105%
103%
112%
118%
2009
2010
2011
2012
Costs
Revenue not linked to trading volume
Revenue Cost covered by Revenue not
linked to trading volumes
Cost covered by Revenue not linked to trading
volumes (%)
Results for the year showed BME’s ability to deal with
stiffer international competition vying for shares of secu-
rities trading, while at the same time raise funds from new
businesses not directly exposed to trading volumes on its
platforms. In 2012, revenue not linked to volumes climbed
6 points to cover 118% of BME’s cost base, a record in the
Group’s short history. In two years, the ratio has improved
by 15 points, indicating that product and service diversifi-
cation is steadily bearing fruit and leaving BME in a strong
position against possible market downturns.
Revenues from trading accounted for approximately 49%
of total Group revenues in 2012 (equity trading alone
accounted for 37%). This is a more than 3-point drop
compared with 2011 and 6 points less than in 2010, and
represents a contribution to profit of 47% (4 points less
than in 2011 and nearly 7 less than in 2010). Revenues
from trading includes figures reported for the Equities,
Fixed Income and Derivatives business units, which will be
discussed at greater length later. If we factor in revenues
from the Clearing and Settlement business unit, where
activity is closely and primarily linked to trading volumes,
the total contributions to BME’s revenues and net profit
would be 76%and 78.5%, respectively, broadly in line with
the 2011 levels.
If one thing makes BME stand out, it is the company’s
ongoing efforts to rein in costs. Operating costs increased
by just 0.6% in 2012, showing how consist the bottom line
really was. Looking at long-run trends (i.e. since the Group
began operations in 2004), operating costs have increased
by 7%, while revenue has jumped 47% and net profit has
soared by 84%.
BME’s business model is predicated on three core exec-
utive pillars: integration of the value chain for products
traded on its platforms, diversification of underlyings and
businesses, and focus on internally developed technolo-
gies. This has positive effects on the company’s profita-
bility. BME’s modus operandi is backed by generating a
consistent flow of net free cash flow, keeping capex low,
achieving a high critical mass, obtaining wide margins
with low leverage, maintaining lowmarginal costs on new
products or projects added to the business range and, in
short, achieving a high degree of efficiency and healthy
returns on equity.
This prudent fund management, aimed at optimising
usage and boosting BME’s value, was rendered evident
yet again in 2012 by two standard metrics for the compar-
ison of BME’s performance vis-à-vis its competitors, its
efficiency and ROE ratios. The efficiency ratio for 2012 was
33.4%, i.e. 13 point lower than the global sector average.
This ratio measures the percentage of costs incurred over
each unit of revenue obtained. ROE was 32%; i.e. 18 points
above the average. ROE (return on equity) measures the
rate of return on shareholders’equity.
Meanwhile, certain initiatives undertaken and alterna-
tives launched by the Spanish stock market in the last
few years to boost transparency, financing, security and
confidence in securities markets and the financial system
as a whole were stepped up in 2012 and showed signs of
increasing acceptance in terms of demand, even though
circumstances were hardly propitious. Market Data, Meff
Power, collateral management, REGIS-TR, IT compliance
solutions, consultancy services for market development in
other countries and InResearch are a few of these, which
we will discuss later on. Other platforms, like MAB Growth
Companies and the SEND electronic debt trading platform
for retail investors, showed encouraging signs of their
growth potential when the economic environment turns
more stable.
27
BME Business Areas
4
Annual
Report 2012
/ BME
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