Strategy
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 digital 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 division, we are on track to embed Fusion as the ‘go-to’ platform for clients by the end of 2025. In 2023, Fusion was implemented on 44% of in-scope desks.
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. Good progress was made in 2023: the number of unique client logins in Rates increased by 24% while FX was up 16%. In addition, clients are increasingly moving away from web-based connectivity. Responding to this we focused in 2023 on delivering API connectivity to Fusion-enabled desks. In 2023, 43 of our top 50 clients were fully integrated into Fusion via an API connection.
In Energy & Commodities, we are consolidating Energy Transition products liquidity onto one screen. Fusion is live in the green certificates market, the voluntary carbon market and the Australian renewables/gas markets. The use of technology in the highly mature OTC Oil market is more nascent. There is client demand, however, for real time pricing screens. We are expanding our capabilities by partnering with a third party technology company to deliver these screens.
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 August 2023 we launched Liquified Natural Gas (LNG) indicies, in partnership with General Index, a leading energy and commodities data provider.
- 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. McKinsey estimates that the demand for carbon credits could increase by a factor of 15 or more by 2030. They expected growth in battery metals to support the electronification of transport is another exciting opportunity.
- 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 and product diversification. In cash equities, our focus is on diversifying the franchise in areas like algorithmic, inter-region and programme trading. During 2023 we right-sized the cost base and strengthened our operational leverage. The cash equities franchise is well positioned as equity markets normalise, whilst expanding it's product suite and growing it's client base.
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 we are reducing our debt, and returning surplus capital to shareholders, subject to our ongoing investment needs and balance sheet requirements.
We freed up £100m of cash by the end of 2023, and are using it to reduce debt and other financing obligations.
We announced a £30m share buyback programme in August 2023, which was completed on3 January 2024. And in March 2024 we announced a second buyback of £30m.
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 delivered £43m of annualised Liquidnet integration cost synergies in 2023 exceeding our £30m target.
