Trading in low cost, passive investment products might be more vulnerable than some thought. Global ETF trading collapsed by 14% in Q3 2017 versus Q2 2017 – and was described as “unusually slow”. Global ETF trading in September 2017 was 24% lower than the same month a year ago.
For those unfamiliar, Flow Traders NV is a global electronic liquidity provider specializing in exchange-traded products (ETPs). The Company continuously quotes bid and ask prices for ETPs listed across the globe, both on and off exchange, in all asset classes. Flow Traders is a proprietary trading firm with offices in the Netherlands, Singapore, the USA, and Romania.
Today’s results from specialized ETF trader, Flow Traders NV (Euronext: FLOW), fell well short of consensus, with trading volume both for the company and the ETF market significantly lower in Q3 2017 versus the previous quarter. The share price rose 1.98%. This from Bloomberg:
[24 October 2017 at 13:54:31 UTC+1] Zero Hedge: Flow Traders Misses on Weak Volumes, Margins]
Flow Traders 3Q Ebitda was 14% below consensus and driven by weaker volumes and margins in Europe, says Morgan Stanley (equal weight).
- Net was 2% below consensus due to one-off tax rebates
- U.S. revenue was down 53% Y/y, hurt by weaker volumes and low market volatility
- 3Q net trading income EU31.7 million
- Flow Traders expects “declining trend in cost growth to continue in 4Q17 towards the lower end of the guided 15-20% cost growth target range for full year 2017”
- Flow Traders intends to increase the pay-out ratio to at least 75% of its net earnings over 2017
The results summary below taken from Flow Traders’ quarterly earnings release shows a quarter-on-quarter decline in the company’s ETP trading (Exchange Traded Products – basically ETFs) of 14% and 9% in Europe and the Americas, respectively. More significantly, the bottom three lines show that the total value of ETF trading fell by 14% and 15% in the Europe and Americas, respectively, and by 14% on a global basis.
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