Publicly traded inter-dealer brokerage ICAP has released its annual results for the full year ending on the 31st of March, 2014. While the company’s revenue number has decreased by 5% to $2.35 billion (£1.4 billion) when compared to last year, we delved in order to report on the details surrounding the company’s EBS business.
While according to the report, the EBS Direct service is growing more than expected by the company, it still measures at about $9 billion in average daily volumes (ADV), compared to the broad EBS numbers which averaged $92 billion for the full year ending on the 31st of March, 2014. Looking ahead the company is expecting a challenging market and regulatory conditions to persist, as trading activity across the spectrum is subdued and volatility remains low.
Revenues generated by EBS have declined by 11% on a yearly basis to $205 million (£122 million), with the report elaborating that normalization in the volatility of major currencies, namely the Japanese yen has been the primary reason for the decline. This statement is hardly confirmed by the figures we see reported by EBS’ major competitors like FXall, which have reported all-time highs during the first quarter of 2014.
With major currencies dormant, volumes have picked up in emerging FX with the US dollar/Russian ruble cross coming in as the 5th most traded pair on the EBS Market platform. At the same time, offshore Chinese yuan trading has increased by over 300%.
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The company has announced the inclusion of a latency floor to level the playing field for the participants in the platform, hence becoming unattractive for high-frequency traders (HFT).
Moving on to the company’s recently launched EBS Direct service, since it was launched in November 2013, according to the report, it has totaled $6 billion in ADV up until March 2014 and has since risen to a peak of $9 billion in the first part of May. According to the data provided by ICAP, 500 customers have signed up for the service, however only 180 of them have traded so far.
One point in metrics which is spelling the declining use of EBS can be found in ICAP’s Information Services (IIS) business, which delivers a set of OTC data solutions to market participants and financial professionals on a subscription basis – if we exclude EBS-related sales from the revenue numbers, IIS’s revenue increased by 5%, however with this included revenue it has decreased by 4% to £70 million.