awareness, and a process in which we have tried as actively and as deeply as possible to engage with those underlying clients and really demonstrate all the capabilities that are on offer. Now equally, as we said quite early on, things like foreign exchange provision, things like OTC, access to our physical hedging capability, access to physical contracts, things that we sometimes just take for granted, it does have to have a lead time of rollout. So we've not put any pressure on people to sell. We've made this very clear. We don't want this to be seen as something that we are trying to force on people. It's all about increased awareness and education and highlighting all the capabilities. And I'm not saying that every single client of RJ O'Brien who traditionally traded futures to hedge their exposure, their risk mitigation in whatever product it might be, will automatically move to an OTC. But the beauty of an OTC product is that we're able to custom make a hedge for our clients. That's what our client base does benefit from. They enjoy the personal suitability and targeting of specifically their product, their exposure, and themselves. And I think that's what makes a difference. but it takes time and we've built out huge OTC businesses from scratch in parts of the world in EMEA and APAC where I would say five, six years ago our OTC capability was almost minimal. That's now a big driving force of our expansion and our relevance to our clients. So we try to apply that same logic to all clients regardless of whether they are legacy RGO Brian or not so that's that's very much the direction we're going very much the strategy and the RGO client base is part of that but you know just like every other client who touches Stonix in one way we want to ensure there's more that we can offer and I think that's why I went into the you know the deep dive with our prime business because That's an illustration where we've brought all the capabilities with an ecosystem into a single product offering, which I think is a distinction between us and many other participants in the market.

And then a question on the payments business. I mean, the RPM continues to decline there. It's fallen for a couple of years now. I think in the past, we talked about a client mix shift having some impact. Thank you for joining us.

And you must remember that up until that point, we were turning away business. We had many, many banks, payments companies wanting to move more business towards us, very much high volume, low value payments. and our system at the time did not have the capability and so we were turning away business. Once we rolled out XPAY, as I said, we increased the capacity 15-fold and then allowed those banks, those FIs, those payments companies to use our payment channels, our rails to get into the country that they were lacking but at a scale that they were not able to provide themselves and prior to the rollout of XPAY, we were not able to provide. So that was a key driver for the need to build out a new system and also a desire to take on that business that the world was struggling with. and so we've seen that growth. We continue to see a lot of large companies, large payment companies, increasing number of banks who have this flow and are now actively directing it to Stolex because we now have that capability and are able to provide that level of service as we do with the lower volume, higher value payments. So it increases that capability, and that's the reason why you're seeing the average daily volume going up, but you're also seeing the revenue per trade going down. And we continue to expect that to be a trend for the foreseeable future.

That could be over the next few years. Go ahead. No, I was going to say you can kind of see what Philip's talking about when you look at, you know, our first quarter of this fiscal year. That's when you really saw a big spike up in our volumes, and you did see a trend down a bit in the rate per million from a little over 10 to, you know, 9,400 per million. But then you've seen that actually trend up, and the volumes have grown, which has been a nice trend during the fiscal year going up. you know sequentially for three quarters so it did kind of level set shift down as Philip said as that system got rolled out but now we're seeing it it turned up a little bit I don't think it's necessarily going to get to where it was but the volumes are growing quite fast and it's nice

and it was just shy of a record quarter and which is the reason I say that is because historically in our payments business the Q1 has always been the high watermark in most years and we were just shy of beating the Q1 high watermark from 2024 so I think it's pleasing to see I am hoping to have a deep dive in payments for our Q1 27 call because it should coincide with quite a few initiatives and exciting opportunities that we want to throw out and bring together and highlight the strategy, which will probably be about three years after we lasted the deep dive.

Okay, great. And then the question on client float, obviously up a lot from the RJO deal, but what do you think that can grow at after the deal kind of annualizes or lapses and then Any changes in your investment strategy there? Are you increasing duration, using more swaps, anything like that?

Yeah, I mean, you know, I think that, you know, post the deal, you know, I think you can certainly be growing those balances. You know, high single-digit percent, right? The industry continues to grow, and I think that we've got a compelling story, you know, being the largest non-bank company and USFCM and continuing to grow, obviously, in the UK and Singapore as well. So definitely becoming more relevant there. And on the investment front, we're not really doing anything different than what we've kind of talked over the last nine months. You know, post-integration, you know, we are continuing to put in some levels. As I said in my remarks today, we did do about another three quarters of a billion of two-year swaps. And to kind of average in this quarter to kind of put a floor, So overall, we've got about $2.5 billion of swaps out there at a little over 350 basis points, which puts a nice kind of floor for us on a piece of it. And then there's a little bit of duration we're taking, but not a lot on the actual investment side. There's probably about $1.5 billion there as well that we've got. A little bit out on the curve, but nothing more than two years. And so, you know, just trying to continue to maximize and make sure that we're earning, you know, a little bit of a premium over so for, you know, 10 or 15 basis points is kind of what we're targeting.

Yeah, okay. And then just one last one. You know, I think at the key we had mentioned greater adoption of your automated trading platform with regards to your OTC derivatives business. I don't know if that's a newer initiative or something you've been investing in. I was just curious why that was called out specifically.

No, it's not new, but I think it's fair to say it's been accelerated and improved and the efficiencies achieved using AI to speed the upgrades and the increased capability and the increased efficiency from our platforms. that's something we are seeing across the board and you're seeing it as a you know highlight in the OTC capability where our you know our electronic swap matching platform has just been rolled out and it has been rolled out at a time but the acceleration of the and the efficiency of the capability within the platform has really made a meaningful difference and a lot of that relates back to my announcement three three in the last quarter where we We went from an AI perspective, from sort of early adoption, experimenting, you know, sort of just playing around to rolling out an enterprise-wide capability, which is becoming increasingly core and central to our overall technology build-out. And, you know, that is a good example. Our SWOT platform is a good example where we're starting to see early wins on that. and we are similarly rolling out the capability to improve efficiency in reconciliations and investigations and LC management, settlement instruction, corrections and technology platform and project acceleration. So, you know, a lot of that will be provided as a sort of post-six-month announcement in the next earnings call. So I think we want to start demonstrating to our investors and the market what we've been able to achieve, whether it's cost savings, reduction in vendors, whether it's efficiency of technology, acceleration of rollout and new product capability, all the such. So that's the objective there in the next year.

And I would just add, Jeff, one of the other nice things that's come out is, you know, if you looked back, you know, six, seven years ago, and a lot of the structured products that were trading in OTC, you know, that was, those were phone conversations that were going on with our best and the broker and the clients to kind of customize the solution and find out what it is. And now we have tools to where customers can just be looking at live pricing for structured products that fit the needs that they have. So it's a much quicker execution, much more customizable and gives them a great view. So those kind of things that are another thing that's kind of driving that, those volume growth.

And it makes expansion geographically that much easier. because you're not feeding through to people to pricing transactions. You're able to offer it to more and more parts of our global footprint and the clients that sit throughout the globe.

Okay. Thank you. That's all I had. One moment for our next question. Our next question comes from Dan Fannin from Jefferies.

Please go ahead, Dan.

Yeah, thanks for taking a follow up. So just wanted to get your updated thoughts on M&A here currently, and maybe the dialogue or activity as you see in the kind of back half of the calendar year, if you see that picking up for yourself.

I think I've been asked that before and I think the response has been we are always looking at transactions. We are known as a consolidator. We're known as an acquirer in the markets and we have stuck to very strict principles of the logic for adding to the Stoenix ecosystem and whether it expands our geographical footprint, whether it expands our product offering or whether it brings us a book of clients that we didn't have before. And that doesn't stop. And I think we said there's always half a dozen transactions that we're looking at and I think I actually put it out there, almost business as usual is for us to be, you know, Thank you very much. you know maybe single sole proprietary sole proprietors who who are looking for an exit strategy you know we are seen as an opportunity for those to you know extract value and bring the capability that will be added and you know hugely supplement the sort of the product offering across our entire ecosystem and at the same time give the entire Thank you very much. And then we've obviously been able to demonstrate that even companies the size of R.J. O'Brien, which are the largest transaction we've ever completed, was able to be integrated on time, on the timelines, within budget and achieving the objectives that we set out on day one. So I think we now have a dedicated team, dedicated resources that continue to look at transactions, to make the acquisitions, to complete the acquisitions, and then most importantly, to complete the integration. And that's a key part of our business and DNA going forward. but you know we are not desperate we don't go out you know trying to find you know gaps unless there's an obvious clearing gap in our ecosystem that we'd like to fill we would you know actively keep an eye out but on the whole we look at many many transactions we're very disciplined in our approach and what we like and what will add to our ecosystem we will look to see if we can we can achieve that.

Great thanks for taking all my questions.

No problem.

I am showing no further questions at this time. I would now like to turn it back to Philip for closing remarks.

Well, thank you all for your time. We're very pleased with our Q3 numbers. And once again, a huge shout out to all Cernyx employees who have helped make this happen by continuing to provide a standout level of service, professionalism, and relevance to the market and our ever increasing number of clients and customers. And of course, to each other. Thank you very much.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.