StoneX Group Inc (NASDAQ:SNEX), a diversified global brokerage and financial services firm, has posted its results for the quarter to end-December 2020, with the document including some information on the acquisition of GAIN Capital.

The company is seeking to mitigate its exposure to GBP.

StoneX explains that, following the acquisition of Gain, and in advance of the planned merger of the operations of Gain’s U.K. domiciled subsidiaries into StoneX Financial Ltd., it enacted a plan to mitigate its exposure to the British Pound in the Gain subsidiaries. As part of this plan, StoneX increased the U.S. dollar balances in the Gain subsidiaries and also utilized derivative transactions to mitigate the remaining British Pound exposure.

In the three months ended December 31, 2020, StoneX recognized a $3.7 million unrealized loss on these derivative positions. In addition, as the Gain’s U.K. subsidiaries have a functional currency of British Pound, the increased U.S. dollar exposure resulted in a $2.7 million foreign currency loss on revaluation for the three months ended December 31, 2020.

In addition, the assets and liabilities of Gain’s U.K. subsidiaries are subject to translation to USD, and for the three months ended December 31, 2020, the foreign currency translation adjustment related to Gain’s U.K. subsidiaries resulted in an $8.8 million increase.

Operating revenues from FX/CFD contracts increased $55.2 million to $59.8 million in the three months ended December 31, 2020, as a result of an incremental $54.8 million in retail FX/CFD contracts operating revenues resulting from the acquisition of Gain in the fourth quarter fiscal 2020.

Sean M. O’Connor, CEO of StoneX Group Inc., stated,

“Q1 was a solid start to the new fiscal year with all our segments showing growth in both operating revenues and segment income, despite generally lower trending volatility and significantly lower interest rates. We saw strong growth in customer volumes, new account activity and customer float. We have made good progress on integrating Gain, including realizing cost synergies, and are actively developing revenue synergy opportunities.

The quarter included a few notable items, which in aggregate reduced our EPS by approximately $0.45 per diluted share, and without which we would have nearly achieved our goal of a 15% return on equity for the quarter. Specifically, we recorded hedging losses relating to the sterling-based capital acquired in the Gain transaction, which was offset with a credit to stockholders’ equity, and with respect to physical inventories we hold for short periods prior to delivery for sale, and we also recorded additional amortization relating to intangible assets acquired in the Gain transaction.”