BME Will Look at Potential Acquisitions, Including Euronext, Says Director General

The Spanish stock exchange will focus on its integrated pre-to-post trade business model to maximize shareholder returns but will look at potential acquisitions, said Javier Hernani. In addition, the director general said further investment in T2S is likely.
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Bolsas Y Mercados Espanoles (BME), the Spanish stock exchange group, will stay focused on a disciplined business approach, but will look at potential acquisitions, including Euronext, director general Javier Hernani said today.

Speaking at a news conference, Hernani said the group will not be focusing on M&A but will instead keep a strong business focus on its integrated pre-to-post trade model to maximize shareholder returns. We have co-operations with many exchanges and we are open to further co-operations as the landscape changes. We have low capex, weve done well with technology and we have an efficient model,” he said. Commenting on whether BME is a buyer or seller of assets, Hernani added: Well look at anything. Euronext is something everyone will look at.

BME has been diversifying its revenue stream since 2005 to offset decreases in the value of equity traded. “We are now in custody and settlement too. We diversified our components from 2005 so that by 2007 our revenue had increased by 37% and the cost base was going down,” said Hernani.

For TARGET2-Settlement (T2S), the eurozone system for harmonized securities settlement, BME has increased its cost base by .6%. Hernani said further investment might be required ahead of the live date of 2015. We first have to incorporate the clearinghouse under the European Market Infrastructure Regulation (EMIR). We will redirect the flows towards this clearing segment for equity and charge clearing fees. There will be more netting to offset any of the settlement we lose to T2S following the reform of the Spanish post trade system under EMIR.”

In clearing and settlement, BME reported a 0.2% increase in revenue in financial year (FY) 2012. Clearing and settlement revenues for the fourth quarter of 2012 decreased 8.9% compared to the fourth quarter of 2011. EBITDA for FY 2012 increased 0.6% over the fourth quarter of 2011. For the fourth quarter of 2012, EBITDA fell 6.1% compared to the fourth quarter of 2011.

The number of trades settled in the fourth quarter of 2012 was 10. 6 million, compared to 11.9 million in 2011. Securities under custody for the fourth quarter of 2012 were 1.706 billion, compared to 1.664 billion at the end of the fourth quarter of 2011.

The fall in volumes settled was offset by other activities of the business unit, said BME.

At a group level, BMEs net income reached 135.5 million for the FY 2012, a 12.7% decrease on FY2011. The result was reached during a period of sustained uncertainty in financial markets, when spreads of Spanish against German bonds reached historic highs, the equity market were down 24% and we lived through seven months of shortselling bans, first in February 2012 and then at the end of July 2012 to the beginning of 2013. The shortselling ban has impacted everyone in the market the derivatives market was 40% smaller in December last year and 50% smaller in January this year.