Flow Traders Ltd · EURONEXT:FLOW
Flow Traders — Investor Day (April 2019)
53 slides from Flow Traders's investor day presentation, Apr 18, 2019
Slide 1: Flow Traders Capital Markets Day
AMSTERDAM CLUJ HONG KONG LONDON NEW YORK SINGAPORE Flow Traders Capital Markets Day Creating the markets of tomorrow 18 April 2019 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 9.30 – 9.35 Opening 9.35 – 9.50 Evolution of Flow Traders investment case since IPO - by Dennis Dijkstra 9.50 – 10.05 Trading – a closer look – by Folkert Joling 10.05 – 10.20 Risk Management – by Maarten van den Muijsenberg 10.20 – 10.35 Q&A – 1 10.35 – 11.00 Coffee break 11.00 – 11.15 Finan
Slide 4: Speakers today
Speakers today Dennis Dijkstra Joost Dankers Diederik Dorst CEO Global Head of Global Head of Finance Regulation and Market Structure Folkert Joling Maarten van Chief Trading den Muijsenberg Officer Global Head of Risk Management Board speakers Flow Traders | CMD 2019 4
Slide 5: Trading has changed a lot through the years
Trading has changed a lot through the years Flow Traders | CMD 2019 5
Slide 6: Evolution of Flow Traders investment case since IPO
Evolution of Flow Traders investment case since IPO Dennis Dijkstra (CEO Flow Traders) AMSTERDAM CLUJ HONG KONG LONDON NEW YORK SINGAPORE Flow Traders |
Slide 7: Flow Traders business case at time of the IPO
Flow Traders business case at time of the IPO Global presence We play a central role in the global ETP Amsterdam ecosystem, providing liquidity to markets, issuers HQ, operations started in 2004 and investors 147 New York 14 20 27 since September 2009 Cluj since Oct 2010 Our business model is te
Slide 8: Key investment highlights as presented at IPO in 2015
Key investment highlights as presented at IPO in 2015 A leading global player … … in a high growth and attractive industry ... with further firm-specific growth opportunities A leading-edge, scalable proprietary platform Robust risk management at the core of the business Strong leadershi
Slide 9: ETP market developments show move from active to passive continues
ETP market developments show move from active to passive continues NTI AUM NTI (€m) 500 AUM CAGR (2010 – 2018): 18.9% 7,000 AUM (€bn)* 450 NTI CAGR (2010 – 2018): 29.7% 6,000 384 400 350 5,000 305 4,192 300 3,962 250 4,000 250 3,323 173 2,667 3,000 200 166 143 2,079 150 1,742 91 1,744 2,000 1,317 10
Slide 10: Execution on strategy led to growth and increased global scale
Execution on strategy led to growth and increased global scale 1100 1000 900 Rapid increase in number of counterparties in 2018 800 700 Counterparties connected 600 500 1100 MiFID 2 and regulation support the increased 400 790 300 694 550 200 100 number of counterparties connected to 0 2015 2016
Slide 11: Resulting in NTI growth while controlling costs
…resulting in NTI growth while controlling costs 250 400 Costs in €m Fixed costs CAGR : 13.5% NTI in €m 200 NTI CAGR : 23% 300 150 200 100 100 50 0 0 2012 2013 2014 2015 Adj. 2016 2017 2018 Total Fixed Costs + D&A Variable Employee NTI Variable employee expenses are fixed 36% of Operational Profit
Slide 12: Flow Traders entering the next phase of growth
Flow Traders entering the next phase of growth “ Become the one-stop shop liquidity platform for investors in financial products globally ” Flow Traders | CMD 2019 12
Slide 13: Trading – a closer look
Trading – a closer look Folkert Joling (Chief Trading Officer) AMSTERDAM CLUJ HONG KONG LONDON NEW YORK SINGAPORE Flow Traders |
Slide 14: Growing trading means growing product portfolio to see all flows
Growing trading means growing product portfolio to see all flows in the market Flow Traders’ current market coverage Top coverage In progress No coverage as Liquidity Provider (yet) Asset class Products Equity Fixed Income Commodities FX ETPs The better connected, the more flow visible
Slide 15: Flow Traders trading universe: ETPs & Futures
Flow Traders trading universe: ETPs & Futures Fixed Equity Income Commodities FX Proven track record ETPs Increased number of products Futures Increased number of counterparties Spot Increased number of venues FWD/NDF Global coverage Trading all asset classes Increased traded volume On-scree
Slide 16: Flow Traders trading universe: FICC
Flow Traders trading universe: FICC Fixed Equity Income Commodities FX Proven track record ETPs Increased number of products Futures Increased number of counterparties Spot Increased number of venues FWD/NDF n/a n/a Global coverage Trading all asset classes Increased traded volume On-scree
Slide 17: Focus on growth has resulted in increase in total value traded
Flow Traders’ focus on growth has resulted in an increase in its total value traded 2015 2018 HIGHLIGHTS Flow Traders Total Value Traded grew as more financial products were added to the platform Going forward the diversification will lead to a bigger contribution of products outside ETPs to a g
Slide 18: FICC – Flow Traders FX trading setup in a nutshell
FICC – Flow Traders FX trading setup in a nutshell FX Global Code Counterparties Access & Connectivity Signed GCC Nov 1st 2018 Large reach of counterparties To all relevant ECNs and through the ETF setup platforms in LD4 and NY4 as maker & taker Natural Flow from ETPs Pricing Skew Uncorrelated Prici
Slide 19: Connected to a vast number of FX platforms as Price Maker
Flow Traders is now connected to a vast number of FX platforms as Price Maker in FX PLATFORM TAKING MAKING Fastmatch | Euronext Currenex | State Street Refinitiv FXAll | Reuters Hotspot | CBOE 360T / GTX | Deutsche Börse EBS Direct EBS Markets ParFX | Tradition LMAX Reu
Slide 20: Risk Management
Risk Management Maarten van den Muijsenberg (Global Head of Risk) AMSTERDAM CLUJ HONG KONG LONDON NEW YORK SINGAPORE Flow Traders |
Slide 21: Risk management – key pillar in Flow Traders business model
Risk management – key pillar in Flow Traders business model Flow Traders Supervisory Board management Audit & Risk Committee Internal Audit Risk Management Regulators Trading Organization Exchanges Counterparties Prime Brokers Flow Traders | CMD 2019 21
Slide 22: Risk management – multiple lines of defense
Risk is not only Risk management – multiple lines of defense (4) (5) (6) Supervisory Board Audit Committee / Remuneration & Appointment Committee / Trading & Technology Committee / Risk Committee External auditor Regulators Exchanges Management Board / Managing Directors / Global Heads / Local Heads
Slide 23: Types of risks Flow Traders identifies
Types of risks Flow Traders identifies Delta Neutral Trading universe Flow Traders Product setup KYC/ AML IT Prime Operational risk Credit/Business Risk Connectivity Brokers Execution CRR Volatility Compliance/ Market risk Regulatory Risk IFR IFD Market sentiment Reg NMS Monitoring Biggest risk we c
Slide 24: Managing and monitoring risk on product level
Managing and monitoring risk on product level Position monitoring is done on instrument level on a continuous basis Flow Traders | CMD 2019 24
Slide 25: Optimal setup with Prime Brokers
Risk management is also about optimal setup with Prime Brokers TC is cash and always has to be Trading Capital leverage Credit Line on larger than regulatory or prime Prime Broker XYZ (TC) trading capital broker capital requirements Trading positions Net Trading Income Flow Traders Risk Risk manag
Slide 26: Monitoring regulatory capital requirements
Risk management control also means monitoring regulatory capital requirements 400 350 334 334 334 290 290 290 290 290 290 296 300 278 278 278 250 172 176 77 63 67 183 111 99 102 111 116 109 156 200 150 100 213 215 211 179 191 174 188 185 162 158 169 151 134 50 - 31-Mar-18 30-Apr-18 31-May-18 30-Jun-
Slide 27: Q&A
Q&A Q&A Flow Traders | CMD 2019 27
Slide 28: Finance
Finance Joost Dankers (Global Head of Finance) AMSTERDAM CLUJ HONG KONG LONDON NEW YORK SINGAPORE Flow Traders |
Slide 29: Adaptive OPEX model
Essential part of Flow Traders business model is an adaptive OPEX model Development NTI (€m) OPEX adaptability (€m) Fixed Employee Expenses Technology Expenses 400 Other Expenses + D&A Variable Employee Expenses Column1 350 192.7 300 154.9 250 137.6 92.9 200 94.2 117.1 383.0 82.1 88.0 58.4 150 304.7
Slide 30: Financial highlights 2017-2018 show importance of cost control
Financial highlights 2017-2018 show importance of cost control Consolidated Fixed 2018 2017 2016 In milllions of euro 1Q19 FY18 FY17 FY16 expenses per Net Trading Income 63.1 383.4 166.0 250.0 employee Employee expenses (fixed) 10.3 36.1 32.2 26.5 89,327 87,463 88,989 Technology expenses 9.5 35.4 37
Slide 31: Detailed technology expenses
Detailed technology expenses Consolidated Comments Technology Expenses In milllions of euro 1Q19 FY18 FY17 FY16 Technology expenses are significant part of Flow Traders’ fixed Market connection costs 2.6 9.7 9.4 7.4 operational expenses Datalines 3.2 12.4 13.4 12.9 Datacenters 2.8 9.3 8.8 9.0 Gr
Slide 32: Employee Participation Plan (FCIP) - mechanics explained
Flow Traders Employee Participation Plan (FCIP) - mechanics explained T0 – Off-balance liability 2022 taken Off-Balance sheet liabilities 20% 2019 2020 2021 2022 Totals on - 2021 FCIP balance 20% 2020 20% FCIP 2017 600 600 600 600 2,400 2019 Bonus 2018 20% 20% pool FCIP 2018 1,842 1,842 1,842 1,842
Slide 33: Conservative and unleveraged balance sheet
Flow Traders’ business model is supported by a conservative and unleveraged balance sheet Condensed Balance Sheet (in €m) Assets 31 Dec 2018 31 Dec 2017 31 Dec 2016 Balance sheet: Trading capital 424.7 271.8 343.3 Straightforward balance sheet as Flow Traders holds no debt Property, equip. and int
Slide 34: Dividend track record shows return generating abilities
Dividend track record shows return generating abilities Development of dividend (€) Development of dividend pay out ratio 2.5 2.35 80% 78% 76% 2.0 75% 72% 1.50 70% 69% 68% 1.5 1.25 68% 65% 0.90 0.93 1.0 64% 63% 0.57 60% 60% 0.5 0.65 55% 0.17 0.36 50% 0.0 Minimum payout level 2010 2011 2012 2013 2014
Slide 35: Regulation
Regulation Diederik Dorst (Global Head of Regulation and Market Structure) AMSTERDAM CLUJ HONG KONG LONDON NEW YORK SINGAPORE Flow Traders |
Slide 36: Our regulatory environment
Our regulatory environment Trade Transaction Capital Systems and ‘Push to lit’ Capital publication reporting requirements algo Testing usage Market EXCHANGE REGULATORY PRIME BROKER New markets, data REQUIREMENTS REQUIREMENTS REQUIREMENTS new products Market Haircut making Order-to-trade Pre-trade Re
Slide 37: Impact of key regulatory developments
Impact of key regulatory developments FACTS MIFID II IFR /IFD BREXIT MiFID II contains detailed regulation regarding market The Investment Firm Regulation and Directive Impact of any changes in regulation, following Brexit, structure, transparency and operational controls (IFR/IFD) are the fut
Slide 38: Impact of MiFID II
Impact of MiFID II MiFID II brought a number of changes, which offered excellent opportunities to electronic liquidity providers 80 MTF flows ETP €m Market changes in EMEA following the introduction of MiFID II 70 60 Heavy focus on transparency and better execution 50 Unbundling of research and exec
Slide 39: IFR/IFD – Classification of financial landscape
IFR/IFD – Classification of financial landscape • IFR IFD permits more – and better fitting - methodologies for calculating capital requirements • IFR IFD provides more proportionate reporting and remuneration requirements Class 1 Class 2 Class 3 Class 1: bank-like and systemic firms Class 2: all ot
Slide 40: IFR/IFD – Capital requirements
IFR/IFD – Capital requirements Unlike CRR, IFR offers optionality to pick a capital requirement calculation method that better fits the business IFR has a simpler liquidity requirements regime than CRR, which is met because we trade liquid instruments Risk to market (Classic CRR, • Flow Traders
Slide 41: IFR/IFD – Remuneration
IFR/IFD – Remuneration IFD’s remuneration provisions need to be implemented into Dutch law, subject to EBA guidance IFD prescribes parameters for governance, payment in instruments and deferral of bonus payments IFD contains no bonus cap for investment firms although member states may impose o
Slide 42: Strategy & Outlook
Strategy & Outlook Dennis Dijkstra (CEO Flow Traders) AMSTERDAM CLUJ HONG KONG LONDON NEW YORK SINGAPORE Flow Traders |
Slide 43: A leading technology-enabled liquidity provider
Flow Traders – A leading technology-enabled liquidity provider A global focused liquidity provider, with strong presence in Europe and expanding across the US and Asia Core business in providing ETP liquidity with increasing diversification into other asset classes Technological expertise and
Slide 44: Continued investments in technology platform and talent
Continued investments in technology platform and talent as prerequisite for future growth Investments to drive market penetration (# FTEs) Investment in human capital is key for future growth 600 Other Technology Trading Growth and education of workforce allows for further Continued investment i
Slide 45: Strategic roadmap
Outlook Flow Traders Strategic roadmap 2025 Flow Traders | CMD 2019 45
Slide 46: Pathway to drive growth towards 2025 is clear - 1
Pathway to drive growth towards 2025 is clear - 1 • Further expand coverage in ETPs (US & APAC) Pricing Excellence • Expand coverage in non-ETPs (FX, FI, Crypto) • Expand trading relationships (venues and OTC) • Expand continuous trading globally Strong Team-Driven Culture • Expand trading infrastru
Slide 47: Pathway to drive growth towards 2025 is clear - 2
Pathway to drive growth towards 2025 is clear - 2 • Equity participation employees in FCIP (“skin in the game”) Pricing • 360 degrees employee performance monitoring and maturing of Excellence new senior management • Flow Academy – internal knowledge sharing • Actively rotate employees within the fi
Slide 48: Strategic roadmap 2025: Increase presence and scale
Strategic roadmap 2025 : Increase presence and scale to grow NTI and reduce cyclical variation 2500 2250 2000 Counterparties 1750 1500 1250 1000 >2000 450 €m 750 NTI 500 1100 400 694 790 250 550 0 350 2015 2016 2017 2018 300 250 250 Venues 200 200 383.0 150 150 304.7 250.0 100 100 172.7 166.0 161 14
Slide 49: 2019 growth strategy ties into Vision 2025
2019 growth strategy Flow Traders ties into Vision 2025 Foundation built recent years leads to 4 strategic focus areas for 2019 to enable organic growth globally through diversification Expand presence in ETP trading, both in Intensify and expand liquidity providing products and trading relations, e
Slide 50: Updated key investment highlights
Updated key investment highlights Key Investment Highlights during IPO Key Investment Highlights in 2019 A leading global player A leading global player In a high growth and attractive industry In a high growth and attractive industry With further firm-specific growth opportunities With further firm
Slide 51: Strategic targets going forward
Strategic targets going forward 1 Grow Net Trading Income (NTI) structurally through more counterparties, more products, more venues 2 Execute on growth path, driven by efficiency improvement, increase of scale and diversification 3 Grow fixed costs at max 15% annually 4 Maintain risk profile while
Slide 52: Q&A
Q&A Q&A Flow Traders | CMD 2019 52
Slide 53: Thank you!
Thank you! AMSTERDAM CLUJ HONG KONG LONDONFlowNEW TradersYORK | SINGAPORE