NEX Group, the London-based electronic trading firm and exchange operator has published its FY18 financial results ended on 31st March 2018. The group posted a healthy and modest growth across its business line helped by market volatility and growth in emerging markets.
The group posted 9 percent increase in revenue in FY18 to £591 million compared to £541 million in 2017 while statutory operating profit fell by 4 percent to $147 million. The company’s NEX Markets division which consists of BrokerTec and EBS platforms had a stable year with decent 4 percent rise in revenues to $151 million compared to $145 million in fiscal 2017.
In a statement from NEX Group, the revenue growth at EBS was contributed by emerging market currency pairs while G10 currency pair trading volume strengthened in the final quarter helped by overall market volatility. Also during the year, EBS Markets continued to develop and create liquidity in NDFs with average daily volume increasing more than 25 percent against last year.
The group continued with its innovation in services during the fiscal and launched NEX Quant Analytics in September 2017, providing community-based analytics tool for clients trading on the EBS platform. New Aggregation Logic (NAL) which was initially introduced in the European region is now set for global launch in the coming months.
The group in order to meet its long-term profits targets has further deepened the cost-cutting initiatives even it received a boost from the increased volatility in the market. In its final result on Tuesday, the group disclosed that it has found an additional £10m of additional cost saving in recent month, taking its target over a three year period to £50m.
The cost-cutting initiative by NEX Group comes despite agreeing to Chicago’s CME Group takeover bid of $5.5 billion or £3.9 billion which makes it £10 per share consideration for NEX. The deal will make CME Group leader in the $500bn-a-day trading volume in US Treasuries market with the purchase. Through this acquisition, CME Group expects to generate cost synergies of $200m by the end of 2021 and to incur a one-off cost of $285m to achieve it.
Michael Spencer, Group CEO said:
Over the past year, we have seen the continued growth of trading activity in emerging markets, increased demand for regulatory solutions and data analytics from the implementation of MiFID II, and the growing role of non-banks in our client base. In February, financial markets received a long-awaited and much-welcomed jolt of activity as volatility returned. Whilst it was short-lived, the underlying level of market volatility is higher today than it was a year ago due to a sustained shift out of emerging market currencies into the US dollar and we have benefited from this. We had some notable and very hard-won developments in the second half of the year. NEX Markets has delivered a 40% margin, NEX Optimisation recovered back to a 28% margin as promised, we saw a rebound in European repo trading and have been achieving continual record trading days in US repo. These are all important developments.
Last week our shareholders voted overwhelmingly in favour of the acquisition of NEX by CME Group. CME is the best buyer of NEX. Scale matters in this industry and bringing these companies together creates exciting revenue, technology and synergy opportunities. Once complete, this will be a truly industry-defining transaction and one which will bring huge benefits to our clients, the market, and to the City of London through CME’s commitment to maintaining London as its European headquarters. As Britain continues its path to leave the EU, commitments like this matter.