As mainstream powerhouses back away from commodity marketplaces and smaller players struggle with technological changes, an old stalwart is expanding into the void.
INTL FCStone, a component of which was founded in 1924, has acquired Gain Capital and is changing its name.
“If we continue to do what we do best and improve on that and offer more products and services, we feel we can be successful in this business,” Dave Smoldt, the president of commodities for what will now be called StoneX, said June 25.
INTL FCStone is already a big player in commodity marketplaces, with everything from retail hedging and investing to commercial and institutional trading, as well as substantial clearing and back office services. The Gain acquisition helps it develop a “unified digital platform” that will be able to service the plethora of niche markets that exist in the commodities world.
StoneX’s growth has occurred as some huge investment and market firms have backed away from the commodities marketplaces in the wake of the 2008 financial meltdown. Many companies rushed to get into the commodities space during the first half of the commodities bull market of the 2000s and first half of the 2010s. However, the financial crisis prompted some to minimize their involvement in specialized markets.
But for FCStone and INTL, which both had many years of experience in agricultural and other commodities, focusing on expansion within commodities made sense. The two companies merged in 2009-10, as the second half of the commodities bull market began.
Meanwhile, smaller companies working with commodities markets were having trouble amassing the size and capabilities required in the fast-evolving marketplaces. INTL FCStone acquired more than 15 of them since 2015.
Smoldt said the company’s edge has been a “customer-centric” approach as opposed to a one-size-fits-all style, which it thinks fits the unique needs of people who hedge, invest and trade commodities. While commodities might have common specifications, each farmer, grain company, processor and manufacturer has unique risk management needs. Similarly, institutional investors and risk managers have theirs.
“By providing that very customized approach to risk management, I think we set ourselves apart, rather than just (being) a place to come and clear your trades,” said Smoldt.
It’s a happy time for StoneX, with the company surpassing the US$1 billion capitalization level, becoming part of the Fortune 100 list and assuming a big role for “under-served clients in niche markets.”
Smoldt said the biggest market gap it is trying to fill now is with digital risk management platforms, which will be important as the industry evolves.
“There’s a lot of technology. But it’s finding the best technology, the best platforms,” said Smoldt.
“You need to be in-step with it, and then also ahead of it, and make sure you’re looking for what will be (the client’s) next need.”
FCStone’s heritage goes back to 1924, when Russian immigrant Saul Stone formed an egg and butter trading company in Chicago. In 1978, Saul Stone and Co. merged with Farmers Commodity Corp.
For most of its history, it focused on the main agricultural markets, but over time added substantial presence in energy, agricultural “softs” and other commodity sectors. Since the 2000s it has come to be active in most areas of the commodities markets.