NEX Group plc (“NEX”) (NXG.L), a financial technology company at the centre of global markets, announces its trading statement for the period from 1 April 2017 to 30 June 2017 ahead of its Annual General Meeting today.
Michael Spencer, Group Chief Executive Officer of NEX, said: “NEX has established itself as a financial technology company providing the industry with products and services that underpin the entire transaction lifecycle, pre-, during and post execution. We have made good progress towards our medium term aspirations, which will deliver value for our clients and shareholders: a group revenue CAGR of 7-10%, an increase in NEX’s subscription based products, drive profitable growth, and create efficiencies to increase divisional operating margins to at least 40%.
“Despite ongoing low volatility and a flat yield curve, financial markets have started the long and slow journey to more normalised conditions with further interest rate rises in the US and early signs of improved economic conditions in Europe.
“We continue to deliver best-in-class solutions for our customers and last month achieved a remarkable milestone when our compression service, triReduce, announced that it had eliminated more than $1,000,000,000,000,000 (one quadrillion) in OTC derivative notional principal since launch. We are proud to have worked with our clients and other infrastructure providers to achieve this goal.”
Group revenue for the first quarter to 30 June 2017 increased by 10% on a constant currency basis (20% on a reported basis). The NEX transformation programme is on track and as previously indicated the costs to achieve these savings will be approximately £10 million, which will not be treated as an exceptional item.
NEX Markets
NEX Markets provides foreign exchange (FX) and fixed income electronic trading technology and services that help clients access liquidity and execute efficiently.
NEX Markets revenue increased by 11% on a constant currency basis (20% on a reported basis) during the first quarter compared to the same period last year principally driven by the CFETS partnership. Trading activity was held back by low volatility albeit with episodic activity around macro events such as the French election and a US rate rise.
While maintaining its leading market position, average daily volume in US Treasuries on the BrokerTec platform increased by 7% to $168 billion in the first quarter compared to the same period last year. Average daily volume for the first quarter in both US and EU repos increased by 6% and 27% respectively compared to the same period last year.
Since the start of the year, FX volatility has waned, especially in G3 currency pairs despite the Federal Reserve increasing rates. Average daily volume on EBS decreased by 3% to $80 billion. Average daily volume on EBS Direct, the platform that allows liquidity providers to stream tailored prices directly to customers, was flat at $21 billion in the first quarter, as compared to the same period last year.
The launch of EBS Live Ultra, NEX’s fastest FX data product to-date, continues to significantly improve price discovery and increased market transparency, efficiency and liquidity.
NEX Optimisation
NEX Optimisation helps clients reduce complexity and optimise resources across the transaction lifecycle.
NEX Optimisation’s revenue increased by 8% on a constant currency basis (19% on a reported basis) during the first quarter compared to the same period last year, underpinned by client growth and innovation.
The triResolve reconciliation service continued to perform strongly with the expansion of its services to include triResolve Margin. The business continues to have a steady increase in the number of participants, up 14% on the same period last year to more than 1,980. Since launch, 85 subscribers have joined the triResolve Margin service which is underpinned by new margin rules for non-cleared trades. Compression services provided by triReduce, continued to see buoyant client demand for interest swaps and increased demand for new cross currency compression services.
NEX Data continues to see client growth and is leveraging its direct client contracts and new distribution deal to enable closer relationships and increased opportunities to cross-sell a variety of data services.
Reset, the basis risk mitigation service, has been held back by low short dated interest rate volatility in Europe.
ENSO reported robust revenue growth during the first quarter compared to the same period last year, driven by increased client demand from hedge funds and asset managers for its portfolio of analytical solutions. NEX Regulatory Reporting (Abide Financial) has experienced increased client demand for MiFID and EMIR services and has been working extensively with clients in support of MiFID II rules which go live in January 2018.
Board changes
In May 2017, it was announced that Anna Ewing has been appointed to its Board as a non-executive director and that Stuart Bridges, Group Chief Financial Officer, has stepped down. Samantha Wren, was appointed Group Chief Financial Officer and joined the board on 31 May 2017. In addition, Ken Pigaga, Global Chief Operating Officer, also joined the Board as a director on that date.
