The following is a discussion and analysis of our financial condition, results of operations and liquidity and capital structure for the years ended August 31, 2008, 2007 and 2006. This section should be read together with our audited consolidated financial statements and related notes included elsewhere in this report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this report on Form 10-K, including information with respect to our plans and strategies for our business, includes forward-looking statements that involve risks and uncertainties. You should review the "Risk Factors" section of this report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in, or implied by, the forward-looking statements contained in this report on Form 10-K.

Overview

We are an integrated commodity risk management company providing risk management consulting and transaction execution services to commercial commodity intermediaries, end-users and producers. We assist primarily middle market customers in optimizing their profit margins and mitigating commodity price risk. In addition to our risk management consulting services, we operate one of the leading independent clearing and execution platforms for exchange-traded futures and options contracts. In fiscal 2008, we served more than 8,000 customers and transacted more than 100.0 million contracts in the exchange-traded and OTC markets. As a complement to our commodity risk management consulting and execution services, we also assist our customers with the financing, transportation and merchandising of their physical commodity inventories.

Fiscal 2008 Highlights

• Record revenues, net of cost of commodities sold, of $336.5 million.

• Record level of customer segregated assets of $2.1 billion set during April 2008 and $1.5 billion at August 31, 2008.

• A 325 basis point decrease in the Federal Funds rate during the year

• Successful completion of three acquisitions - Downes-O'Neill, LLC and Jernigan Group, LLC/Globecot, Inc.

• Replacement of previous margin and subordinated credit lines with a $250 million margin call facility and a $55 million subordinated debt facility with a syndicate of lenders.

• OTC and exchange-traded contract volumes increased 81% and 62%, respectively, from fiscal 2007.

• Ceased construction and testing of Green Diesel's developmental stage biodiesel plant resulting in a loss on discontinued operations of $6.8 million, net of tax

We operate in three reportable segments consisting of Commodity and Risk Management Services ("C&RM"), Clearing and Execution Services, and Financial Services. In years prior to fiscal 2008, we also reported a Grain Merchandising segment. We also report a Corporate and Other segment, which contains corporate expenses and equity investments not directly attributable to our operating segments. Our profitability is primarily driven by the C&RM and Clearing and Execution Services segments of our business, as shown in the table below. The table sets forth for each segment the income (loss) before minority interest and income tax expense for each of the three fiscal years ended August 31, 2008.

                                                                     Year Ended August 31,
                                                              2008            2007           2006
                                                                        (in thousands)
Commodity and Risk Management Services                      $  67,550       $ 45,721       $ 21,937
Clearing and Execution Services                                20,161          9,610         10,981
Financial Services                                              1,689          1,052            (19 )
Grain Merchandising(1)                                             -           2,130           (430 )
Corporate and Other                                           (11,258 )       (4,286 )       (7,938 )

Income before minority interest and income tax expense      $  78,142       $ 54,227       $ 24,531

(1) As a result of our sale of our controlling interest in FGDI on June 1, 2007, we have no sales of commodities and cost of commodities sold related to our previously presented grain merchandising segment for the year ended August 31, 2008. For the year ended August 31, 2007, sales of commodities and cost of commodities sold include only nine months of results from the operations of our grain merchandising segment. See Operations by Segment included within Management's Discussion and Analysis of Financial Condition and Results of Operations.

Factors that Affect Our Business

Our results of operations have been, and we expect will continue to be, affected principally by customer creditworthiness and liquidity, counterparty creditworthiness, customer acceptance of risk management, commodity price volatility, transaction volumes, interest rates, customer fund balances and our ability to develop new products for our customers.

Customer Creditworthiness and Liquidity

Our customers' ability to maintain and access adequate credit facilities is critical to our results. Throughout the agriculture and energy industries, higher commodity prices and continued volatility has required increased lines of credit, and placed a strain on working capital debt facilities, leveraging customers to unprecedented levels in order for them to continue to carry inventory and properly execute hedging strategies. Recent volatility in the financial markets has tightened credit further, and increased the difficulty in obtaining adequate financing.

Counterparty Creditworthiness

Our ability to maintain or grow our OTC business is dependant on our ability to find counterparties willing to transact, and our ability to insure those counterparties against default. Developments in the financial markets may hinder our ability to obtain insurance on certain counterparties, or that insurance may be at an increased cost. Failure to obtain this counterparty insurance would reduce the number of counterparties of with which we can transact. Additionally, counterparties may require additional margin be deposited, which we may not be able to pass thru to the customer and accordingly have to reduce business transacted, which affects our results of operations.

Customer Acceptance of Risk Management

The growing sophistication of company managers and the heightened expectations of investors have increased the acceptance of commodity risk management strategies. Demand for risk management consulting services is growing in industries that have not traditionally been significant users of hedging techniques and the derivatives market. This increased demand drives our fee revenue from risk management consulting services and our commission and interest income generated from the trading activity of our customers. As we expand our customer base beyond the traditional users of derivative products, our ability to provide an analysis of the commodity markets and advise our customers about how to manage the commodity risk inherent in their businesses will continue to be an important driver in our ability to generate future revenues.

Commodity Price Volatility

Rising commodity price volatility historically has led to increases in transaction volume and better financial performance in both our C&RM and CES segments. High commodity price volatility affects our financial performance by increasing the uncertainty of the profit margins of intermediaries, end-users and producers, which ultimately leads them to derivatives as a way of mitigating their financial risk from changing prices. At the same time, market volatility creates opportunities for professional traders, who find derivatives a more efficient way to transact relative to traditional physical commodities. In general, high commodity price volatility increases the demand for risk management consulting services and trade execution and clearing by commodity producers,

intermediaries, end-users and professional traders. However, high commodity prices also forces our customers to obtain additional lending capacity. Failure of our customers to obtain necessary financing capacity would limit their use of derivative products for hedging strategies.

Transaction Volumes

Market transaction volume, as measured by numbers of contracts, has continually increased over the past five years due to higher commodity price volatility, product innovation and a shift to electronic trading. As noted above, high commodity price volatility results in increased demand for risk management consulting services and increased transaction volumes. In addition, product innovation in both the international exchange-traded and OTC markets has resulted in higher transaction volumes. The continued convergence of derivatives and cash markets and the expanded use of derivatives for hedging and investment purposes have been the primary drivers of this industry trend. The shift from open outcry, pit-based trading to electronic trading platforms has increased trading volume as customers are drawn to more efficient and lower cost markets.

Interest Rates

The level of prevailing short-term interest rates affects our profitability because a significant portion of our revenue is derived from interest earned from the investment of funds deposited with us as margin for trading activities by customers in our C&RM and CES segments. The level of customer segregated assets deposited with us is directly related to transaction volume, open contract interest of our customers and the level of margin required for each position. As the majority of the interest we earn relates to client balances, held with us on deposit, on which we return a portion of the interest to our customers, we report interest revenues, net of interest returned to customers. Our financial performance generally benefits from rising interest rates. Rising interest rates increase the amount of interest income earned from these customer deposits. In contrast, declining interest rates decrease the amount of interest income earned on customer deposits.

Customer Fund Balances Held on Deposit

The amount of customer funds on deposit with us affects our profitability because a significant portion of our revenue is derived from the investment of funds deposited with us as margin for trading activities by customers in our C&RM and CES segments. The amount of this balance is affected by the volume of business transacted, the level of commodity prices and the level of required margin.

Product Development

Our ability to develop customized products to meet our customers' specialized needs affects the overall profitability of our operations. These customized products often have unique and complex structures based on OTC traded contracts and we provide value-added service components to our customers that make these products more profitable for us.

Statement of Operations

Revenues

Our revenues are comprised of: (1) commissions and clearing fees, (2) risk management service, consulting and related brokerage fees, (3) interest income,
(4) other revenues and (5) sales of physical commodities.

Commissions and clearing fees. Commissions and clearing fees represent revenues generated from exchange-traded and Forex transactions that we execute or clear in our C&RM and Clearing and Execution Services segments. Commissions and clearing fee revenue is a product of the number of transactions we process for our customers and the rate charged on those transactions. The rate that we charge our customers varies by type of customer, type of transaction and a customer's volume of trading activity.

Service, consulting and brokerage fees. Service, consulting and brokerage fees are revenue generated in the C&RM segment. Service revenues are monthly fees charged to IRMP customers for customized risk management consulting services. Brokerage fees are generated from OTC derivative trades and Forex trades executed with our customers and with other counterparties. These brokerage fees vary on a per trade basis depending on the level of service provided and the type of transaction. When transacting OTC and foreign exchange contracts with our customers, we will generally offset the customers transaction simultaneously with one of our trading counterparties. On a limited basis, our OTC and Forex trade desks will accept a customer transaction and will offset that transaction with a similar but not identical position on the exchange. These unmatched transactions are intended to be short-term in nature and are conducted to facilitate the most effective transaction for our customer. Consulting fees are primarily fees we charge for providing various other risk management-related consulting services to customers, which are generally performed on either a monthly or project-by-project basis.

Interest income. Interest revenue is primarily driven by the level of customer segregated assets deposited with us and the level of short-term interest rates. The level of customer segregated assets deposited with us is directly related to transaction volume and open contract interest of our customers. The majority of the interest we earn relates to client balances, held with us on deposit to satisfy margin requirements, on which we may return a portion of the interest to our customers. We report interest revenues, net of interest returned to customers. Additionally, we earn interest from our internally-generated cash balances invested at short-term interest rates, and also from financing fees related to commodity inventory repurchase programs within our Financial Services segment.

Other revenue. Other revenue represents various ancillary revenue streams, including transportation related income, profit-share arrangements and patronage income in our Financial Services segment, dividend income and income from equity investments and non-recurring items. Historically, income from non-recurring items have included gains on the sale of exchange membership stock or exchange seats, special dividends and litigation settlements, and can vary significantly from period to period. Losses on investments with Sentinel were included in this line in fiscal 2007.

Sales of commodities. During fiscal 2008, sales of commodities represent revenue generated from the sale of Chicago Climate Exchange (CCX) carbon financial instruments (CFIs). During fiscal 2007 and 2006, the majority of the sales of commodities represented the sale of grain in the previously-reported Grain Merchandising segment. When evaluating commodity sales, management focuses on the margin (gross profit) from commodity sales (see "Non-GAAP Financial Measures"). The focus on gross profit from commodity sales removes the effect of commodity price driven changes on revenue and cost of goods sold, which may not have an effect on net income.

Costs and Expenses

Cost of commodities sold. During fiscal 2008, cost of commodities sold represents the product of the volume of purchased CFIs and their related cost. During fiscal 2007 and 2006, the majority of the cost of commodities sold represented the purchase of grain in the previously-reported Grain Merchandising segment.

Employee compensation and commissions. Employee compensation and commissions consists of salaries, incentive compensation and commissions and is one of our primary operating expenses. We classify employees as either risk management consultants or salaried and support personnel, which includes our executive officers. The most significant component of our compensation expense is the employment of our risk management consultants, who are compensated with commission based on the revenues that their customers generate. Accordingly, our commission expense component is variable and is dependent on our commissions revenue and service, consulting and brokerage fee revenue.

Pit brokerage and clearing fees. Pit brokerage and clearing fees relate directly to expenses for exchange-traded futures and options clearing and settlement services, including fees we pay to the exchanges and the floor pit brokers. These fees are variable and fluctuate based on transaction volume. Clearing fees are passed on to our

customers and presented gross in the consolidated statements of operations under the Financial Accounting Standards Board ("FASB") Interpretation No.39, Offsetting of Amounts Related to Certain Contracts (as Amended), as there is no right of off-set.

Introducing broker commissions. Introducing broker commissions are commissions that we pay to non-employee third parties that have introduced customers to us. Introducing brokers are individuals or organizations that maintain relationships with customers and accept futures and options orders from those customers. We directly provide all account, transaction and margining services to introducing brokers, including accepting money, securities and property from the customers. The commissions we pay an introducing broker vary based on a variety of factors, including on the trading volume of the customers introduced to us. This expense is variable and is directly related to the overall volume of trades by those customers.

Employee benefits and payroll taxes expense. Employee benefits and payroll taxes expense consist primarily of employee health insurance, a defined benefit pension plan, two defined contribution plans (401(k) and ESOP), and payroll taxes. Accordingly, these expenses normally fluctuate in relation to employee compensation and commissions and the number of employees. In July 2008, all benefit accounts under our defined benefit pension plan were frozen. See Note 9 to the consolidated financial statements.

Interest expense. Interest expense consists of interest charged to us by our lenders on the loans, lines of credit and letters of credit outstanding. Our interest expense depends on the amount of debt outstanding and the interest rate environment, with all of our credit lines bearing interest at variable rates. This expense is primarily related to interest paid to lenders in our financial services segment.

Depreciation and amortization. Depreciation expense arises from the depreciation of property, equipment and leasehold improvements. Amortization arises from the amortization of intangible assets with determinable useful lives.

Bad debt expense. Bad debt expense consists of both amounts written off based on known defaults of customers and brokers, as well as an allowance for accounts that we believe may become uncollectible through our review of the historical aging of our receivables from customers and brokers and our monitoring of the financial strength of our customers, brokers and counterparties.

Other expenses. Other expenses consist primarily of office and equipment rent, communications, marketing information, travel, advertising, insurance, professional fees and other various expenses. The majority of these expenses are relatively fixed in nature and do not necessarily vary directly with changes in revenue.

Minority interest. On March 3, 2008, the Company executed an agreement with NASDAQ OMX Group, Inc. ("NASDAQ") in which NASDAQ contributed cash of approximately $5.0 million in exchange for preferred units in the Company's subsidiary, Agora-X, LLC ("Agora-X). The NASDAQ's initial interest associated with the preferred units is 13.33% ownership in Agora-X, and NASDAQ has agreed to contribute additional cash consideration, upon the completion of certain conditions, for a potential ownership interest of 20%.

On November 9, 2007, we acquired an additional 45% of the ownership interest in Green Diesel for a total ownership interest of 70%. As a result, we included the financial statements of Green Diesel in the consolidated financial statements since the acquisition date and initially recorded the minority interest held by an unaffiliated third party in Green Diesel. As a result of allocation of the impairment loss included in the loss from discontinued operations, the minority interest held by the unaffiliated third party has been reduced to zero and all activity for the periods presented has been reflected in the loss from discontinued operations. Subsequent to August 31, 2008, the Company completed the sale of its ownership interest in Green Diesel, which included recognition of an additional $0.2 million in loss on discontinued operations, net of tax.

Prior to June 1, 2007, minority interest reflected the 30% minority interest held by Agrex in FGDI, the subsidiary that comprised our previously-reported Grain Merchandising segment. Such minority interest ended effective June 1, 2007, when Agrex purchased a majority interest in FGDI (see Notes 18 and 25 to the consolidated financial statements).

Prior to March 31, 2006, minority interest also included a 30% interest held by an unaffiliated third party in FCStone Merchants Services. Effective March 31, 2006, FCStone Merchants Services redeemed the minority ownership interest in accordance with the limited liability company agreement.

Income tax expense. Income tax expense consists of current and deferred tax expense relating to federal, state and local taxes. We file a consolidated federal income tax return and combined state and local income tax returns for all wholly-owned subsidiaries.

Loss from discontinued operations. The loss from discontinued operations is comprised of impairment losses from Green Diesel's biodiesel development plant, operating losses from the discontinuance of its operations and costs incurred in disposition of the plant.

Revenues, Net of Cost of Commodities Sold

Revenues, net of cost of commodities sold, consists of total revenues presented as determined in accordance with GAAP, less the cost of commodities sold. Revenues, net of cost of commodities sold, is a non-GAAP financial measure that is used in this report on Form 10-K because our management considers it an important supplemental measure of our performance. As discussed below, prior to our sale of a controlling interest in FGDI, LLC ("FGDI") in fiscal 2007, the consolidation of FGDI's high revenue, low margin grain merchandising business made it very difficult for the reader of our financial statements to discern trends in profit margins and business drivers. Management believes revenues, net of cost of commodities sold, is a more relevant measure of our economic interest in these commodities transactions because it removes the effect of commodity price driven changes in revenue and cost of commodities sold, which may not have a meaningful effect on net income. In managing our business, management has historically focused on revenues derived from sales of commodities, net of cost of commodities sold. This financial measure is meaningful in managing our business as profit is driven more by the margin on commodities sold rather than the price of the commodities and analyzing consolidated costs and expenses as a percentage of total revenue is not meaningful because total revenues related to commodity sales is a disproportionately large number compared to margin. Measuring expense as a percentage of revenues, net of cost of commodities sold, provides a clearer understanding of the trends in costs and expenses and expense management.

As a result of the Company's sale of its controlling interest in FGDI on June 1, 2007, the Company is no longer consolidating the assets, liabilities, revenues and expenses of FGDI in its consolidated financial statements. Subsequent to the sale date, the remaining 25% equity interest in FGDI is recorded under the equity method, as a component of other revenues. Sale of commodities and cost of commodities sold included in the consolidated statement of operations for the years ended August 31, 2007 and 2006 related to FGDI were $1,077.9 million and $1,060.6 million, respectively, and $1,077.5 million and $1,061.0 million, respectively.

Critical Accounting Policies and Estimates

Our consolidated financial statements and accompanying notes have been prepared in accordance with GAAP applied on a consistent basis. The preparation of these consolidated financial statements requires us to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We evaluate these estimates and assumptions on an ongoing basis. We base these estimates on the information currently available to us and on various other assumptions that we believe are reasonable under the circumstances. Actual results could vary materially from these estimates under different assumptions or conditions and could adversely impact our operating results and financial condition.

Our significant accounting policies are summarized in Note 1 to our consolidated financial statements. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made; if different estimates reasonably could have been used; or if changes in the estimate that are reasonably likely to occur periodically could materially

impact the consolidated financial statements. We believe the following critical accounting policies reflect the significant estimates and assumptions used in the preparation of our consolidated financial statements.

Commission Revenue and Clearing and Transaction Fees

Commissions on futures contracts are recognized on a half-turn basis in two equal parts. The first half is recognized when the contract is purchased (opened) and the second half is recognized when the transaction is closed. Commissions on option contracts are recognized upon the purchase or sale of the option. If the Company is required to perform additional services when an option is exercised or closed, a separate commission can be charged and recognized at that date. Commissions and fees are charged at various rates based on the type of account, the products traded, and the method of trade. Clearing and transaction fees are charged to customers on a per exchange contract basis based on the trade date. Such fees are for clearing customers' exchange trades and include fees charged to the Company by the various futures exchanges.

Service, Consulting and Brokerage Fees

Service fees include brokerage fees and margins generated from OTC derivative trades executed with customers and other counterparties and are recognized when trades are executed. Service fees also include IRMP fees which are billed and recognized as revenue on a monthly basis when risk management services are provided. Such agreements are generally for one year periods, but are cancelable by either party upon providing thirty days written notice to the other party and the amounts are not variable based on customer trading activities. Service, consulting and brokerage fees also includes income from limited forms of proprietary trading. This trading involves taking short-term proprietary positions in derivatives and foreign currencies. These strategies involve . . .