Swissquote goes from strength to strength as multi-asset M&A drive continues to bear fruit

Swissquote’s revenues rocket, and the company’s multi-asset environment and ever expanding capital base have marked it out as one of the benchmarks in stability in electronic trading. The company’s bow is continuing to be strengthened by a recent transaction in which Windel Investments, which was a shareholder of Swissquote stock, sold its stock back to the firm. Here is our analysis

Swissquote has come a very long way since its sensible, steady and firmly rooted Gland origins in 1999.

The company’s commitment to continued vault-like security of client assets and ringfenced proprietary trading system’s multi-asset capability has stood it in very good stead to grow to be the largest Swiss electronic trading company and one of the most technologically advanced banks in the entire country.

Today, the company released its half-year figures for the initial six months of 2017, which demonstrate a massive leap forward in revenues for the company which compared to the same period last year (ending June 30), heralded a 17,887,730 CHF compared to 11,121,173.

At a time during which volatility has been low, this is likely to be not simply a strengthening of organic client activity, but actually reflects the result of something that Swissquote has proved its mettle in several times, that being mergers and acquisitions of specialist companies that operate trading environments in specific asset classes.

Ryan Nettles speaks to Andrew Saks-McLeod about in-house multi-asset solutions and M&A at the firm’s headquarters in Gland, Switzerland

Gone are the days in which a brokerage can simply offer a limited range of spot FX pairs and hope to generate sustainable revenues, largely due to the lack of value proposition which blights many holders of MetaTrader 4 white label licenses that offer the same environment and are competing for the same retail segment, and also due to the risk associated with the high fluctuations in spot environments that could, if not backed by another longer term or material asset, make or break a company.

Swissquote has over the past five years, acquired MIG Bank and ACM and has expanded its proprietary trading environment into direct market access to equities, funds, bonds, warrants, and options & futures organically and via acquisition of its Swiss peers. The bank also offers services designed specifically for asset managers and corporate clients, and has become extremely stable as a result of having a diversified product range.

On 15 March 2017, Swissquote acquired 750,000 treasury shares from Windel Investments Ltd which increased the percentage of Treasury shares to 7.67%.

These shares were initially transferred as part of the consideration for the acquisition of MIG Bank Ltd in 2013. The total consideration as well comprised of 210,000 stock options with a strike price of CHF 47.50 and an exercise period ending 26 September 2017. At 30 June 2017, the remaining treasury shares balance is primarily held for the purpose of covering employees share and option plans.

Speaking to Ryan Nettles, Head of FX Trading and Market Strategy at Swissquote today, FinanceFeeds discussed this, with Mr Nettles having clarified “Windel Investments was a shareholder of Swissquote stock which we bought back.”

Now, as it stands, the company’s likelihood of increasing its benefit from Windel Investments’ activities in terms of commission and trading volume as well as having increase its number of treasury shares from 14,405,560 in the first half of 2016 until June 30, to 32,880,599 for the period between January 2017 and the end of June this year.

Back in October 2015, Mr Nettles explained to FinanceFeeds “Swissquote entered the leveraged FX business in 2008 and I knew Swissquote had great potential as a listed Swiss bank which offered online trading across all asset classes and I wanted to help grow its FX business further in Switzerland as well as internationally where it was not well known.”

“Over the past five years there has been a drive toward transparency, and there have been many incidents in the industry such as the Swiss National Bank event and other geopolitical issues and as a result there are a lot of volatile moments in the FX market and the whole financial industry which has caused some of the larger Tier 1 prime brokers to pull back a bit due to worry of credit risk with regard to who they do business with” – Ryan Nettles, Head of FX Trading and Market Strategy, Swissquote Bank SA

During Swissquote’s continual growth, the ability to operate as a Swiss bank as well as have an ever expanding capital base has enabled it to strike liquidity partnerships across all classes of the financial spectrum, an important move during the time at which many Tier 1 banks were moving away from the OTC world.

Due to the actions of some of the large OTC firms such as Swissquote (and some of the large British OTC companies), banks are now starting to realize that this is an industry sector which provides enormous revenues and that the risk is not what it was when extending counterparty credit, largely due to the development of very sophisticated OTC trading environments and the links to raw materials, commodities, FX, metals and exchange traded futures that are now part and parcel of core business.

With a liquidity coverage ratio of 599% during the first half of 2017, Swissquote fared better than some of the Tier 1 banks which distribute FX liquidity.

FinanceFeeds discussed this with Mr Nettles in Geneva very recently, which is viewable in this video:

 

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