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Edited Transcript of BME.MC earnings conference call or presentation 27-Apr-17 8:30am GMT

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Q1 2017 Bolsas y Mercados Espanoles Sociedad Holding de Mercados y Sistemas Financieros SA Earnings Presentation

May 2, 2017 (Thomson StreetEvents) -- Edited Transcript of Bolsas y Mercados Espanoles Sociedad Holding de Mercados y Sistemas Financieros earnings conference call or presentation Thursday, April 27, 2017 at 8:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Javier Hernani Burzako

Bolsas y Mercados Españoles, Sociedad Holding de Mercados y Sistemas Financieros, S.A. - CEO

* Marta Bartolomé

Bolsas y Mercados Españoles, Sociedad Holding de Mercados y Sistemas Financieros, S.A. - Controller

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Conference Call Participants

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* Enrique Yáguez Avilés

Mirabaud Securities LLP, Research Division - Research Analyst

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Presentation

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Javier Hernani Burzako, Bolsas y Mercados Españoles, Sociedad Holding de Mercados y Sistemas Financieros, S.A. - CEO [1]

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Good morning. Here we are to report to you on the financial results for first quarter 2017. Today, of course, is the day where we will also be holding our Annual General Shareholders Meeting to approve the accounts for financial year 2016. And amongst other items, there's the proposal to the meeting for the supplementary dividend, which I'll be explaining later. The expectation is that this will be passed as a [decision during AGM].

First, the results for the first quarter 2017 then. EUR 39.3 million for our net profit for the quarter. That's 0.3% up on the fourth quarter 2016, minus 8.3% in comparison to Q1 2016. Without the impact of that purchase of 50% for Infobolsa, that would have been a 4% reduction not a 8.3%. We believe these are sound results, sustained results in line with the guidance given to analysts, and I think that is also important. Once again, we have not come up with any surprises for anyone. We are a very reliable company and the figures are stable as we expect them to be. We have a positive appraisal of these figures in equities. The trading figures have come down 19% and 17% compared to Q4 and Q1. Although, they have performed better compared to Q4 2016, certainly, the second quarter this year, April, in particular, is performing much better than Q1. We're seeing an upturn in volumes and I'll be talking about that in a moment. But in general, the results have been maintained despite difficult volume situation. We've also improved our ratio of diversification. But at the end of the day, that's EUR 39.3 million net profit figure we have achieved in Q1, we believe, is a very strong, sound and stable figure.

One of the most important points to highlight to you is the spectacular inflow of investment in Q1 into the Spanish market. Once again, we are seeing figures that are very big, more than EUR 9 billion. 3 big companies that have been pressured on the stock market. Apart from the [CIMIs] in the map, the Spanish market, and I think we have to say this very loud and clear, is now top with regard to IPO is that for European stock markets, and it's only this -- and it's #2 in the world overall after the New York Stock Exchange. That inflow of funds, the arrival of new companies is certainly a characteristics of this market, new blood into the market. The potential for growth here is an extremely important point. We believe that it is the outcome of a new situation in the Spanish economy. Growth, macroeconomic stability, and also there is a keen interest of companies in this new environment to diversify their funding sources. I do want to highlight that we are #1 and therefore, IPOs to date. Diversification, that has also lined us to uphold results on our profit. The revenue is not linked to volumes and cost ratio, which is a key tracking indicator for our business. Performance is at an all-time high, 124%. So those revenues not linked to volumes, as I said, are covering our cost at a ratio of 124%. So even with 0 volumes in the market, we would still be able to achieve a 24% better figure, slow, upward trend, very much in the style of BME. We do things gradually and in competitory form, we add businesses to us. It's hard work at first, but in the long run, it takes us to a highly diversified position.

The key ratios that we always use to do our benchmarking exercise with our peers in the industry, efficiency and ROE. We are still the leading company. 34% is our cost to income ratio. Our efficiency ratio, more than 19 points ahead of the average peer group, and in ROE we are also ahead, 35.5% is our figure, 16.2% average peer group. So in both metrics, in efficiency and ROE, we are still the top company in the sector, and a long way ahead of the closest competitors. Once again, this is a feature of the company. It's in our DNA and allows us to uphold the results that we are reporting.

The dividends, let me just underscore what I said earlier on in this presentation. The Annual General Shareholders Meeting that will be held after this results presentation will have as an item on the agenda for proposal, that EUR 0.80 per share complementary or supplementary dividend, that the total is EUR 1.8 there. You may remember, but from the last time we paid, that was a proposal from the board to the AGM, we hope that will be approved. The highest payout ratio in the sector, 93%. It's our commitment to give back to the shareholders what is theirs. We have a very sound liquidity position as you will see later. Our cash position with our ordinary results is kept to a minimum, and we always try to distribute payout as much as we can to our shareholders. From just take a point of view. 5th May is the date for that payout of that supplementary dividend, ex-dividend, 3rd May. So it's -- the last date that you will be able to actually buys shares with the rights to a dividend is the 2nd May, which will be a bank holiday here in the Madrid, remember that. Things have changed, so you may remember since the last reform, and we now have a group of retail customers I'd like to remind of that, so it's all clear. Let me turn to our business units and their performance and we'll go through them one by one as usual. The very first point I want to make to you is the distribution of business units. This is different to the previous occasion. The very first time we have merged the market data and the IT consulting units, previously separate into 1 single management unit, so this is different in the presentation this time. And we will have to, of course, make a restatement of previous results, so we will be able to track the quarterly performance of the business.

I'll explain in more detail later but the reason for this is the necessity to bring together the personnel and the resources in these areas. We believe there are very clear synergies to be achieved here, commercial and also production synergies, thinking about the software and development. This is a good driver for the future. So this is now the second or the third business unit we have in BME. It is an organizational change and the relevant reporting change that we will carry on and maintain for the future.

Let me take you through the details of the different business units one by one. Equities market has performed well in revenue terms. Revenue, up 2.9% to EUR 37.7 million in Q1 2017. That was a sequential recovery trend quite clearly in this business unit. You may remember what we did in Q4, EUR 37.7 million. I know I'm not comparing things equally. Each quarter is different. The cyclical highlights are always different. We all know that, but these results reassure us and we are very hopeful to see further growth in the revenues for the market for the third month -- quarter in the row. So it's plus 12% compared to two of the previous quarters that was Q3 last year. April is a better month. It's perhaps a watershed moment. There is an upturn taking us forward. Let's see if the recovery will be consolidated, but there is a sequential trend that you can see in that bar chart as volumes have been growing. Compared to Q1 last year, 90% down it's true, EUR 170 billion and there, minus 17, 12.86 compared to 15.6 but if compared to 4 -- Q4, were better 12 volumes is the difference, more or less the same the revenues at EUR 13 million.

So there is a sequential recovery, and April, I think is the point to make to you. This certainly points to a very different market situation moving forward. The yields for equities, there have been variations really in line with the volumes themselves, beyond 0.99 and almost 1 basis point for this quarter, that's 12% down from Q4 and plus 25% for Q1 2016. As you always know, the mix there causes a lot of model changes in those figures. Two points though that I'd like to make here. Good explanation for you. You will find one is that the market still has core volumes in the trading books. It's very strong there. You can see that on the spreads, but the evolution of the IBEX 35 spread is quite spectacular, where all-time lows for the IBEX 35 spreads and for the average spread, 5.1 basis points. I think that is a record and that is in lower volumes, of course, this is happening at the time of the variance. So you can see how there is pressure on spreads. And once again, BME is the trading venue. With the best execution of trades way ahead of any of our competitors in their platforms and right across all of the securities. I wanted to highlight that because quite recently, we did get in ahead of the requirements for next year, the new legislation there. The best execution, comparative volumes, a lot of that reporting that will have to take place like a -- it will be monthly as of next year. But it's already on the website. You can see our spreads and how we compare against our competitors, against platforms that are also working with Spanish securities. But all of the platforms and all of the securities they copy, copy. Copy Is the verb, yes, and I'll explain that with example of one particular day, I think it is important. When we talk about parasites and other such, the 24th April, that was the French elections, more than 300,000 trades that day and a very -- in the early hours, they disappeared. They disappeared completely from trading. Disappeared is the word at the time of volatility, because they were not able to copy the spread at the speed the market required then, we were fixing the price. We were setting the price for the market. Investors, of course, were hungry. They were very keen to get liquidity, to get a good price, and they come to where they can find that. That's here, BME, and then the ones who are copying us were running behind us with -- desperately trying to catch up and they were only able to do that to keep up with us when the volatility dropped and the spreads stabilized and stability came back to the market.

Those -- the -- if you can copy, whether you're a good student, you may in fact, pass the exam, but when you do it through copying another's. But of course, when the teacher asks the question very quickly, you're not able to answer because there is no time to copy. I think that's the point, isn't it? I want to actually make it very clear. That day that was very high volatility, pure market trading conditions when investors needed liquidity, needed the market. Then on that day you -- that quite set out the way we all operate individually and we were the one setting the core figures.

So at that time, the yield you can obviously see in recuperation on the recovery of block trades. We talked about that in the past because they did fall last year little more than other equities markets. We did explain at the time that we thought that there was a less composition of block trades. We knew that would happen. We asked for patience at that time because with the changes in the market in both trading, we had to get adaptation the part of those who were working with block trades, but that is now picking up.

And we're now getting more trading volumes at lower price, of course. But of course, this is making a much smaller contribution to our revenue as the block trades are down, we have a lower yield. But last year, the -- it was higher because we had more block trades than this year. That is a component that always differs. It makes a difference to our yields, and we do understand how difficult it is for analysts to make their forecast on this. But for us, the yield is always the outcome. It's a result, it's what has happened rather than a prediction for the future. That's the situation. The market is suffering, of course, and it's composition between core equities and block trades can always change. On the positive side, the upside on the yield is the mid and small caps of trades. Despite the increase in volumes, we're seeing about 50% there. Very interesting in diversification terms. A lot of volume not coming just from the large accounts but also through these smaller mid accounts, which is a good way of diversifying revenues and the impact on our P&L account. Of course, the yield is higher from mid and small trades, so we have that add-on to our yield in that case. So block trades, they're lower yields in comparison of volumes compared to Q1 last year, it's worse. If you compare it to Q4, it's better.

But April, let me underscore that April, has started off very well. Equities, let me go back to the number of new listed companies. EUR 9.4 billion almost there and that's for Q1. It's a very good comparison against 4Q as well. We have the new admissions that's up 190%, admissions from Prosegur Cash, Neinor and Gestamp, taking us to that #1 position. If you look at inflows, new IPOs at the moment, second largest market volume, secondary public offerings, and the most active European market. Looking ahead to the future, the -- we believe the capital that is coming in can be very helpful. The total capitalization of the company compared to last year has gone up 24% and for us, that is absolutely crucial looking ahead to the future. In the revenues, accretions, the prices of shares -- operate -- increase in prices, increase in volumes, increase in revenues. So as the IBEX is soaring, the valuations of these Spanish companies are still far from an index terms from where they should be. And just remember that before Lehman, our IBEX was 16,000 points and we are the only market that has still not got back to the -- its level, pre-Lehman Brothers. All of the other markets have picked up once again and gone back to their figures from before all-time highs but they -- the evaluations will have to be what they have to be. But, of course, if evaluations improves, the share performances improves. Our values will improve. We have more raw material, I think, if number shares are in the market to play with. And in terms of the (inaudible), 58 billion shares in the market and now it's 104 billion in the market. Many things have happened since then, but the evaluations have to be the way they are. But the number of shares that are being traded in circulation is much higher, and it's the performance. If the share prices go -- do go up then we will have this impact on us that other markets don't have. They don't -- they haven't changed their structure in the way that we have. Fixed income, not quite such a good performance. It's a complex market as you know because of the interest rates there at the level they are. Don't want to talk much about that. Revenues pretty much stable with a better impact from trading there. In public debt that the listing has dropped slightly, a good position, however, in the MARF, which is still growing ahead. It's growing very relevant to terms, EUR 883 million in issued volumes. That's plus 83% outstanding balance of over EUR 2 billion. That is plus 51%. We think that's the success story. There's a lot stll to be done. Volumes are down but we are seeing that investors are looking very closely at this market, at this platform. The MARF is an exciting alternative for the fixed income issues. It's fast. It's versatile. I think it's proving that it is the quality it has and it will be an interesting option for the market as we move forward. It will also help to bring further speed and versatility into the fixed income market here in Spain. Fixed income, I always like to say this, just despite this modest contribution to the bottom line, we are working very hard on this and I'll explain that later. On the future of fixed income, that will have a lot to do with new regulations. MiFID, of course, will introduce some relevant regulatory changes that are about the pre-trading and post-trading transparencies as well as with the trading value into nonrealization requirements as we have blocked trades and OTCs there. We have an offering of services that I think is the right one. Its very much aligned with what people want and it comes from our in-depth knowledge of the environment. The investors working with us and we will try to provide the solution for them to the new situation of fixed-income volumes. So that the platforms will be the solution for the transparency, which is required for the fixed income market, for everything with OTC and everything that doesn't go through the platforms and all the services that we'll be offering from January 2018 will be the solution.

We believe there is a good future there. The contribution to the bottom line is not high but at least it's positive. If this is just quite clearly a business option that we want to develop, because we believe that there will be a structural change that will take place at the speed then, whatever that is, but we are in an excellent position already because the fixed-income market in Spain in volume terms is a big market, and there we are in that market. Derivatives. More poor volatility here and that's impacting us. This is the trend, general trend, everywhere across the world. IBEX 35 has dropped minus 19%. That's just to quote an index but among the most -- the top ones in Europe. Minus 22%, minus 15%, minus 29%, minus 39%. Derivatives is a turn on negative trend. Trading is going down. And there's lower volatility in the market derivatives are volatility, so it's hand in hand. So given this environment, and despite that,

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I'm sorry we are having a technical issue. We'll be back as soon as we fix up. Thank you.

So we'll see what we could do with derivative of new products to give us a more sound business baseline in access, definitely to certainly to more clients. Now on clearing, improved revenues by 67%. This is not like-for-like, because first quarter last year we didn't have the clearing of all the equity trading instead of last year. So this quarter does not have, again like-for-like against last year. I think that what's happened here, if you remember the reform of equity markets, when we did that reform is actually we were generating more revenues in clearing coming in from netting through settlements, and the netting ratios are again the same ratio similar level as year in closing in 2016, about 65%, 66%. So it's sound and operating smoothly. The project was, in fact, very good, and is working very good and we're very pleased with that project, with the outcome of that project. Settlement and Registration. And that's bringing in a different business units to close. But as I said, revenue has gone down, as I just said, significantly. Settlement was about 40-something, 50-something percent accounted for that business unit, but now it's about 30%, registration is -- accounts for 150% and all the sources linked to Settlement, which have been changed through reform by 21%. Expenses are down, operating costs are down, minimally, but we're finding that there's an impact of having the cost of reform I've already -- although there are Phase 2 [Q3S], these are sunk costs already that I'm reading out, taking into account. So that's -- so there is an improvement in the costs because we've gone already through that wave of investment. T2S is still being developed, a lot of fantastic work we've done here, basically to deliver this service by September where we need to need to connect. And just before we started this presentation, we're adopting the rates to T2S, basically Europe, European equities. This will be in line with what all the other stock markets are doing. Basically, what everybody else is doing is not go into the revenues of Settlement and Registration. Not just include what T2S has in Settlements, but rather try and recover the costs as well. So cost recovery, if not the same level, to at least try to our most to make sure that we get the same amount of revenue as before. The cost is not going to go down for no one here. So except for the investments I mentioned earlier, but basically, these have a tariff that enables us to recover all the costs, there have to be -- well, basically, if this means -- see, that's a feel you can actually settle. So all the European equities are -- Euroclear in Italy, all the big ones and all of them, in fact, we find that having their tariff's than finding that ours are competitive and we still -- we don't expect as more revenue or hard work, but still satisfied with the work we've done. So to bring this session to close Market Data and value-added services. There's one thing I didn't mention about registration, which is quite important. REGIS-TR which I still think is positive. Not registration but REGIS-TR with (inaudible) approach for the (inaudible) repository in Switzerland. It's very good, very decent, let's see how far we can develop that, but whenever there is an opportunity to boost business in REGIS-TR as you know there's joint venture with Deutsche Börse at 50% and the future of that is, basically, we are going to need more requirements for communication of all 3 repositories. And that's a -- if they could use the FS -- [FFSR], which means we have to rereport to [FO swaps] all 3 repositories as we report -- to communicate to all 3, collateral transactions on. This will ultimately create more activity for repositories and this is the activity that REGIS-TR will benefit from.

And then our customers is quite high will continue to grow given the new regulatory requirements regarding inventories and TR. So as I said on market data and value services. There is an opportunity that the market is -- the company is dedicated to. These are particularly products that we have here. And I think basically you can look at the slide, which is self-explanatory. You can see here how, for consumers and people that know the industry, you can see the link between the different products, the relationship between products. We have information, financial data, reporting, regulatory services, which is a new bet to make the most of MiFID. The APAs, RMs, ARMs, APAs. So within BME, we'll have an area to develop of this business, but have them all under the same umbrella, on the same team, same department that will lead to significant synergies of product and know how, factory-- software factory. Commercial potential for North America would be very interesting because the same people can sell -- the same staff can sell all this range of products basically to the same customer base. We think that has huge synergy potential. And by putting it together, the team has done a lot of significant effort to develop these products that will generate a lot of growth, and we think that makes sense.

Other companies have proceeded in this manner when they've merged these business units together. And we felt that IT and consulting and marketing, to put them all in same department, it made sense in and it has upside. This slide also talks about the strategic philosophy that BME has to be one-stop shop. BME will -- always wants to provide a solution for anything, any customer needs, any sort of information needs or product. Anything they need they can find at BME, whatever regulation requires. That we will have, too. So basically, it's a big effort to cover all our customer needs throughout the competitive chain and anything related to regulation as well. So what we're going to do next in the company is to legally merge Infobolsa, Visual Trader and BME and Innova. And the company will be called BME InnTech, innovation and technology. We will create a new company, which we will call BME Regulatory Services to bring -- to pull together all the new regulatory services and requirements. So we're going to have this regulatory services center to take into account all the new things that are coming out, plus all the old stuff as well, CCAR, ASIR. There was a market, there is a customer base, which is good for us, and we think there are synergies. There's a potential. We already have -- for the customer, we're already providing these sort of legal services to a lot of them, we have this opportunity. And we think we can continue to sell these services through these new regulatory requirements. And again, putting them through this single department, they'll be a lot potential upside. So through this restructuring, we believe revenues growing 6.6%, costs grow 50%, operating costs go up about 56%, but that's basically because the restructuring of costs that have been brought into this business unit so from a -- this is what generates this increase, but it's a one-off and, as you well know, these are managed centrally of the cost of the company due to the address in a consolidated manner. So that's the breakdown for each business unit. This is the, well, net revenues and margin, a bit for each business unit. We already discussed them. And financials, as usual, solid. A sound balance sheet, nothing I need to report from -- other than the liquidity, which is very, very strong, over EUR 200 million in surplus liquidity, more than EUR 250, ex dividend, that is. I'm not talking about goodwill. I think we discussed it last time. Year-end closing represented all the valuation -- a valuation by independents that we had a considerable goodwill. That's fully accounted for, though. So the company has a very, very lean balance sheet. The P&L is basically what we saw earlier but put together into the P&L. Maybe I -- perhaps I should highlight the results -- we'll have the financial results, but before that, let me talk about that 5.1 becomes 1.7 without Infobolsa. That's the run rate of costs that the company has at present with March and May up 2.3% and 1.6% year-end 2016, so more or less along with inflation. Inflation in Spain right now is just above 1%, let's see how it closes. But we're following the guidance of being very close to inflation. That's the target. And as for the French results, well, the best thing I can say here is, well, (inaudible) zero because most of our investments, as you know, the financial result is almost 0 because we need to also comply with BME Clearing capital requirements and also a new one for BME [Clearing]. That means that you have to have negative rates there until there is no -- negative interest rate until there is no change in interest rates by the European Central Bank then that won't change, so we have 0 financial result except for the cash that we have invested in long term that will enable us to offset that. That's the situation as it stands right now.

I'm not going to go into detail on the different ratios, which I've discussed earlier, and the return on equities, the classic numbers. Let me talk to you about -- address the business drivers for BME. Again, addressing liquidity for Van Gogh Santander, BBVA has gone up from 7 to 3, excellent performance from BBVA, moved up from the seventh to the third in the ranking. Telefonica and Iberdrola have swapped positions. Sorry that's Inditex, they swapped around their positions, and Telefonica has gone down a little bit in the ranking, but either way 5 highly liquid stocks, among the most liquid stocks in EMEA, so very strong there. And just bring it to close with spreads, my favorite topic here at BME. I don't want to go into more details, but minimum historical lows, fantastic results and the spread for small caps has improved by 24 points, 24.1 basis points, which again as I said in equity, that's due to the improved volumes in the small and medium caps where there's some improvement in the spreads. And so that brings my presentation to a close and now we'll move on to the Q&A session.

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Questions and Answers

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Enrique Yáguez Avilés, Mirabaud Securities LLP, Research Division - Research Analyst [1]

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Enrique Avilés. 2 questions. The first one regarding costs. Now once you've linked to target securities, do you see any other element that might pressure on your costs to an upside more beyond the inflation? I mean, the second question is your outlook starting next year, what assessment and analysis have you made of the impact that MiFID II, what impact will it have on liquidity in the mid and small caps -- Spanish small and mid-caps? And what can you do in order to sustain the results there?

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Javier Hernani Burzako, Bolsas y Mercados Españoles, Sociedad Holding de Mercados y Sistemas Financieros, S.A. - CEO [2]

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Well, costs, costs, first of all. We do hope that if this happens then we'll never have a big amount every year. This is a multiyear project and I really want to spend time and money in projects that will bring in some net revenues not just these adaptation/ stroke protection projects for the company. Strategically speaking, it would be almost like an intellectual release from -- for us. We'd be liberated out of the reform and we could be more intense in the work that we're doing on revenue and generation projects, but the TARGET2-Securities aside, unless we come up with a massive project like that one, and we'll tell you about it, of course, if that happens, because that would be a plus point for the future. But we haven't one in mind. It isn't in a portfolio of projects at the moment. It would mean a massive investment, but we would never invest a lot of money in any new projects unless we expected to get equally large returns. But I think your question is more about the regulatory side of it. We don't see at all that we we'll ever have anything as big as that. We're working this year on the internal resources side of our business. It is also important and, of course, this is what we do in BME. It is our standard work to adapt to a method. Our equities and fixed income teams have been working very hard to make those adaptations that we have to do for the products and our customers. The official -- the formal side of it all, the formalities -- and a lot of that it's been done with very little recourse to external funding, to external cost. We're not generating those costs. And that has always been our trademark. In the future, however, any new projects that we undertake would have to generate much more revenues there. Mid and small caps, now, and MiFID, if the market improves, then I think that will help everybody. It will help the mid and small caps, too. It's true that the regulation does deal more with them. There's another player in regulation, which is the Capital Markets Union, and the measures that Europe is trying to implement to improve company access to markets, to work on the culture side. In general terms, there is a lot of important work to be done to try and get more liquidity for the small and mid-caps to help them along, and I think that's a positive step. We are doing some interesting work. I talked about it just before. We have opened a (inaudible), what that means is if companies are interested, keen to be listed on the market, they do their initial training. They build up an equity story. They talk to interested investors so that when they do decide finally to make -- take that big step, but then investors already know them. And they themselves, as management teams in these companies will have had that initial training. I think that it's all in line with this idea of taking that market as far ahead as possible it can go in Spain and Europe. Once again, we -- there's a lot of bank financing for Spanish companies. That's the way it's always been. And that is an opportunity for us to see how we can actually take, perhaps, the funding shares to, even to maybe 50% market and 50% back here. I'm talking about the companies if we group them together overall. That is something that we might be able to achieve in the future. The mindset of companies has changed a lot over these recent years. The environment as well. This rush of IPOs is all about the keen desire to be in the market because of the flexibility it gives you in funding sources and all of this will help.

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Unidentified Analyst, [3]

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[Juan Carlos] from Finantes -- [Fidentes], rather. I have a follow-up question to the question that Henrique has just asked here in the room. Are the other costs level, both TARGET2-Securities and the funding platforms? This type of development, I mean, do you think you could give us some idea, some guidance, some quantification of the cost impact on your cost line? And since you did mention that fund platform, could you give us some idea of the number of customers you've got there? Perhaps your expected revenues. It may be a little too early, but could you give us some idea there? And now going back to those comments just now on treasury, cash and banks, and how unfortunately you always have to have some short-term financial investments there. I mean, could you give us an idea of the percentage there? What the split is like?

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Javier Hernani Burzako, Bolsas y Mercados Españoles, Sociedad Holding de Mercados y Sistemas Financieros, S.A. - CEO [4]

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To answer the last question on the cash. BME Clearing, at present, has a capital -- share capital of EUR 50 million -- sorry, reserve cash and that's invested. That's cash that we have invested. Now, we still have yet to define Iberclear. That's already in the standard -- that we're implementing that regulation. Actually, we're preparing vis-à-vis that regulation. We're still missing. What we need to do is understand how much does Iberclear has to have as regulatory capital. How much do we need to know -- how much do we need to have as a buffer or short term, available in the short-term. Right now what we have available in the short term is about half -- half of it we have in cash and the rest is in -- it's invested in less than 18 months. We don't want to go long term because we think that cash, well, once we have a fully -- a full picture about of what we need to do, that means surplus cash level will then we'll either invest it or we'll just give it to the shareholders because there could be a risk in the long term with bonds and we don't want to take on. It doesn't make any sense, so we just have to wait and see and right now it's not something that we don't like. We don't like as far as our return on investment is concerned but we don't think we should take on the risk of investing in long term and have either an extraordinary dividend or find ourselves -- because we don't want to find ourselves in a difficult situation if the market turns around in the long term. Costs, T2S, that comes to an end in September and when we see the numbers. And as you've seen there's a -- compared to the last quarter last year, there's been a drop in the numbers. And I'm not sure because I don't have the numbers right on top of my head, I can't give you the specific number. Perhaps, Marta, do you have it?

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Marta Bartolomé, Bolsas y Mercados Españoles, Sociedad Holding de Mercados y Sistemas Financieros, S.A. - Controller [5]

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Well, basically the T2S costs are internal, internal costs. We may have to -- we may need additional support, but we don't expect any significant impact from that end.

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Javier Hernani Burzako, Bolsas y Mercados Españoles, Sociedad Holding de Mercados y Sistemas Financieros, S.A. - CEO [6]

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I'm sorry, the other question was? Oh, the funds platform, likewise, same thing. It's an internal development. And revenue outlook, of course, that's BME's very strict position here, as you know. What we can say is that we're pleased, we're very happy because it's been a positive feedback and response, testing was good. Some (inaudible) said they were sort of operating without us in June. And like every new product and any transaction, we'll just have to see how it works and what customers come in to start using it and we'll see what it contributes, what revenues we can make. We -- in the funds platform, we've put everything in place as per our expectations, but in Spain there is a lot of funds that are traded. That is a fact and a part of them will stay where they are, others will come to us. We'll just have to see. But there is one thing that we had to do, at least from a strategic point of view and philosophically as well,we are a trading machine. We are a trading machine and we trade absolutely every single financial asset that we can trade in Spain, everywhere, along -- end-to-end throughout the value chain. What we didn't have, which is quite significant is the funds participation, so we had to find a way to support that. But also from a -- take into account transparency and also market know-how. That's key. That's in our DNA. We'll see how much it contributes to net income and then see whether we can raise interest as well in the market and whether there will be demand for this platform or -- straight to this platform or through other channels. But from a cost point of view will be more -- it's a more complex structure so more -- don't you find it will be more expensive to run vis-à-vis, say, equities? Well, it's the same trading platform, we've just had that -- we've just done some -- we've adapted it, but the same core engine runs on -- I'm sorry, [smart] we didn't talk very much about that, but we've done a huge convergence in software in the past years. Earlier BME, if you look back, it was almost Middle Ages, really, but we moved very quickly. We had a lot of different training software and we've converged them. We've merged them and now we have a single, very powerful, trading platform -- software, so it's going to run on that same platform. Now post-trading, we've had to develop a specific project for that. We think we need to do other amendments there because, of course, it's a different asset. And we've also sat down and listened to what the industry wants and how we can adapt that to the equity market environment. That's why it's taking us a bit longer than we needed to complete the reform. We're not going to develop a fund trading platform by getting rid of the other one while we are still working on the new platform. That didn't make sense. So it did take a bit longer. However, that doesn't really -- hasn't really represented a significant rise in costs. Once it starts running, then -- once it's part of our installed capacity, it's just another asset that we'll trade within the system. So I don't think it will be significant.

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Unidentified Company Representative, [7]

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Okay, so let's move on then to the questions that we've received from the website. Very few questions on this occasion, on the one hand, they're asking about clearing revenues. When traded has gone off the [trains] now by 50%, why have -- why has the cash gone down 50% -- 9%. Could you give us -- I was mentioning that. Can you read the question? Clearing revenue has gone down 9%, traded that's gone down 50%, right, that's the derivatives.

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Javier Hernani Burzako, Bolsas y Mercados Españoles, Sociedad Holding de Mercados y Sistemas Financieros, S.A. - CEO [8]

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Yes, that's equities, clearing and derivatives, and derivatives have fallen off, yes, that's the reason, yes.

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Unidentified Company Representative, [9]

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And then there's also a question about this new business unit that has being set up, the market data and value-added services unit. The question is whether there will be any one-offs that will come into Q1 from this reorganization?

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Javier Hernani Burzako, Bolsas y Mercados Españoles, Sociedad Holding de Mercados y Sistemas Financieros, S.A. - CEO [10]

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No. Basically, as the cost restructuring, cost that we put -- allocated where they pertain -- where they belong. What we've done is -- with the restructuring, again, to reallocate those costs. But we haven't incurred additional costs just because we did it. It's just the costs that we had already -- the real costs that we had, they needed be allocated to new organizations. So it's a one-off. Again, it was a cost that took place because of that.

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Unidentified Company Representative, [11]

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And then regarding trading -- on trading, UBS has a question. Could you give us some visibility on the block? I think you explained it in part, but they would like to know if you can give us a like-for-like, the block for this quarter against last year, block trades.

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Javier Hernani Burzako, Bolsas y Mercados Españoles, Sociedad Holding de Mercados y Sistemas Financieros, S.A. - CEO [12]

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Yes, as I explained earlier, basically what has happened in comparison to the previous quarter is that the level or the volume of block trades has been lower. So that's the comparison Q1 this year and Q4. I'm not sure I've got the figures here with me. Perhaps you have them? Yes. I think it's the same level. I think it was 33% block trades last year and it's 32% this year, so very similar. Are you talking about Q1 or Q4? Compared to Q4 or Q1-Q1? It's Q1-Q1, yes.

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Unidentified Company Representative, [13]

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And to finish off, the with the questions that have come in. Any news on LatAm? And the Latin American strategy is the question. What progress is being made there. Any news for us?

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Javier Hernani Burzako, Bolsas y Mercados Españoles, Sociedad Holding de Mercados y Sistemas Financieros, S.A. - CEO [14]

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Well, synergies moving forward. Year-end was good. We experienced sales of different products. We have to have different products, routing systems and also different finance software that was sold for another customer. In Columbia, Mexico; Mexico we also had interesting sales. I think we're starting to find -- we're starting to see that there is all the sales effort is now yielding fruit. It's cyclical, however, the sales of these projects takes time to yield results. We -- same thing last year, we saw the results towards year-end, and the year kicked off fairly good from a projects standpoint. We are talking about additional revenues of EUR 4 million or EUR 5 million with these new projects, that includes setups, maintenance and so on. We just start now producing interesting results for us. When we get to full incenting of LatAm as a reporting unit, we will report that separately, of course, because if we perform correctly here, we'll have a LatAm side. We'll have LatAm, so it will be driver of the business here, so we'll explain the diversification that we're attaining there, which is starting to impact positively our results. So the year-end was good. And the sales that we're expecting have finally have been signed. We have other numerous initiatives in other countries related to the sales portfolio that we have already -- that I already explained earlier.

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Unidentified Company Representative, [15]

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Well, that brings our -- that's all the questions we have for today.

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Javier Hernani Burzako, Bolsas y Mercados Españoles, Sociedad Holding de Mercados y Sistemas Financieros, S.A. - CEO [16]

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Okay, well, thank you very much for joining us and this webcast for Q1. We're going move on to the AGM. And we'll see you in the second quarter. Let's see if this recovery of volumes is so striking in April. Let's see if that consolidates in coming months for May and June. Thank you very much.