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BGC FX Revenues Decline in 2016, But Fenics a Bright Spot

BGC Partners has released fourth quarter and full year results for 2016, which show that revenues were down in both its fully electronic FX and financial services businesses compared to the previous year.

BGC posted Q4 2016 FX revenues of $70.8 million, down 5.8% from Q4 2015, and full year revenue of $303.3 million, down 6.6% from 2015. 

The notional volume from its fully electronic FX trading unit was also down year-on-year, dropping 21.8% from $13.4 trillion in 2015 to $10.5 trillion last year. Although the reported notional volume of $2.4 trillion in Q4 2016 was a 4.5% improvement on the previous quarter, it was still down 7.2% from Q4 2015.

Total revenues for BGC’s financial services division were $1.5 billion in 2016, down 1.6% from the previous year. Revenue for Q4 2016 was $359.3 million, down 5% from Q4 2015.

In its results disclosure, BGC says the revenue decline in its financial services division is primarily due to the sale of Trayport and lower volumes across global FX markets. It does note, however, that this was partially offset by the addition of GFI, as well as strong growth from fully electronic credit brokerage and the data, software and post-trade businesses. 

BGC also says that Q4 and full year 2016 revenue for its financial services businesses would have been at least $6.5 million and $21 million higher, respectively, were it not for the strengthening of the US dollar relative to other major currencies.

Despite the decline in revenue – in both its FX business and its financial services business more broadly – Shaun Lynn, president of BGC, was optimistic in his outlook for future growth opportunities.

“Our rates revenues increased by over 7% year-on-year in the fourth quarter, and we saw particularly strong overall financial services top-line growth in November as a result of increased activity following the US election. The combination of potential regulatory reforms, our investment in technology, and the expectation of rising interest rates makes us confident in the prospects of our financial services business,” he said in a statement accompanying the results

Lynn added: “The widely discussed regulatory changes should be very beneficial for both our clients and us. Over time, we could see the overall industry returning to activity levels seen a few years ago.”

He highlighted BGC’s Fenics business as a particularly strong performer in the financial services division, pointing out that it increased its full year pre-tax earnings by over 20% compared to 2015.

“As we continue to convert hybrid and voice desks to fully electronic trading, further expand our customer base, and roll out several new Fenics offerings over the course of 2017, we expect to improve fully electronic earnings and revenues,” concluded Lynn.

Galen Stops

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