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Flow Traders announces second best year since inception

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ETF and ETP liquidity provider Flow Traders reports that the fourth quarter of 2016 saw its strongest quarter in the year and 2016 was its second best year since inception.

Flow Traders saw net trading income of EUR68.7 million in the fourth quarter and its ETP Value Traded grew faster than the market quarter-on-quarter. Fourth quarter 2016 EBITDA margin improved to 48 per cent as a result of the increase in trading activity.

Market ETP assets under management (AuM) reached the highest level on record end of 2016 and Flow Traders writes that the full 2016 net trading income confirmed the long term historic outperformance versus the ETP Market AuM growth rate. Full year ETP Value Traded outperformed the market as well. Total Capital position remained stable year-over-year, Flow Traders writes and the proposed final dividend for FY16 is set at EUR0.70, implying a total dividend over FY16 of EUR1.25 and a dividend pay-out ratio of 63 per cent.

There were no loss days over 2016 which means that Flow Traders now has over 31 consecutive months without a loss day. In terms of trading venues, 2016 saw them grow from 95 to 104 in 2016 as Flow Traders entered the markets in India and became a member of IEX in the US.

The number of products Flow Traders is registered market maker in rose to 4,153 (+34 per cent year-over-year). Flow Traders ended the year with 341 employees, an increase over the year of 27 per cent.

Co-CEO Dennis Dijkstra (pictured) says: "2016 was a strong year for the ETP industry and for Flow Traders. The global ETP market continued to reach new highs, as the total ETP AuM set a new record of EUR3.3 trillion at the end of 2016 and the number of ETP listings continued to grow to nearly 9,800. This growth was realised in a market that was less active compared to 2015, as volatility declined with the exception of a few anticipated liquidity events. Investors responded in a fairly controlled manner to these events, such as Brexit, the FED rate decision, the US elections and the Italian referendum, whereas in 2015 investor reactions to liquidity events were more pronounced as they came unexpected.  It is amid these market dynamics that Flow Traders realized a 2016 NTI of EUR250 million, which is the second best since inception and an affirmation of our long term growth strategy.

“Regionally, Flow Traders continued to improve its performance in 2016. We realised a record annual result in the US and strengthened our number one position as ETP Liquidity Provider in Europe by growing our market share in the region. In Asia, the impact of the changes set in motion in 2H16 started to materialise in 4Q16 and are expected to become more visible in 2017, as we will be increasing our footprint in the region.

“With the markets' continued focus on developments like MiFID II and further improvements of the trading infrastructure globally, Flow Traders is ideally positioned to continue its growth path and capture additional growth opportunities as they arise".

Co-CEO Sjoerd Rietberg adds: "In 4Q16 Flow Traders' ETP Value Traded outperformed the market for the second quarter in a row, reaching EUR189.4 billion, mainly driven by EMEA and the Americas. Macroeconomic events in the US and Europe pushed our quarterly NTI to the highest level in 2016 of EUR68.7 million.

“Throughout 2016, our trading infrastructure operated as expected and the trading team showed great discipline during events like Brexit and the US elections. Our Institutional Trading teams increased the number of counterparties and reinforced our dominant position in the OTC market via Request for Quote (RfQ) trading. Our Technology department realised some important improvements in our trading platform, which benefited our performance almost immediately. All these changes brought Flow Traders up to the next level, as demonstrated by our growing market share while maintaining our desired risk profile.

“In all, we are pleased with the FY16 results, also given the market circumstances. In 2017 we will keep executing our organic growth strategy and continue our efforts to maximise NTI."

CFO Marcel Jongmans states: "As costs developed as expected in 4Q16, Net Profit came in at EUR25 million, pushing our FY16 Net Profit to EUR92 million. This underlines the strong cash flow generation of our business model. It enables us to pay a dividend that is well above the targeted pay-out levels, whilst keeping ample head room to execute our organic growth strategy. We are confident that in 2017 Flow Traders will keep growing in line with the long term growth trend, while maintaining its cost discipline and cementing its role as a leading global ETP liquidity provider". 
 
Looking forwards, Flow Traders predicts that in line with market expectations the ETP market continued to grow in global Assets under Management, a trend that is expected to continue in 2017 in light of further regulation such as MiFID II. The firm writes that the shift in assets from active management funds towards the passive industry is ongoing and strongly drives ETP growth across all asset classes.

As part of the firm’s growth plans, it writes that it will continue to grow organically by increasing coverage of the ETP space, while pursuing a goal to grow NTI at a faster pace than the ETP Assets under Management. It will also be opening a new office in Hong Kong in 2017 and re-locating to a new office in the US.

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