Spanish exchange Bolsas y Mercados Españoles (BME) has seen profits from its equities business rise in Q1, prior to the introduction of more effective competition from multilateral trading facilities (MTFs) on 3 May.
The exchange posted a net profit of €41.5 million in the first quarter of 2011, up 15% on the same period in 2010. Operating costs remained stable compared to the first quarter of 2010, at €24.5 million.
At €38.4 million, revenues from the equities business unit in the first quarter were 10.6% higher than the same period a year earlier and 12.9% above on the previous quarter.
According to market data vendor Thomson Reuters, equity turnover was €174 billion on the BME in the first quarter, which gave the exchange a 96-97% monthly market share, well ahead of MTF Chi-X Europe which had a market share of between 1.8-1.9% for the first three months of the year.
Post-trade reform
First-quarter revenues generated from BME's clearing and settlement business unit amounted to €19 million, up 8.9% year-on-year. The unit reported that the nominal amounts processed in the equity and fixed income markets reached €1.61 trillion, which represents a 6.5% increase from the first quarter of 2010 and a 3.2% rise from the figure posted in December of the same year.
Changes to Spain's rules on post-trade processing may reduce these revenues in future. Since 18 January, MTFs have been able access to the Spanish settlement system directly via external central counterparties (CCP), under ”Title V' reforms, which remove the requirement to cross positions on the BME with a local broker.
To settle Spanish trades previously, MTFs had to obtain an identification number generated by one of the country's four exchanges before the local central securities depository, Iberclear, could make the appropriate transfer of stock ownership. To circumvent this requirement, MTFs sent all Spanish trades to a local broker at the end of each trading day.
From early next month a number of MTFs will have made the necessary changes to their post-trade operations to compete with the BME on a more level playing field.
On 3 May 2011, EuroCCP's settlement fee for Spanish securities will be reduced from the current €2.42 to €1.00 and its clearing fee will be reduced from €0.07 per side to €0.03 per side, up to 100,000 sides on a participant's average daily volume. EuroCCP is used by Spanish MTF PAVE, which expects to launch in H2 2011, and MTF Turquoise, which has announced that it will launch a pricing promotion from 3 May. Chi-X Europe and fellow MTF BATS Europe which both clear via pan-European CCP EMCF will also be offering new low cost services from this date.
Alternative revenue streams
In other areas, the BME also saw revenue grow. As a consequence of heavier issuance of equities and fixed income, revenues increased 23.9% to €6.3 million, accompanied by a 5.9% reduction in operating costs.
Investment flows in new shares grew by 60.7 times compared to the first quarter of 2010, to €8.43 billion. Investment flows in listed shares came in at €7.88 billion, 105.1 times higher than in the first quarter of 2010.
Revenue from information and data are grew moderately, with a 1.6% increase in the first quarter of 2011 compared to the same period in 2010, at €7.8 million, while revenue from IT and consulting came in at €3.7 million, up 8.8% year on year.
Trading volume in the derivatives business unit in the three months to March grew by 6.9% over the same period a year earlier, to €6.8 million.
The volume of contracts traded to March showed mixed results. While the trading volume of main IBEX 35 futures increased by 7.3% and by 3.3% for the Mini contract, options on the IBEX 35 decreased by 39.5%.