Trading solutions provider Fidessa is banking on its growing derivatives business to improve earnings this year, after posting flat revenue for 2013.
Revenue generated from derivatives has more than doubled, representing almost 5% of total revenue for 2013, according to Fidessa’s preliminary results released this week. And the solutions provider is expecting further growth in derivatives revenue in 2014.
Fidessa said it had a good base of new derivatives signings and would continue to keep a close watch on all areas of regulatory change for new opportunities, making reference to newly-established swap execution facilities in the US and dark pool restrictions.
Chris Aspinwall, CEO of Fidessa, said the firm suffered a reduction in consultancy revenue as a result of client’s discretionary spending, but despite the pressures, Fidessa has expanded its capabilities across asset classes.
“Coming into 2014, we are seeing continued improvement across the markets in which we operate and this is reflected in our current deal pipeline,” he said.
“As this improvement starts to take effect, it should gradually result in a reduction in the headwinds we face, allowing the growth we are generating through sales of our derivatives platforms, our service-based platforms and our regional expansion to flow through into overall revenue growth rather than being masked by the decline in equities.”
Fidessa reported £279 million in revenue in 2013, compared to £278.6 million in 2012, saying the low level of growth was due to conditions in equity markets, and the consolidation, restructuring and closures across the customer base continuing.
Listed-derivatives technology provider Orc has also taken a dent in revenue because of client consolidation. Operating revenue for the period from January to December 2013 was SEK427m (€47.6m), down by 16%.
Tony Falck, CFO of Orc, said the market for financial products and services remained challenging. “Our big clients have been closing down branches and that has been hitting us.
“It’s not that we’ve lost any market share, it’s just that the market has been shrinking,” he said. “We see signs that it’s stabilising, but it’s difficult to predict where it will go.”
Falck said there is a need for Orc products and services, which have been broadened with the launch of new offerings last month, but customers have been waiting for regulation to be finalised to get a clear idea of the conditions they can operate in.