Good day, and thank you for standing by. Welcome to Stonex Group Q2 Fiscal Year 26 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Bill Dunaway, Chief Financial Officer. Please go ahead.

Good morning, and welcome to our earnings conference call for our quarter ended March 31, 2026, our second 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 filed 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 for 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 second quarter earnings call for fiscal year 2026. I'm very pleased to report a consecutive record quarter, including record net operating revenues, net income, and EPS. This was driven by strong performance across all four operating segments, highlighting our depth and breadth of product offering and capabilities within the unique Stonex ecosystem. It also reflects the continued progress of integrating RG O'Brien, which remains on track to be substantially completed later this fiscal year with no change to expected synergies and efficiencies, making Stonix the largest non-bank FCM in the United States. Despite the geopolitical uncertainty, nearly all of our products reported a double-digit growth, driven by higher volatility and increased demand for our services. This has included delivering another record quarter for listed derivatives, with volumes approaching 100 million contracts and average client equity approaching $14 billion, reflecting the expanded scale of the platform following the RGO acquisition. Record OTC derivatives volume, transacting over 1.5 million contracts, a 68% increase in year on year. As a reminder, we offer customizable OTC contracts to customers, giving them the benefit of a lookalike option or swap or structured product to more closely address their risk management needs, whilst we benefit from typically higher rate capture when compared to traditional listed derivatives. We reported record securities average day volume of over $12 billion, driven by strong performance across both our equities and fixed income franchises. We will touch on our equities business later today, but we believe we have one of the most diverse equity market ecosystems covering execution, market making, custody and clearing, prime brokerage, as well as equity capital markets and research offerings, which we acquired through the benchmark acquisition last year. Alongside our securities and derivatives records, we also reported record operating revenues derived from physical contracts, which underscores our continuing global relevance in the physical space within the commodities market over consecutive quarters. Turning to payments, we recorded our second highest ADV of $92 million following the record set last quarter with year-on-year growth of 19%. This performance reflects continued engagement from institutional counterparties using our cross-border payment solution. Lastly, we saw FX-CFD volumes grow by 3% year-on-year and the revenue capture of $103 per million up by 6%, reflecting the higher market volatility seen in this quarter. We continue to set records across our key metrics, but are mindful that the geopolitical landscape remains complex and disciplined risk management will remain at the heart of our business as we continue to service our clients' business needs and activities. As our company scales, processing ever higher volumes, growing our client base, and improving our offering to clients, I wanted to spend a couple of moments touching on one of our strategic initiatives regarding the use of AI. We are seeing the deployment of AI evolving from isolated experimental use to now serving as an enterprise force multiplier that enhances operational efficiency across our organization. What started out as a useful development tool for our programmers has now grown into utilizing AI agents across client support, internal operations, and platform development. Within payments, we mentioned our XPAY system in previous calls, which was a proprietary built platform. And within this, we have developed AI-assisted automation to help with the settlement instruction repair, validation, and reconciliation designed to reduce manual intervention and improve our straight-through processing rates. Alongside this, we are developing AI chatbox to aid client services with client queries, document translation, and compliance-related tasks. We are also applying AI to further improve the productivity of our software developers through the design of support agents for agentic development. This should culminate in, one, accelerated development, shortening the time from a proof of concept to a functioning prototype. Two, enhanced agility and innovation, automating testing, delivery of iterative improvements, which should lead to innovation. And three, business solutions, ultimately leading to the delivery of working solutions for our commercial teams that are responsible to our clients' needs. One such example of this was the development of a feature, which we estimated would have taken the team without AI approximately two to four times longer to design, test, and launch. This is the sizable step change we hope to replicate across the organization, whilst ensuring we operate within a standardized framework and remain cognizant of local regulations, controls, and governance. It is a promising start, and we see significant opportunities to leverage technology further, to develop products and services faster, meet our clients' needs, and optimize our resources to continue to deliver strong financial performance. With that, I will now turn over to Bill, who will go through this quarter's financial results.

Thank you, Philip. I will begin with the financial overview for the quarter, and we'll be starting with slide number five in the slide deck. Just as a reminder that our board of directors approved 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 March 23rd, 2026. So all per share metrics on this call will be on a split adjusted basis. Second quarter net income came in at a record $174.3 million, with diluted earnings per share of $2.07. This represented 143% growth in net income. However, earnings per share grew at a 120% rate due to an additional share's outstanding as compared to the prior year, primarily related to the issuance of approximately 3.1 million shares related to the acquisition of R.J. O'Brien during the fourth quarter of fiscal 25. Net income and diluted earnings per share were up 25% and 24% respectively versus our immediately preceding first quarter of fiscal 26. This represented a 26.5% return on equity, despite a 75% increase in book value over the last two years. On a tangible book basis, this equates to a 37% return on tangible equity for the quarter. We had operating revenues of approximately $1.6 billion, up 64% versus the prior year, and up 9% versus the immediately preceding quarter. As a reminder, our operating revenues include not only interest in fees earned on our client balances, but also carried 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 70% versus a year ago and 14% versus the immediately preceding quarter. Total fixed compensation and other expenses were up 44% versus the prior year quarter, with $56.9 million of this attributable to acquisitions made over the last 12 months, most notably RJO and benchmark. Also contributing to this increase as compared to the prior year bad debt expense increased 12.3 million primarily within our commercial segment which despite this had a second consecutive record quarter total fixed compensation and other expenses excluding bad debt expense were up five percent or 16.4 million versus the immediately preceding quarter fixed compensation and benefits were up 32 percent versus a year ago and up 13 percent or 18.7 million versus the immediately preceding quarter. The increase versus the immediately preceding quarter included a 10 million dollar increase in employee benefits, most notably payroll taxes, paid time off benefit costs, and retirement costs, which is typical as we start a new calendar year, as well as eight and a half million in higher severance and retention costs, including costs associated to a formal collective redundancy consolidation process for UK-based employees following the integration of certain RJO entities, as well as severance and retention costs for certain U.S.-based positions relating to ongoing integration activities. These increases were partially offset by higher participation in our employee-elected deferred compensation plan, which is part of our restricted stock plan. Professional fees increased $1.9 million versus the prior year, primarily as a result of higher legal fees related to our defense and various legal matters net of recoveries they were down 14.4 million versus the immediately preceding quarter which included significant legal costs incurred related to the btig arbitration matter during the second quarter we received the final arbitration award from the finner arbitration panel adjudicating the claims between us and btig The panel awarded us $1 million in compensatory damages and awarded BTIG $2.9 million in damages. These amounts were offset, and we made a net payment of $1.9 million during the March of 2026. On May 4, 2026, we made an immaterial payment to fully and finally resolve all differences with BTIG and no additional claims between the parties remain. gain. The conclusion of the BTIG litigation, along with the resolution of the option seller's arbitrations and settlement of the patent case inherited through the acquisition of gain capital, mark the end of the large-scale litigation matters that have resulted in heightened legal expenditures over the last five years, most notably the last 24 months. Moving on, I had mentioned the acquisitions over the last 12 months and wanted to touch on the contribution of the most notable one, R.J. O'Brien. Excluding amortization of acquired intangibles and a $7.7 million negative mark-to-market adjustment on their investment portfolio, R.J. O'Brien contributed $35 million in pre-tax net income for the quarter, a nice improvement over the immediately preceding first quarter. Looking at our results from a longer standpoint, our trailing 12 months results show operating revenues up 40%. Net income was a record $462.4 million, up 57% with diluted earnings per share of $5.60 and a return on equity of 19.8% for the trailing 12 month period, above our target of 15%. For the second quarter, our average client equity and FDIC sweep balances were $15.2 billion, up 91% versus the prior year and up 4% versus the immediately preceding quarter. Finally, we ended the second quarter of fiscal 26 with a book value per share of $34.16. 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. Transactional volumes were up across all of our product offerings, and spread and rate capture increased in all products with with the exception of securities down 3% and payments down 7%. Just touching on a few highlights for the fourth quarter, we saw operating revenues derived from listed derivatives increased 189.4 million or 148% versus the prior year. Primarily due to the acquisition of RJO, which contributed 151.7 million, as well as strong growth in base metals activities in LME markets, which increased 20.2 million versus the prior year. Listed derivative operating revenues increased 18% versus the immediately preceding quarter. Operating revenues derived from OTC derivatives increased 98% versus the prior year, driven by increased client activity and a widening of spreads, most prevalent in agricultural and energy markets, including renewable fuels, driven by heightened volatility as a result of the onset and continuation of the U.S.-Iran conflict. This also represented an 89% increase versus the immediately preceding quarter. We had strong performance in our physical business, with operating revenues derived from physical contracts increasing 162% versus the prior year, primarily driven by a $116.1 million increase in precious metals operating revenues. Operating revenues derived from physical contracts were up 21% versus a record immediately preceding quarter. Securities operating revenues were up 38%, as volumes were up 35%, partially offset by a 3% decline in the rate per million captured versus the prior year, with the improvement driven by growth in U.S. equity volumes, as well as an increase in overall client activity driven by the onset and continuation of the U.S.-Iran conflict. Payment revenues increased 14% versus the prior year quarter due to a strong 19% increase in average daily volume, partially offset by a lower rate per million. Payment revenues were down 2% versus the immediately preceding quarter. FX CFD revenues were up 9% versus the prior year quarter, resulting from a 3% increase in average daily volume and a 6% increase in rate per million, each of which were primarily driven by improved performance in our self-directed business. FX and CFD revenues were up 13% versus the immediately preceding quarter. Our interest in fee income earned on our aggregate client float, including both listed derivative client equity and money market FDIC suite balances, increased $54.8 million, or 54%, versus the prior year, with the acquisition of RJO Bryant contributing $53.9 million. Average client equity increased 110%, as RJO contributed $6.4 billion in average client equity for the current quarter, while the average money market FDIC sweep client balances declined 7%. Turning to slide number 7, this depicts a waterfall by product of net operating revenues from both the prior year quarter to the current one, as well as the same for the trailing 12-month periods. Just a reminder, net operating revenues represents operating revenues less introducing broker commissions, transaction-based clearing expenses, and interest expense. For the quarter, net operating revenues increased 70%, principally coming from listed derivatives and physical contracts, up $84.6 million and $116 million, respectively. In addition, we had a very strong quarter in OTC derivatives, which nearly doubled, adding $58.8 million versus the prior year. Net operating revenues from securities also added $36.9 million.

On a net basis, interest and fee income on client balances increased $33.2 million, with RJO contributing $30.3 million.

Looking at the bottom graph, for the trailing 12-month period, listed derivatives has the largest increase, up $187.7 million, primarily as a result of the acquisition of RJ O'Brien, as well as strong growth in LME-based metal markets. Securities was up $180.6 million versus the prior year, driven by a 27% increase in average daily volume and 17% increase in rate per million. Physical contracts, net operating revenues, added $162.1 million versus the prior fiscal year, primarily driven by strong performance in precious metals. OTC derivatives added $90.4 million off of strong performance in agricultural and energy markets, including renewable fuels. Interest in fee income increased $87.6 million, primarily as a result of the acquisition of R.J. O'Brien. Moving on to slide number eight, I will do a quick review of our segment performance. Our commercial segment saw record net operating revenues with an increase of 111 percent, primarily resulting from 52 percent and 98 percent increases enlisted in OTC derivatives, respectively. In addition, physical contracts increased 239%, while net interest income and fee income increased 55%. The growth enlisted derivative and interest income were primarily driven by the acquisition of RJO, as well as in base metal markets on the LME. Segment income was another record, increasing 151% versus the prior year, while on a sequential basis, net operating revenues were up 30% and segment income was up 36%. Our institutional segment also saw strong growth in net operating revenues and segment income up 65% and 40% respectively. The growth in net operating revenues was principally driven by a $33.3 million increase in securities revenues. In addition, listed derivatives and interest and fee income increased $60.4 million and $14 million, respectively, primarily driven by the acquisition of RJO. On a sequential basis, net operating revenues and segment income declined 3% and 13% respectively. In our self-directed retail segment, net operating revenues increased 15% and segment income was up 40%, which demonstrates the strong operating leverage in this segment. This growth was driven by a 9% increase in rate per million captured in FX CFD contracts, along with a 3% increase in average daily volumes. On a sequential basis, net operating revenues were up 18%, and segment income increased 65%. Our payment segment, net operating revenues, were up 10%, and segment income increased 30%. Average daily volume was 19% up versus the prior year, while rate per million was down 7%. versus the immediately preceding quarter, payments net operating revenues decreased 3% while segment income decreased 6%. Moving on to slide number nine, looking at segment performance for the trailing 12 months, we saw strong growth in institutional segment with net operating revenues up 62% and segment income increasing 58%. Our commercial and payment segments added 48% and 11% in segment income, respectively. Our self-directed retail segment income decreased 23%. Finally, moving on to slide number 10, which depicts our interest in fees 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 in fee income net of interest paid to clients and the effective interest rate swaps increased $29.1 million to $103.6 million in the current period, and as noted, the acquisition of R.J. O'Brien contributed $30.3 million in net interest in the current quarter. On a sequential basis, interest and fee income, net of interest paid to clients, and the effective interest rate swaps declined $7.8 million, primarily related to an $11.7 million mark-to-market adjustment on our investment portfolio. During the second quarter of fiscal 2026, we entered into an additional $600 million in fixed rate SOFR swaps to hedge our aggregate interest rate exposure, which brings our aggregate swap position to $1.8 billion with an average duration of approximately two years and an average rate of 3.38%. These swaps are reflected in the interest rate sensitivity table on this slide. As shown, we now estimate 100 basis point change in short-term interest rates, either up or down, would result in a change to net income by $47.6 million or $0.58 per share on an annualized basis. With that, I will hand you back to Philip for our product spotlight on our global equities business.

Thank you. Now turning to slide 12, I wanted to highlight another facet of our ecosystem and speak about our principal market-making business within our global equities business line. Our equities business operates is a global market intermediary built around agency execution, custody and clearing, market making, prime, as well as capital market services. We serve institutional clients offering access to exchanges, liquidity, and clearing and custody infrastructure. We monetize client activity through commissions, spreads, and financing. Through the benchmark acquisition, we further enhanced our relevance to customers with deep equity research and ability to connect users through corporate access and capital market services we have built an ecosystem that is designed to service clients across the full equities life cycle on our next slide slide 13 turning to equity market making specifically it is important to recognize the scale and relevance of this business. We are a principal equities market maker providing liquidity and execution across a wide range of global securities. In 2025, Stonex ranked number one in over-the-counter American depository receipts and foreign securities, a position we have held consistently since 2015, according to FINRA ORF data. We make markets in approximately 18,000 equities globally, and we rank number one in over 1,500 individual securities. This is supported by more than 20 years of experience, 24-hour market coverage, and access to 120 global markets. For institutional clients, this matters because it translates into reliable liquidity, pricing, and execution, particularly in less liquid international or complex stocks. While this part of the business may be less visible than the traditional listed securities, it plays a meaningful role in how institutional investors, asset managers, and retail broker-dealers access global equity markets with Stonex. Moving on to the next slide, slide 14, what makes our market-making franchise different and succeed? Our entry into the highly competitive REG NMS stock was built upon our leading OTC ADR franchise, market experience, and deep institutional relationships developed over decades. This foundation has allowed us to scale into the listed space in a disciplined way. Second, market making at Stonex operates within a vertically integrated equities ecosystem. As already shown, it exists alongside clearing, custody, prime brokerage, research, and capital markets. It is all connected. This integration improves capital efficiency and allows us to serve clients more comprehensively. Third, we benefit from the aggregation of trading flow across a globally diversified client base that is institutional as well as self-directed retail. This aggregated diverse flow allows us to provide deeper liquidity and more consistent pricing, supporting high quality execution for our clients while managing risk and hedging more efficiently. Finally, technology is the real enabler. Our proprietary electronic platforms are designed to support best execution and allow us to deliver tools focused on execution quality. The result of these factors are reflected in the growth you see here with our REG NMS market making volumes growing at a compound annual rate of over 130% since 2022. We believe we are a fraction of the total addressable market which is likely measured in trillions of dollars of notional volume lastly turning to the priorities on slide 15 required to scale the market making platform first we continuing to streamline our operations by consolidating platforms automating middle office processes and simplifying reporting and post-trade workflows This improves operating efficiency and supports our operating margins as volume grows. Second, we are deliberately deepening our market share, expanding our NMS wholesale market-making capabilities, growing outsourced trading relationships, and increasing our presence in ETFs and global options where client demand is rising. Third, we are strengthening our global reach and technology platform. This includes building a footprint in Asia-Pacific, expanding sales coverage in the EMEA region, and continuing to invest in the core architecture that underpins our market-making platform. Overall, we expect to process higher volumes, expand our global reach, and continue to invest in a platform that is efficient and scalable and supportive of high operating leverage. Importantly, all of this is being done in a way that strengthens our broader equities ecosystem, making Sternix increasingly relevant to our clients across execution, liquidity, clearing and custody, prime services, research, and capital markets. Now, to close out this presentation, this was a hugely pleasing quarter all-round, highlighting record net income of $174.3 million, which is up 143% versus prior year, diluted EPS of $2.07, up 120% versus prior year, and achieving an ROE for the quarter of 26.5% and 19.8% for the trailing 12 months ending March 31, 2026, and an ROE on tangible book value for the quarter of 37% and 25.9% for the trading 12 months. Book value per share of $34.16, up $8.43, or 33% versus prior year. And results over the last two years have grown trading 12-month net operating revenues by 56%, or a 25% CAGA, and trading 12-month earnings by 91%, or nearly 38% CAGA. A more volatile economic backdrop has emerged, potentially surpassing levels of the past two years, but this environment plays into our strengths as volatility continues to be a key driver of our business. We have seen significant growth in our client assets, average client funds, securities clearing, prime brokerage, and metals, which provide stable recurring income. We believe our unique ecosystem, which offers extensive depth and breadth of product and a widespread geographical reach, combined with a significant total addressable market, will continue to power growth in the years to come. We naturally remain very excited about our future growth and continued expansion of our 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. Please limit to one question and one follow-up. To ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Dan Fannin from Jefferies.

Dan, your line is now open uh thanks good morning so uh you know yeah good morning um you know the environment continues to be quite constructive as you highlighted and was hoping to just get a bit more context around the health of that you know one of your peers highlighted a customer loss in i think january on the natural gas side was hoping you could talk about just kind of the the good and bad volatility that you saw in the quarter and then also give us an update here given we're now in may of kind of what's happened as the quarters ended and we've seen you know some of the exchange volumes also start to moderate how that's translating across your business as well

sure so as we said in the q1 q a um there was surprisingly very little in terms of credit losses and we did remind the market that continued heightened level of volatility while positive from a revenue perspective, it obviously does increase the chance of some credit losses. Now, we work very closely with our clients each and every day to help mitigate that, because communication with our clients through these extreme volatile periods is, whilst unusual, is important that we maintain that level of communication and ensure that we help our clients to minimize their own exposure, their own liquidity risks. And I think in light of the fact that if you look at the levels of volatility in the last two quarters, I think the level of credit losses we've provided for have been somewhat minimal. So I wouldn't say it was particularly unusual. I think it highlighted the quality of our clients. And I think probably more relevant, it highlights the interaction and engagement that we have with our clients. But But as we've said very openly many times, this level of increased volatility, there should be an expected increased risk in credit losses that come with that heightened revenue generation.

And then I guess just to follow up on just the kind of current environment we're seeing in April, particularly in certain of the markets where we know we can see volumes have moderated, whether that's metals or precious metals or other areas. Can you give us an update in terms of how that business looks here thus far to start fiscal third quarter?

Yeah, certainly. I mean, Dan, we've had a tremendous activity in, you know, the first couple quarters and last year, I guess, in the precious metal space. And then, obviously, you know, listed derivative, OTC, everything was really doing well with the volatility we saw here in the second quarter of fiscal year. But, you know, we do see, you know, we see that what you see is from the standpoint of some moderation, you know, coming into April as we start the third quarter, just with, you know, a little bit, I wouldn't, it's certainly not normal, but, you know, off where you saw it in Q2 from the standpoint of activity. But still overall a very good environment from the standpoint of interest rates and, you know, still an elevated volatility market.

Got it. Okay, that makes sense. And I guess I'm not used to being restricted by my number of questions on this call. Feel free. Go ahead. Go ahead, Dan. You're fine. I guess, you know, just, Bill, you mentioned some of the costs associated with R.J. O'Brien and severance and what we saw in the quarter. Can you update us on the synergies and just, you know, broadly at the highest level how the integration is going? Clearly, the environment's good, but I'd like to get a little bit more detail around what you're doing under the hood and how that's going.

Well, if I maybe start, Dan, by just giving you an update in terms of what we set out from a timeline, from an integration program perspective, we are on track. And I think the last call, we highlighted the targeting of our non-U.S. businesses and the integration that go with those businesses was the priority and also a testing ground to ensure that the larger program of integration in the U.S. is able to run more smoothly based upon any observance of any issues that arose during the non-U.S. integration process. So those have begun. This quarter we're currently in is obviously an important quarter for us. And we've begun the process of the integration of our US FCMs. And it's on a much more gradual basis, whereby we begin testing with some small group of clients. We then have a second group, which has already occurred, and then we have a gradual buildup to the entirety of the FCM consolidation at the end of this month. So it's an ongoing process. The timeline hasn't changed from where we set out and how we set it out almost two quarters ago. And in terms of the costs and the efficiencies, those are also in track, but I'll let Bill highlight those in detail.

Sure. Thanks. Thanks, Philip. You know, we touched on this a little bit last quarter, Dan. So within the quarter, you know, we talked a little bit coming out of last quarter what the run rate is. For the second quarter, we had about seven, just shy of seven, $6.9 million worth of synergies that, you know, we saw in the numbers in Q2. And the exit run rate kind of coming out of Q2 at those same synergies is about a little over $8 million. So we're at about a $32 million run rate, you know, to reaffirm kind of where our target is. Our expectation is that we'll be $50 million by the end of the process. And we think that coming out of Q2, we're probably around $32 million on an annualized basis. And we expect by the end of fiscal year to be, you know, probably closer to $45 million. And then we'll have that kind of remaining piece dribble in in 27. Does that answer your question? Or makes sense?

Yeah, no, that's super helpful. And then just lastly, Bill, on the context of the hedge that you talked and quantified, do you think you're kind of – do you expect to do more as the year goes on, or is this kind of what – you've talked about this previously, but is this the kind of right amount in terms of interest rate exposure you're looking to manage to?

Yeah, we talked about this when we first did the RGO kind of integration in that first quarter, and Sean had touched on at the time that, you know, at that time we had about $13 billion in the two kind of combined portfolios, and there was about, you know, roughly half of that that is our balances that, you know, we keep virtually most of the income on those assets. So that's really the key one that we're trying to protect. So this puts us at, you know, around a billion eight of swap coverage. And we've got about a billion and a half of kind of duration, right, that's going out to, you know, 20, 24 months of physical purchases of investment. So, we feel like we've got a good start, but, you know, I think we'll probably continue to look where applicable to still put in some floors there just to, you know, protect the downside on that where it's just kind of, you know, that there's not sharing on those balances. So, we want to make sure that we're comfortable with the levels we're set in. So, still an active management program that we've got in place. Hopefully, that kind of gives you some guidelines of what we're looking to protect.

That's helpful. I'll get back in the queue.

And feel free, Jeff, if you've got multiple questions as well.

Your next question comes from the line of Jeff Schmidt from William Blair. Jeff, your line is now open.

Hi. Good morning, everyone. Good morning, Jeff. In the commercial hedging business, could you just give us a sense of the mix of that business? I mean, obviously, strength was widespread, but how much is agricultural versus energy or, I guess, renewables? and RJL's interest rate business as well?

So within the majority, just to level set it, the majority of the RJL interest rate business is actually in the institutional segment because it's more institutional customers looking to the big group and others looking to manage their interest rate exposure. But if we're looking on the commercial side of the listed derivative, it's probably going to be more heavily weighted towards the energy and the renewable fuel side. I mean, you know, a lot of it was soybean oil and other inputs into renewable fuels. So, you can call that agriculture, you can call that renewable, you know, it's a little bit of both. It's the inputs on the agricultural side, the outputs on the energy side, but it's more so that. I mean, I think we're still seeing, we had a bit of a slow start to Q2 and kind of, I would say that like the U.S. row crops, you know, corn, soybean, wheat, but then we saw nice activity in the back half of the quarter. But really, the OTC market was really where we saw was the real standout with the best volume, best revenues we've seen historically on the OTC space. And with that volatility, I think those customized solutions that we can provide to customers to really kind of help capture margin and mitigate their risk showed the benefit in that quarter to clients, and we saw a lot of uptake in activity.

And I would only add that in Q1, maybe we were slightly overshadowed by the success of the metals business in relation to everything else. But in Q2, there was a consistent level of increased activity, increased revenue across the board, which we don't always expect and we shouldn't expect. But it was pleasing to see that that was evident. And, you know, as Bill said, obviously energy was very much the story of the quarter, but there was consistent growth in other areas as a result of increased volatility, but also just increased activity from our clients and across the board, which good to see. Very pleased.

Okay, that's helpful. And then maybe if you could do the same in the physical trading business. I mean, is that mainly precious metals and gold in particular? What portion of the mix is that? And then where are you in terms of cross-selling with RJO clients? I don't think they have that physical trading capabilities.

No, they don't. And I think that was raised last quarter. I think there was a level of confusion whether a lot of that came from RGO integration and cross-selling. The physical aspect is very much driven by our very successful precious metals business, but also our very successful non-metals business, which in areas of cocoa, in areas of coffee, we had continued expansion, and continued growth across the board. But unfortunately, within the physical space, there is still an overshadowing by the physical metals business. And we saw Q1 showing record levels of transaction volume and net income attached to that physical metals business. Unfortunately, Q2 overshadowed Q1. So that continued level of growth and client activity. But it was, as I said before, across multiple sub products within our commercial business, there was a broad level of increased activity and increased revenue. And I would say, with regards to our OTC business, where we are, you know, we highlighted a record level of OTC contracts, that is something that we look forward to greater participation from the RGO integration post full integration in the U.S., where we are able to more easily offer OTC contracts and OTC products and capabilities to the legacy RGO client base. Until the integration happens, it's just slightly more cumbersome in terms of papering and different legal entities, and so that would make that life easier.

And Jeff, to your numerical question there. For a total of $190 million worth of physical contact operating revenues in Q2, about $150 of that was precious. The rest was the rest of the what we called physical agriculture and energy before. We're now calling stonex supply and trading, but that's kind of more the agriculture and energy side of the business.

Okay. Okay. Very helpful. And then could you provide an update on the M&A environment and sort of what inning you think we're in for industry consolidation? Are, you know, opportunities up versus a year ago? You know, how are valuation expectations trending?

I think generally, we will always continue to see a certain level of small to midsize interest and M&A activity. And I think I mentioned this previously, is that We are known in the market as a consolidator. We are known as an expander of our ecosystem. And I think that drives the interest in people wanting to bring their business, who maybe either want an exit strategy or they want to take their business to the next level and be part of a broad, more capable, expansive ecosystem that they can operate within StoneX. And I think we've mentioned previously that on the whole, most of the acquisitions we've done end up within a relatively short period of time growing in multiples of where they were prior to becoming part of StoneX. And a lot of that is the heavy cost of business, the heavy cost of regulation, the heavy cost of having a monoline businesses in certain areas where you don't have that diversity of revenue, you don't have the ability to utilize and access the clients across multiple products. And I think that's our benefit. So as a result, that is why we do get a near constant level of interest in that sort of small to midsize sort of 10 to 30 million dollar range of businesses that we are very easily able to acquire, incorporate, tack onto the ecosystem and then start leveraging either the client capability, the geography expansion or the product that those acquisitions provide us. And I think it's important that we talk about our ecosystem all the time. And that is a huge driver of much of the M&A activity. And I think it's something we probably don't talk enough about because the way we operate our verticals and our products, we don't allow, we don't want any silos within our businesses. And over the last 10, 15 years, I think we've done a very good job of integrating multiple new products, new entities, new capabilities that were previously on a standalone basis. Everything is becoming much more integrated, and that allows us to truly leverage those capabilities and truly have multiple product initiatives like we've seen with our FIG initiative, where we're bringing together all aspects of the company and heading in the same direction. That drives interest in us from an M&A perspective, and it drives interest that we have in other areas where we would like to continue that level of ecosystem expansion. So I don't think the market has changed drastically. We continue to have a lot of interest. And we do almost make small acquisitions on a very regular basis, which we probably don't promote as much because we're so used to that level of expansion. But always, always looking at transactions, always looking at potential expansion opportunities.

Okay, great. Thank you, everyone.

Thank you, Jeff.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. Please hold while we compile the Q&A roster. This now concludes the question and answer session. I would now like to turn it back to Philip Smith for closing remarks.

Thank you. In closing, I would just like to say a huge thank you to all the employees of Stonex. for their vital contribution in achieving this record quarter. Working tirelessly every day with our clients through such heightened volatility market conditions is what we do. And Stonex employees do this incredibly well. A service for which I'm hugely proud of. And this quarter, I feel is a testament to that dedication and that service to our clients. so a huge thank you to all of our employees and look forward to seeing what q3 brings thank you very much thank you for your participation in today's conference This does conclude the program and you may now disconnect.