Our vision is to be the world’s most trusted, and innovative, liquidity and data solutions specialist. To achieve this, we are focused on the delivery of three strategic priorities:
Our transformation is being delivered at pace, including Fusion, our award-winning electronic platform. Fusion is about providing more client-led technology, and deeper liquidity. It is a tool that enhances the client and broker experience. It has a range of features, including a single login access, and access to aggregated liquidity for specific asset classes.
Client benefits include lower cost, greater speed and increased efficiency delivered by straight-through-processing. Benefits for brokers include enhanced profitability, increased volumes and stickier client revenue. In our Global Broking EMEA Rates business, for example, there was a material outperformance in contribution margin in 2022 for Fusion-derived activity compared to desks without the platform.
In our Global Broking division, we are on track to embed Fusion as the ‘go-to’ platform for clients. We plan to implement Fusion on desks comprising 55% of total Global Broking revenue, by the end of 2025. In 2022, we moved from 20% to 40% of targeted in-scope revenue in Global Broking covered by Fusion.
Our focus in 2023 remains on Rates and FX, our largest asset classes. We will also commence rolling out Fusion across Credit, another significant asset class, and TP and ICAP Sterling Interest Rate Swaps: Volume Matching.
A key focus is the adoption of Fusion by our Global Broking clients as an essential daily working tool. We have a dedicated Fusion sales team working closely with our brokers to drive client adoption.
In Energy & Commodities, Fusion is live in the Environmentals business, and the first trades have been completed. In Liquidnet, Fusion is live in Liquidnet Primary Markets for New Issue Trading.
We are diversifying our business through a three-pronged approach focused on: new clients, new asset classes, and more non-broking revenue.
In Parameta Solutions our emphasis is on products, clients, and distribution to grow revenue and contribution.
- Parameta Solutions is the first inter-deal broker to be accredited as an FCA and ESMA-authorised benchmark administrator in the UK and EU
- In August 2022, we launched ClearConsensus, an enhanced consensus pricing tool, in partnership with PeerNova, a Silicon Valley data management and analytics firm. This helps our clients improve their fair value assessments, enabling more efficient capital allocation and optimisation
- In March 2023 we announced a new partnership with Numerix, a leading global OTC analytics company. This leverages our market-leading OTC data with Numerix’s analytical capability. Our goal is to ensure that clients have automated, high-quality, independent fair valuations of OTC derivatives.
In Energy & Commodities, we are making good progress expanding our revenue streams in two new segments: renewables and digital assets.
- Emissions credits trading will play a key role during the energy transition. This is an area we are focusing on, launching a well-received Brazilian energy desk majoring on renewables and a client-facing Fusion screen covering Green Certificates in Norway, voluntary emissions in Europe, and Australian renewables.
- In December 2022, we obtained FCA registration in December as a crypto asset exchange provider. Our Digital Assets proposition provides the credible infrastructure, and assurance, needed for institutions to allocate capital to this growing asset class. Longer-term, we believe blockchain will lead to the tokenisation of traditional asset classes, resulting in more efficient, automated trading and settlement.
Liquidnet’s strong, and long established, buy-side connectivity brings us considerable client diversification. So too does the Dealer-to-Client (‘D2C’) Credit proposition. Our strategy is focused on: (a) completing the Liquidnet integration, (b) expanding the product suite to meet the changing needs of clients, and (c) exploiting new growth opportunities like D2C Credit.
Our strategy of transforming, diversifying and dynamic capital management is about delivering sustainable shareholder returns, now and in the future.
Through our programme of dynamic capital management and ongoing cost discipline we are on track to free up cash and reduce debt.
Our focus on capital management – returning, where possible, and appropriate, surplus capital to shareholders – is an important element of our strategy.
In August 2022, we announced that we aimed to free up £100 million of cash by the end of 2023. Progress has been good and we are on track, with around £30 million of cash already freed up in H2 2022.
Examples of dynamic capital management include, but are not limited to:
- Consolidation of broker-dealer entities in the US;
- Sale of office space in Paris;
- Closure of dormant UK regulated entities; and
- Efficiencies from reorganisation of settlement and clearing arrangements.
Our emphasis on capital management is accompanied by a clear distribution policy: a 50% pay-out ratio of adjusted post-tax earnings for the year as a whole.
We are also focussed on cost savings. We achieved our target to deliver £25m of Group P&L savings by the end of 2022 and we are on track to deliver at least £30m of Liquidnet integration costs synergies by the end of 2023, at which point we expect the integration to be complete.