ASX Reports Solid Full-Year Results, Although Futures Revenues Slump

Despite overall revenue growth, interest rate and electricity futures fee reductions saw derivatives and OTC market revenues dip by 0.7%.

The Australian Securities Exchange, or ASX Limited (ASX), today released its full-year results to June 30, 2015, which saw rising revenues across the board, with the exception of its derivatives and OTC market business.

The antipodean exchange recorded total operating revenues of $700.7 million, up 6.4% YoY. Underlying profit (excluding significant items) came in at $403.2 million, which represents a 5.2% increase from the previous year’s results.

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Strong performance was noted in the exchange’s Listings and Issuer Services, with revenues of $176.6 million, up 13.9% YoY. Listings revenue includes annual listings fees, fees related to capital raisings and revenue from structured products. Contributing to this figure was an expanded range of exchange-traded products (from 96 to 140), a good number of IPOs (120 compared to 107 in the previous year) and strong Issuer Services revenues, which rose 19.0% to $33.3 million, driven by an 11.1% rise in the number of holding statements to 13.1 million.

Revenue from futures was down 2.1% to $181.6 million.

Cash market revenues also rose, recording a 6.7% YoY increase at $125.2 million. All three revenue components grew, supported by a rise in overall equity market activity. Namely,  revenue consisted of fees from the trading ($35.5 million), clearing ($47.1 million) and settlement ($42.6 million) of ASX-quoted equities, debt securities, warrants and ETPs.

Additionally, Information Services revenue was $73.7 million, up 7.0% YoY, Technical Services revenue was up 8.3% YoY at $57.3 million, Austraclear revenue came in at $45.3 million, up 10.4% YoY, and interest and dividend income saw a modest 1.8% growth, amounting to  $71.9 million.

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Bucking the growth trend was ASX’s derivatives and OTC market business, which at 29.4% accounts for the largest share of the group’s revenues. Overall, the business saw a slight dip in revenues, down 0.7% YoY to $206.2 million. While revenue from equity derivatives grew 10.9% to $24.6 million (despite activity levels declining by 3.3%), revenue from futures was down 2.1% to $181.6 million. Higher volumes were offset by fee reductions introduced by ASX in the electricity market on July 1, 2014 and in the interest rate futures and OTC clearing business on October 1, 2014.

Despite the sluggish performance in the derivatives and OTC market business, ASX is optimistic that “the new fee schedules create a more sustainable business and position ASX to compete for liquidity in an evolving global market structure.”

The new fee schedules create a more sustainable business and position ASX to compete for liquidity in an evolving global market structure.

Indeed, in recent months, ASX signed a Memorandum of Understanding (MOU) with the China Futures Association, which aims to enable ASX to develop a better understanding of China’s futures markets, and a Head of Agreement with the Bank of China, which provides Sino-Australian financial markets with RMB settlement services, extending the exposure of the currency to a multitude of asset classes.

Elmer Funke Kupper, ASX Managing Director and CEO, said: “In FY15, ASX delivered positive earnings growth, supported by activity increases across all major markets. At the same time, ASX implemented attractive fee reductions in its derivatives business and opened a world-class 24-hour Customer Support Centre. These investments improve the alignment with ASX customers and create a more sustainable business.”

He added: “ASX is awaiting the Government’s decision on the review of the market structure for clearing cash equities. A continuation of the current model for five years would give ASX certainty to invest in the ‘once in a generation’ replacement of CHESS. In addition, ASX has committed to implement a new equities clearing fee schedule that would provide savings to its clients.”

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