Slide 1: Flow Traders Analyst Day presentation
Flow Traders Analyst Day presentation 28 June 2017 Amsterdam Cluj Hong Kong New York Singapore Flow Traders |
Slide 2: Disclaimer
Disclaimer This presentation is prepared by Flow Traders N.V. and is for information purposes only and the Forward-looking statements speak only as at the date at which they are made. Flow Traders expressly material contained in this document is provided ‘as is’. It is not a recommendation to engage
Slide 3: Agenda
AGENDA 9.00 – 9.05 Opening 9.05 – 9.45 Core investment case and key messages by Dennis Dijkstra and Sjoerd Rietberg + Q&A 9.45 – 10.30 Diversify trading to other asset classes explained by Sjoerd Rietberg + Q&A 10.30 – 11.00 Break out / tour dealingroom 11.00 – 11.45 Regulation & Trading by Marcel J
Slide 4: Changing market dynamics necessitates a shift in focus to better understand Flow Traders growth potential
Changing market dynamics necessitates a shift in focus to better understand Flow Traders growth potential Historic long term development of Net Trading Income (NTI) Flow Traders outperformed the growth in Assets under Management in the ETP market However, in the last 2 years, the ETP Asset under Man
Slide 5: Where we come from - Overview of the internal growth drivers
Where we come from - Overview of the internal growth drivers Investments to drive market penetration (# FTEs) Maintained investments around key functions (# FTEs) 360 360 APAC Americas Europe Other Technology Trading 300 49 300 105 37 52 240 240 Continued investment in 180 26 29 26 30 36 180 70 90 1
Slide 6: A flexible remuneration model protects the business through a down cycle
A flexible remuneration model protects the business through a down cycle Development NTI (€m) OPEX adaptability shows cushioning effect cost development on results 300 Fixed operating expenses have increased primarily as a result of the growth in number of 250 200 employees and investments in Techno
Slide 7: ETP market fundamentals remain solid although activity has slowed since 2015
ETP market fundamentals remain solid although activity has slowed since 2015 ETP Assets under Management growth by region (€bn) ETP Assets under Management growth by product (€bn) 4,000 US Europe Asia 4,000 Equity Fixed Income Commodities Other 3,500 3,500 ETP Assets under 3,000 3,000 Management con
Slide 8: Low Volatility and slow down of ETP Value Traded correlates with lower Velocity
Low Volatility and slow down of ETP Value Traded correlates with lower Velocity Volatility at historically low levels Market velocity on a declining trend since early 2015 VIX Index 12 85 Lowest volatility 75 point in 10 9.57 almost 30 9.11 65 years 7.98 8 7.97 7.09 55 6.58 7.42 6 6.24 45 5.43 35 4
Slide 9: Velocity differs per region – US shows the base
Velocity differs per region – US shows the base Velocity EMEA Velocity Americas 2.31 2.40 13.00 2.14 2.14 2.20 2.03 2.00 10.94 10.63 1.96 2.00 1.85 11.00 1.69 9.25 9.08 1.80 9.00 8.21 7.83 1.60 7.36 7.37 1.40 7.00 1.20 1.00 5.00 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3
Slide 10: On- / Off-screen trading in US and Europe
Overview On- / Off-screen trading in US and Europe (Asia not available) Americas ETP Trading Volume Q1'15 - Q1'17 ( €B ) Trend on-exchange / off-exchange in the US has €6 been growing steadily in the last 5 quarters in €5 favor of OTC trading Traded Volume ( € Bil ) €4 €3 Off-screen trading comprise
Slide 11: Flow Traders’ ambition is to become the world’s leading technology-enabled liquidity provider
Flow Traders’ ambition is to become the world’s leading technology-enabled liquidity provider Safeguard the Flow Traders corporate culture to remain flexible under any Pricing market circumstance Excellence Continuously improve our trading capacities by improving our knowledge, our experience and ou
Slide 12: Vision2021
A clear pathway to driving growth over the next 3-years Actively grow Aim for Expand ETP New share Maintain Conscious cost headcount to operational product participation balance management to stay at forefront excellence coverage plan for between capital facilitate growth of market employees growth
Slide 13: Europe
EUROPE Focus on regulations and growing traded asset classes Amsterdam Cluj Hong Kong New York Singapore Flow Traders |
Slide 14: Flow Traders expanded its position as the #1 ETP liquidity provider in Europe in 2016
Flow Traders expanded its position as the #1 ETP liquidity provider in Europe in 2016 Europe NTI (in €m) Highlights 200 182.5 2016 NTI reached EUR 157.5m, second best NTI result in existence of Flow Traders Europe 180 33.4 157.5 160 Flow Traders ETP Value Traded in Europe reached EUR 418bn (+11% Y-o
Slide 15: Americas
AMERICAS Focus on growing efficiently in all areas Amsterdam Cluj Hong Kong New York Singapore Flow Traders |
Slide 16: 2016 was Flow Traders best performing year to date in the US … but focus remains on growth
2016 was Flow Traders best performing year to date in the US … but focus remains on growth Americas NTI (in €m) Highlights 80 67.5 2016 NTI grew 32% to EUR 67.5m, highest level realized in the US ever 70 Flow Traders ETP Value Traded in US reached EUR 190bn (+12% Y-o-Y) where the market remained fla
Slide 17: Asia
ASIA Singapore/Hong Kong Focus on technological development, local visibility and regulatory status Amsterdam Cluj Hong Kong New York Singapore Flow Traders |
Slide 18: Flow Traders started to implement the improvement program in Asia in 2016
Flow Traders started to implement the improvement program in Asia in 2016 APAC NTI (in €m) Highlights 71.3 Overall trading in Asian markets slowed down substantially in 2016 70 Flow Traders 2016 NTI reached EUR 25m, below 2015 levels and a bit higher than 2014 60 18.5 Flow Traders ETP Value Traded r
Slide 19: Hong Kong – Overview and timeline of setting up the office
Hong Kong – Overview and timeline of setting up the office Why the Hong Kong Office? Market participants To become regulated, which will increase the visibility with institutional investors Local banks and banks like Commerzbank, Macquarie and Societe Generale To position optimally for when the Chin
Slide 20: Balanced and flexible approach to recognizing growth ambitions
Balanced and flexible approach to recognizing growth ambitions Costs growth at max 15% annually after 2017 Stable cost growth Diversify Regulation and Capital 2021 trading to other asset classes Balanced Growth capital ambition allocation Balanced Capital Growth target: aim to grow allocation, divid
Slide 21: 1. Diversify trading to other asset classes: FX Trading
1. Diversify trading to other asset classes: FX Trading Amsterdam Cluj Hong Kong New York Singapore Flow Traders | Analyst Day 2017 21
Slide 22: FX markets have grown significantly through time, but are easing from a spur of growth in FX spot
FX markets have grown significantly through time, but are easing from a spur of growth in FX spot Daily average global FX trading volume and growth rates, 2001-16 ($ trn) -2% Significant growth in 5.4 CAGR* CAGR* Yen (Swaps/Spot) 5.1 2001-13 (%) 2013-16 (%) 1.0 1.0 Other 19% -2% 4.0 +13% 0.7 3.3 2.3
Slide 23: Instruments are rapidly shifting towards electronification
Instruments are rapidly shifting towards electronification FX instruments going up the electronification curve… …resulting in lower costs / higher volumes 4 4x FX Spot (pips)* 1 1992 2010 The costs that market participants are faced with, are highly dependent on the relationship it has with its coun
Slide 24: The majority of the trading flows are traded on several competitive platforms
The majority of the trading flows are traded on several competitive platforms Daily average global FX trading volume, 2016 ($ trn) Category Daily FX volume Trend YoY 5.1 Reuters (Matching & Fxall) 375 Bloomberg FXGO 165 CME Group 115 ~65% ICAP (EBS) 90 2.8 FX Connect 80 360T 100 1.8 Currenex 70 Hots
Slide 25: Considerations for a successful market entry into FX
Considerations for a successful market entry into FX Internal optimisation There is a large currency component in ETF trading. By optimizing internal flows in FX, Flow Traders can improve competitive pricing in ETFs and engage in FX streams Margin and capital requirements are (i) driving up costs fo
Slide 26: 2. Regulation & Capital
2. Regulation & Capital Amsterdam Cluj Hong Kong New York Singapore Flow Traders | Analyst Day 2017 26
Slide 27: Regulatory environment of Flow Traders
Regulatory environment of Flow Traders EXCHANGE REGULATORS REQUIREMENTS PRIME BROKER REQUIREMENTS Flow Traders Regulatory-, Prime Broker and Exchanges environment sets the boundaries within which it can operate Flow Traders aims to hold a close and pro-active relationship with regulators in every re
Slide 28: Upcoming Regulation – Flow Traders is preparing for MiFID II
Upcoming Regulation – Flow Traders is preparing for MiFID II Flow Traders is looking forward for MiFID II as it will bring transparency and a more level playing field. MiFID II is expected to have an impact on Trading. The regulatory impact on electronic trading is expected to cause a shift to more
Slide 29: Impact MiFID II on Non-Bank Liquidity Providers like Flow Traders
Impact MiFID II on Non-Bank Liquidity Providers like Flow Traders MiFID II is expected to bring a number of changes, which offer opportunities to Non-Bank Liquidity Providers (NBLP’s) like Flow Traders. Changes that are expected to take place, are: Examples of market changes expected, based on the i
Slide 30: What do Prime Brokers and Regulators in the different regions demand?
What do Prime Brokers and Regulators in the different regions demand? Europe Americas Asia Prime Brokers Haircut Haircut Haircut Regulatory margins, equal to Regulators Net Capital model Not regulated Prime Broker Haircut Excess Capital Excess cash with Prime Broker Excess cash with Prime Broker Exc
Slide 31: Prime Brokers and the relationship with a liquidity provider like Flow Traders
Prime Brokers and the relationship with a liquidity provider like Flow Traders leverage Trading Capital Credit Line on Prime Broker XYZ Simplified example (TC) trading capital in Europe and APAC Haircut (HC) Positions build up Charge Prime Brokers Flow Traders TC always has to on position be larger
Slide 32: Regulatory Capital grew through the years with various momentum in the markets
Regulatory Capital grew through the years with various momentum in the markets Flow Traders ETP Value Traded (€bn) Development of regulatory capital 400 400 338.8 343.3 350 350 298.9 299.3 300 280.3 300 250 270.1 276.1 250 204.3 247.0 252.2 200 200 202.2 347.0 150 310.0 150 168.2 293.0 293.0 142.8 1
Slide 33: Flow Traders – a principal trading firm – key characteristics
Flow Traders – a principal trading firm – key characteristics Principal Trading Firms (PTFs) Exclusively trade on own account in financial instruments on Effectuate transactions that are either cleared by regulated markets central counterparties or settled DVP Have no exposures to customers Do not u
Slide 34: How is Trading of a Principal Trading Firm related to its Capital use?
How is Trading of a Principal Trading Firm related to its Capital use? Profitable Trading opportunity Technology Capital Skilled Traders The better the Technology, the more profitable trades can be identified The more profitable trades can be identified, the more trading can be done Capital facilita
Slide 35: Conclusion & Guidance
Conclusion & Guidance Amsterdam Cluj Hong Kong New York Singapore Flow Traders | Analyst Day 2017 35
Slide 36: Flow Traders – A technology enabled ETP liquidity provider
Flow Traders – A technology enabled ETP liquidity provider A global ETP focused liquidity provider, with strong presence in Europe and expanding across the US and Asia Core business in providing ETP liquidity with increasing diversification to other asset classes Technological expertise and propriet
Slide 37: Focus for Flow Traders towards 2021
Focus for Flow Traders towards 2021 1 Grow Net Trading Income (NTI) structurally 2 Execute on organic growth path in all regions, driven by efficiency and diversification 3 Grow costs at max 15% annually after 2017 4 Regulatory focus on MiFID II and CRD towards 2018 and beyond 5 Maintain growth prof
Slide 38: Thank you!
Thank you! Amsterdam Cluj HongFlow Kong Traders New | York Singapore