Investment Technology Group In Asia
Investment Technology Group (ITG) reported that during the second quarter of 2009 which was released July 30 that they had realigned its organizational structure from three distinct businesses to four. The International Operation was split between the European and Asia Pacific businesses. Let’s briefly examine what ITG is doing in Asia.
ITG’s Asia Pacific business spans Australia, Hong Kong, Japan and Singapore with revenue derived from trading, network connectivity and research service. While less than 5% of ITG’s consolidated revenue comes from Asia there has been a focus on ramping up the business here in APAC as demonstrated, among other things, by the splitting of the International Operations.
They reported (Asia segment) in the first half of the year that revenue was down 22% from USD16.6 million H1Q2 2008 to USD12.9 million. This zone also lost USD8.2 million dollars versus USD2.4 million in the corresponding period last year. While it is no surprise that revenue fell given that commission is generated as a percentage of the trade value nearly 95% of revenue comes from these ad valorem commissions. What is interesting though is that share turnover on the APAC exchanges dropped by more on a percentage basis than turnover at ITG suggesting that they are capturing market share.
There was no country data available to determine how much volume they execute in each market but assuming that commission is about 3bps across the zone including crossing and program trading flow. Reported revenue as mentioned was USD12.9 million of which 95% was commission would roughly estimate to about USD41 billion in the first half or USD410 million of share value traded per trading day. To put that into perspective the Stock Exchange of Hong Kong does about USD7.7 billion and the Tokyo Stock Exchange about USD17 billion per day.
ITG has added nearly 23% more staff to APAC and while this negatively impacts the balance sheet in the short term it would seem that the gain in brokerage market share can be directly attributed to that in the face of anemic trading turnover.
ITG is known for its algorithms such as Float, Active and Raider, its POSIT Crossing network, Triton the EMS and list trading application, Macgregor and it’s pre and post trade analytics suite. This agency firm with its storied brokerage history has its sites set high and looks to be a force to reckon with here in Asia.