Prepared remarks
Good day, and thank you for standing by. Welcome to the StoneX Group, Inc. Q3 FY '26 Earnings Conference Call. 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 30, 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 10-Q 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 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. While there's been a moderation in volatility this quarter, I'm pleased to report our third quarter results. Total net operating revenues of $719.7 million were up 47% versus the prior year, alongside net income of $127.9 million, up 102% year-on-year. We also recorded a diluted EPS of $1 per share, an 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 19% 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 RJO 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 highlighted last quarter with growth in both ADRs as well as U.S. 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 R.J. O'Brien. The U.S. FCM consolidation work remains on track to be substantially completed later this fiscal year. We completed the vast majority of RJO's remaining U.S.-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 #1 nonbank FCM in United States. More broadly and as anticipated, volatility moderated from the exceptional levels of the second quarter. Even so, client activity remains strong, supported by continued client engagement and pockets of elevated volatility, resulting in nearly all of our products delivering double-digit growth, reflecting the strength of our diversified business model, the investments we have made across our platform and the scale of the ecosystem we have built. Now I will turn over to Bill for a more detailed discussion on our financials this quarter. Over to you, Bill.
Thank you, Philip. I'll start with Slide #5 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 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 $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, driven by a $6.9 million decline in severance and retention costs, a decrease in back office and administrative salaries, along with a decrease in payroll taxes. 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.J. O'Brien and Benchmark. The acquisition of R.J. 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 months 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 sweep 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 #6 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 increase $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 LME 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 the 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. listed 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 sweep 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 billion in average client equity for the quarter and the average money market FDIC sweep client balances declined 2%. Moving on to Slide #7. I'll do a quick review of our segment performance. Our Commercial segment increased net operating revenue 90% versus the prior year, primarily resulting from 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 Payments 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 immediately preceding quarter, payment net operating revenues increased 7% and segment income increased 8%. Moving on to Slide #8. 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 Payments 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 #9, 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 sweep 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 1.5 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 $0.38 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, and turning 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 at a 60% plus CAGR over the last 7 years and is one of the clearest examples of our ecosystem at work. The thesis was straightforward and is the same thesis that runs through everything StoneX 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 impose 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 futures strategies. Our investment in automation leaves 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 multifamily offices. Securities financing and lending are also central to our U.S. offering. 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 earn 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 U.K. 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, StoneX's existing relationships provide a natural cross-selling opportunity for Global Prime. 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 introduction, helps 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 StoneX. Finally, we are focused on making the platform more valuable for clients who choose to do more business with StoneX. Through cross-product margining and collateral relief, integrated coverage teams and consolidated reporting, we are making it easier for clients to access the full breadth of the ecosystem through a single relationship. This is evidenced by clients engaging with us across multiple capabilities from the beginning. And in some cases, we have clients on board across seven products simultaneously. We believe these initiatives will drive greater client engagement, strengthen retention 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 StoneX 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. Trailing 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 trailing 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 trailing 12-month basis, with book value per share of $23.70, up $5.76 or 32% versus the prior year. Our performance to date reflects the power and scale of the ecosystem we have built at StoneX 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?
Questions and answers
Our first question comes from Dan Fannon from Jefferies.
So 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 wanted to get a little bit more color around the underlying activity, what's driving that. We've also read about Project Vault. If that is—curious if that is something that the government is doing that is having an impact on the growth of that business?
Yes, sure, Dan. So our physical business, as you know, separates between metals and nonmetals, and it's very much precious metals versus non-precious metals, more in the commodities, agricultural and such. We've seen over the last two quarters where the metals, the precious metals physical business has outperformed, done incredibly well and exceeded expectations. A lot of it was driven by dislocations in various markets between location A and location B. I covered that in detail in the last two earnings calls. Regarding domestic and non-metals business, that physical business continues to grow. We continue to build out market share and, as we set out when we made acquisitions such as CDI, which put us into the physical cotton business and expanded us into physical coffee and physical cocoa, these are areas where our financial business is very strong and our client base is very deep. When we expand into those areas, we take comfort in the fact that we are extending the product offering and the ecosystem within that space from a very strong position in our financial business. Continued success in building out those businesses has come where we've been able to work closely with our financial business and our financial-based clients to offer them an additional level of service. That's been crucial in our build-out of the physical business. We continue to add more products and capabilities and create a unique ecosystem for our clients. Some clients are eager to operate in the physical space and want the hedging capability. We have the ability to embed optionality into physical contracts. That's a fairly unique product offering because we have the strong financial business, strong OTC business and an increasingly strong physical business. Bringing those together makes a very formidable product line for us. We want to highlight in a couple of quarters' time how we've brought together various parts of the business we've acquired and built out organically. We want to show that as a separate division, which is increasingly becoming a more relevant business line for us.
Understood. 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 synergy side? And then at the time of the deal, you announced 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, and I'll let Philip handle the second one. On the cost synergy side, as I mentioned on the last call, we were exiting Q2 with about a $32 million annualized run rate of cost savings. We're exiting Q3 with something closer to $37 million to $38 million, still targeting what we discussed last quarter by the end of the fiscal year, so the end of next quarter, to be in the mid-40s—$45 million, $46 million run rate—and by probably the end of first quarter to be at the $50 million we originally announced. So we're tracking well from where we were last quarter and continuing to see that grow here in Q3.
And I think when we last spoke last quarter, we said this Q3 was a very important quarter for the integration. The large integration process of the U.S. FCM was going to happen, and that did happen. It has been completed. We are now able to start looking at the business more holistically, looking at the clients and going deeper into cross-selling capability. From the moment we announced the deal, even before closing, there was a lot of interaction between StoneX and R.J. O'Brien. That continued into closing and into the integration. There are early success stories where increased capabilities that we can provide from StoneX to R.J. O'Brien clients, who are now StoneX clients, have delivered benefits and momentum. We remain positive about the outcome. From Day 1 there were products we could offer to customers—platforms, access to physical products, physical programs—that assist our clients immediately. Other opportunities require engagement, education and suitability checks to ensure products we offer to legacy R.J. O'Brien clients are appropriate. We didn't provide explicit revenue synergy timelines because we did not want to be bound by timetable expectations that could rush suitability and client education. That momentum continues, and as clients become embedded in the StoneX system, we can leverage the relationship at a greater rate and continue to mark wins along the way.
Understood. And then, Bill, just a follow-up on just the quarter's results, and if there were any one-time items or things in the income statement—professional fees looked low—if there are any benefits or items we should normalize out as we think about your fiscal fourth quarter?
Sure. We tried to point some of those out. There's about a $12.5 million insurance recovery in professional fees, net of some settlements, so it's about $8.5 million on a net basis for the quarter. We did talk about the synergies. There were also a little over $4 million of severance and retention in the quarter. So netting those out versus the synergies, I think those are probably the only two items I would call out.
Our next question comes from Jeff Schmitt from William Blair.
On the revenue synergies, I know you spent 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 you just started your cross-selling efforts for your OTC derivatives. Maybe you can give us a sense on how long you think that could take?
That does seem to be the question everyone wants to know. We've achieved a lot of interaction between R.J. O'Brien and StoneX even before the integration completed, increasing awareness of what we can offer. We have had some easy wins offering platforms and capabilities that legacy R.J. O'Brien clients are now using because they see the opportunity. In some instances, clients wanted these capabilities at R.J. O'Brien but didn't have them. R.J. O'Brien has 350 IBs who themselves have underlying clients, so reaching the end clients requires integration, awareness and engagement. We have been actively engaging those underlying clients to demonstrate the capabilities on offer. Some products, like foreign exchange provisioning, OTC access, or physical hedging, require rollout lead time. We have avoided pressuring sales because suitability and correct product-market fit matter. We didn't set rigid revenue synergy timelines for that reason. Momentum continues as clients embed into the StoneX system, and we see the same logic we applied to build OTC businesses in EMEA and APAC: it takes time but yields meaningful results. Our Prime business is an illustration of combining capabilities into a single product offering that distinguishes us in the market.
And then a question on the payments business. The RPM continues to decline there. It's fallen for a couple of years now. In the past, you talked about a client mix shift, moving into larger banks. Could you discuss what's driving that? And how much further do you think that can fall?
If you go back to when we did the deep dive on payments, it coincided with the launch of our proprietary system, X-Pay. The key there was capacity. Up until that point, we were turning away business because our system did not have the capability. Once we rolled out X-Pay, we increased capacity dramatically and allowed banks and payments companies to use our payment channels and rails to access countries they couldn't reach at scale. Prior to X-Pay, we were unable to provide that scale. That rollout was a key driver of growth. We continue to see large payments companies and an increasing number of banks directing flows to StoneX because we can provide that level of service, including lower-value, higher-volume payments. That's why average daily volume is up while revenue per trade is down. We expect that trend to continue for the foreseeable future.
You can see what Philip is talking about when you look at our first quarter of this fiscal year—that's when you saw a big spike in volumes, and you did see the rate per million trend down a bit, as Philip described, as the system got rolled out. But then you've seen that actually trend up and the volumes have grown, which has been a nice trend during the fiscal year, up sequentially for three quarters. So it did, kind of, level set as that system got rolled out, but now we're seeing rates per million trend up a little bit as volumes grow. I don't think it's necessarily going to get back to where it was, but volumes are growing quite fast, and it's nice to see rates per million are going up.
It was just shy of a record quarter, which is important because historically Q1 has been the high watermark in most years, and we were just shy of beating the Q1 high watermark from 2024. That's pleasing. I'm hoping to have a deep dive in payments for our Q1 '27 call because that should coincide with a number of initiatives and opportunities we want to highlight, which will be about three years after we last did the deep dive.
Okay. Great. And then a question on client float. Obviously up a lot from the RJO deal. What do you think that can grow at after the deal annualizes or lapses? And any changes in your investment strategy there? Are you increasing duration, using more swaps, anything like that?
Post the deal, you can certainly see that those balances can grow at high single-digit percent annually. The industry continues to grow, and we've become more relevant as the largest nonbank U.S. FCM, and we're continuing to grow in the U.K. and Singapore as well. On the investment front, we're not doing anything materially different from what we've discussed over the last nine months. Post integration, we entered about another $750 million of two-year swaps to average into this quarter and put a floor. Overall, we've got about $2.5 billion of swaps out there at a little over 3.50%, which provides a nice floor for us on that piece. There's a little bit of duration on the investment side but not a lot; roughly $1.5 billion is out on the curve but nothing more than two years. We're aiming to earn a small premium over SOFR—roughly 10 to 15 basis points.
And then just one last one. The transcript mentioned greater adoption of your automated trading platform with regards to the OTC derivatives business. Is that a newer initiative or something you've been investing in for a while? Why was that called out specifically?
It's not new, but it's been accelerated and improved. The efficiencies achieved using AI have sped upgrades and increased capability. That's something we're seeing across the board and is highlighted in the OTC capability where our electronic swap matching platform has been rolled out over time. The acceleration and efficiency of the platform have made a meaningful difference. That relates back to our recent move from early AI adoption and experimentation to rolling out an enterprise-wide capability which is becoming central to our technology build-out. Our swap platform is an early example where we're seeing wins. We're also rolling out capabilities to improve efficiency in reconciliations, investigations, LC management, settlement instruction corrections and project acceleration. We plan to demonstrate what we've achieved—cost savings, vendor reductions, technology acceleration—over the next few quarters.
One of the other benefits is that six or seven years ago, many structured products in OTC trading were negotiated by phone between clients and our desk. Now we have tools where customers can look at live pricing for structured products that fit their needs. It's much quicker execution, more customizable and gives clients a better view, which is driving volume growth and revenues.
It also makes geographic expansion easier because you're not relying on people to price transactions manually; you can offer it across our global footprint and to clients throughout the globe.
Our next question comes from Dan Fannon from Jefferies.
So just wanted to get your updated thoughts on M&A here currently and maybe the dialogue or activity as you see in the back half of the calendar year, if you see that picking up for yourselves?
We are always looking at transactions. We are known as a consolidator and an acquirer in the market, and we stick to strict principles around logic for adding to the StoneX ecosystem—whether it expands geographic footprint, product offering or brings a book of clients we didn't have before. That will not change. We often look at smaller transactions in the $10 million to $40 million range that add capability. Many small monoline businesses or sole proprietors look for exit strategies, and we are an acquirer of choice for them because we can add capability and bring our platform to their clients. We have not seen a change in activity since the beginning of the year. We now have dedicated resources that continuously evaluate and complete acquisitions, and most importantly, complete integrations. We're disciplined; we don't pursue deals out of desperation. If there's an obvious gap to fill, we'll act, but on the whole, we look at many transactions and only pursue what adds to our ecosystem.
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. Once again, a huge shout-out to all StoneX 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.