INTL FCStone Starts Trading on LME Floor in Expansion of Metals

INTL FCStone Inc. (INTL), dating back to a door-to-door egg wholesaler in 1924, started trading on the London Metal Exchange today as the first newcomer in four years after the acquisition of MF Global U.K. Ltd.’s metals business.

The team of 15 people led by Malcolm Leonard returned as INTL FCStone staff to the booth it had occupied next to JPMorgan Chase & Co. before MF Global Holdings Ltd. filed for bankruptcy in October. INTL FCStone took over MF Global’s metals business and the workers last month, one of 10 acquisitions in the last three years.

“On the metals side, we’ve leapfrogged maybe 10 years of development time by getting an experienced team on board,” Sean O’Connor, 49, chief executive officer of INTL FCStone, said in a phone interview from New York. “The addition of the LME team will increase the share of revenues we get from executing commodity contracts.”

The LME handles more than 80 percent of global trade in metals futures. Prices more than tripled in the past decade as demand from emerging markets led by China overwhelmed supplies from mines. The LME, which is owned by its members, handled $11.6 trillion of contracts last year, compared with $2.5 trillion in 1999, reflecting both higher prices and increasing speculative interest in raw materials.

Metals, Grains

New York-based INTL FCStone provides advice, trading and clearing in metals, grains and foreign currencies for more than 10,000 clients, according to the company’s website. Revenue was $269 million in the 2010 fiscal year, it said on its website.

INTL FCStone (Europe) Ltd. is the first new company to trade on the LME floor since 2007 when ED&F Man Commodity Advisers Ltd. joined the exchange and became a category 1 member, giving it the right to trade in the 6-meter-wide (20- foot) trading pit on Leadenhall Street. There are 12 ring traders including J.P. Morgan Securities Ltd., Barclays Capital and Societe Generale.

“We’ll become an integral part of the market,” O’Connor said. “We will make money doing it. And for a lot of people who’re active in the LME, they see the fact that you’re a ring dealing member is almost like you are a primary dealer in the Treasury market.”

INTL FCStone, which in September became a category 2 member, had no plans to become a category 1 member until the MF Global (MF) business was available, O’Connor said. “The MF metals team is a pretty near-perfect fit for our strategy,” O’Connor said. “They were probably the jewel in the MF crown.”

Hencorp Purchase

MF Global’s unit is one of 10 acquisitions by INTL FCStone in three years, according to William J. Dunaway, chief financial officer of INTL FCStone in Kansas City, Missouri. This year it acquired Hudson Capital Energy LLC’s business and customer relationships, Coffee Network and the LME business of Ambrian Capital Plc.

The company, which has been active in physical metals for at least six years, sought to expand trading in futures in response to demand from its consumer and producer clients, O’Connor said.

INTL FCStone rose 4.5 percent to $24.83 at 3:11 p.m. London time in Nasdaq Stock Market trading, valuing the company at $446 million. The gain is the biggest since Nov. 30.

About 80 percent of INTL FCStone revenue is from commodities, according to information on the company’s website. It traded $47 billion of physical commodities in 2010, O’Connor said.

INTL FCStone was created from the 2009 merger of INTL Assets Holding Corp. and FCStone Group Inc. The company has added 100 to 150 people in the past 12 months, bringing the total to about 1,000 people, according to O’Connor. The MF Global metals unit brought about 50 people to INTL FCStone in London, New York, Hong Kong and Sydney.

“We’re growing while everyone else has been declining,” O’Connor said. “Our business model is based on the real need of the market.”

To contact the reporters on this story: Agnieszka Troszkiewicz in London at atroszkiewic@bloomberg.net; Maria Kolesnikova in London at mkolesnikova@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

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