Flow Traders Ltd

F:O3I

Earnings Call Transcript 2018-Q1

[Operator]

Ladies and gentlemen, thank you for holding, and welcome to the Flow Traders Q1 Results 2018 Event Call. [Operator Instructions] I would like to hand over the conference to Mr. Serge Enneman. Go ahead, please, sir.

[Serge Enneman]

Thank you, operator. Good morning all. On behalf of Flow Traders, I would like to thank you all for joining us today. This morning, we have released our first quarter 2018 trading results. Due to the exceptional results and the important changes in our regulatory environment, we wanted to follow up this morning's results with a call. Going forward, we will continue to report on an interim basis, so no calls for first quarter and third quarter results unless the circumstances require further highlighting. Today, our co-CEO, Dennis Dijkstra, and our CFO, Marcel Jongmans, will present prepared remarks. After which, our co-CEO, Sjoerd Rietberg, will also join to answer your questions. Before we begin, let me draw your attention to the disclaimer on Page 2. Please be advised that if you continue to listen to this presentation, you are bound to this disclaimer. Also please note that the results that we will discuss in this presentation are unaudited results. With these formalities out of the way, I would now like to hand over the call to Dennis for his opening remarks.

[Dennis Désiré Matthijs Dijkstra, Co]

Thank you, Serge. As you already mentioned, during the 2017 results, Flow Traders has witnessed its strongest quarter ever in the first quarter of 2018. While looking at the underlying drop dynamics in the ETP market, we saw that in the first quarter of 2018, volumes traded in the market picked up substantially, spreads have widened somewhat, the volatility increased substantially, the global ETP AuM growth stabilized following market movements and the impact of MiFID II on the ETP market, so far, led to an increase of volume traded on MTFs. The pickup in the market activity led to an improved performance for Flow Traders in all regions, especially in the U.S. Traded volumes grew by 49%, and the regional out performances, in combination with the widening trend in market spreads, led to a sharp jump in our net trading income. This confirms our business model. Fixed cost decreased 2% quarter-on-quarter as Flow Traders continue to operate very cost-consciously. Following the IFRS treatment of the employee participation plan, the variable compensation pool was less than 36% of the operational profit. This led to an EBITDA margin of 63% and earnings per share of EUR 2.36. To better highlight the impact of all our trading activities going forward, we will also present our non-ETP Value Traded. This includes all hedging currency commodity and future trading and liquidity-providing activities in other financial [ costs ]. The trading in these products is of importance for our NTI. The contribution of these -- of trading these products is expected to grow in the future, as we will further deploy our market-making capabilities in FX and other asset costs. In the appendix, we have attached an overview of our ETP and non-ETP Value Traded in the last 5 quarters. On the regulatory front, the impact of CRR and MiFID II is that our own funds requirement, as calculated under the standardized method of CRR, is EUR 151 million. This results in excess capital for Flow Traders of EUR 183 million at the first reporting date of the 31st of March, 2018. Given the excess capital position and our unlevered balance sheet, we reiterate our dividend policy going forward. Flow Traders continues to be the largest ETP liquidity provider in EMEA, and Flow Traders has so far not witnessed a material impact from VIX when volumes traded in the ETP market. Let's now have a brief look at the KPI developments in the first quarter. As it's shown on this slide, the ETP Values Traded in the market grew considerably. Values Traded in the -- in U.S. even grew sharply. Flow Traders' trading performance stood out in every region in the first quarter. We gained market share across the globe, also in the U.S, which was a bit lagging in the previous quarter. We also present the non-ETP Value Traded going forward. This, to reflect that our NTI is not only determined by our performance in ETPs, given that Flow Traders expects to diversify further in the future, and hence, the non-ETP part is expected to grow bigger. This means the value factor in ETPs as a metric is less meaningful. This concludes the presentation on the market development. Now we take a closer look at the financial performance. For this, I would like to hand over to Marcel.

[Marcel C. Jongmans, Former CFO & Member of the Management Board]

Thank you, Dennis, and good morning all. On this slide, we present our simplified P&L. Flow Traders witnessed its strongest quarterly performance ever in the first quarter of 2018. As shown here, the sharp increase in net trading income was supported by prudent cost management. Technology cost decreased as Flow Traders continued to operate cost-consciously, resulting in an overall decline in our fixed cost of 2% quarter-on-quarter. Our FTEs continued to grow to 411 end of first quarter from 394 end of 2017. That means that year-over-year, our fixed cost has grown by 4%, which is what was in the guidance limit of 15% annually. Regarding the variable employee expenses, the treatment of our employee participation plan under IFRS decreased to a lower cash amount than the fixed 36% we normally report. We are not allowed to take the amount from the plan as a liability on the balance sheet, which impact the 36% variable employee expenses in the P&L. So the amount from the plan is considered as off-balance sheet liability, which will flow into the P&L in the coming years when the amount is vested. As a result, we took 50% of the variable expenses off-balance in the first quarter for the incentive plan. The effective tax rate this quarter was 16.9%. On these developments, we saw a net profit of EUR 109.7 million or EUR 2.36 per share. Flow Traders continued to execute on its organic growth strategy as was continuously highlighted during 2017. The growth initiatives are developing as planned. And looking at the performance in the different regions, we see that the investments are paying off. We will continue on this growth path, where we focus on the balance between efficiency improvement and growth. Now we turn to the next slide for an update on our capital. On this slide, we show our capital first as a required capital levels from a regulatory as well as a prime broker perspective. These are both new charts and do not relate to the regulatory ratio overviews we have presented before. Under CRR, Flow Traders N.V. own funds requirement was EUR 151 million on the reporting date of the 31st of March, 2018, which in the slide we have above, we referred to as required CET1 capital. This means that Flow Traders has an excess capital of EUR 183 million. What we know for a fact is that we comply with the requirement under the standardized method of CRR, and that as such, the new capital requirement has no effect on our trading strategy and growth plans. The own fund requirement has been backed up and remains stable. We want to express our gratitude to our colleagues in Flow, who have worked extremely hard to accomplish this in such a short time frame. At the same time, the European Commission released a proposal for a new investment firm regulation, which is designed for investment firms specifically and is perceived as more proportionate. This new legislation is expected to be implemented around 2020. On the right-hand side, we show the development of our prime broker solvency ratio and our total trading capital. This graph continues to show how comfortably we meet the requirements of the prime brokers in the first quarter. Taking all of the above into consideration, it means that given our conservative and unleveraged balance sheet and our prudent capital management, our dividend policy is reiterated. This concludes the financial review. Now I would like to hand back the call to Dennis to highlight the impact of MiFID II in the first quarter.

[Dennis Désiré Matthijs Dijkstra, Co]

Thanks, Marcel. Flow Traders was well prepared for MiFID II, and the implementation went according to plan. Looking at what MiFID II wanted to achieve, we see that, first, more of a leveled playing field has been created. Second, transparency and visibility have increased off exchange as more volumes are being traded from the MTFs now. And third, following the unbundling of research and execution, the focus on best execution and best price discovery has increased, which means that more account parties see possibilities for best execution. All these developments are proving to be beneficial to the ETP market and to Flow Traders so far. The increase in flows traded on MTFs was strong, but Flow Traders continued to be the largest liquidity provider, both in-stream as well as on the MTF back function in the EMEA. Flow Traders also grew the number of counterparties, further driven by the unbundling of research and execution. The impact of SIs on the flows traded in the ETP market seems limited so far. Regarding the implementation of MiFID II, we will continue to track the developments proactively and support any necessary changes to make sure MiFID II grow to accomplish its principles. With this, we conclude this call. And now, I would like to hand back the call to Serge.

[Serge Enneman]

Thank you, Dennis. This concludes our presentation. We would now like to open up the floor for any questions you may have. Operator, would you be so kind?

[Operator]

[Operator Instructions] The first question is from Mr. Ron Heijdenrijk, ABN AMRO.

[Ron Heijdenrijk, Analyst]

Ron Heijdenrijk, ABN AMRO. I have 2 questions on capital activity. One is during the first week of February, could you enlighten us how much capital headroom you still had during that period? And then secondly, have you already done a preliminary analysis on IFR/IFD? How much that would actually shave off of your capital requirement?

[Sjoerd Aalderik Rietberg, Co]

Ron, thanks. Sjoerd here. I will answer your first question on the capital needed during the more active periods in this quarter. So actually, what we've seen, not only this quarter but actually during all trading activities we have is that due to the fact that we are trading in and out and providing continuous liquidity while hedging our positions, our capital -- our trade capital in sales is not really a constraint for our activities. So as you are well aware, we intend to not have big positions on our trading boost. We tend to provide liquidity and continuously, in fact, increase the velocity as much as we can of our trading activities. And that's also what we've done during the market turmoil as you can call it in the first 2 weeks of February.

[Ron Heijdenrijk, Analyst]

And -- sorry to interrupt you there, but does that go for both the regulatory capital as well as the prime broker capital?

[Sjoerd Aalderik Rietberg, Co]

Yes. In our perspective, this development more or less go hand in hand. Yes. Marcel?

[Marcel C. Jongmans, Former CFO & Member of the Management Board]

Ron, then I'll answer to your second question about IFD/IFR. We don't think it will be worse than the CRR. There are still a lot of discussion going on about the paper presented the last few months. So a lot of discussion going on there. We expect that CRR is really the maximum there if you look into the details into their proposal.

[Operator]

The next question is from Mr. Martin Price, Crédit Suisse.

[Martin Price, Former Research Analyst]

Firstly, I've got 3 questions. First of all, I just wondered if you could comment on how Q2 is evolving from a net trading income perspective. Perhaps in the context that maybe the previous record quarter of Q3 '15, are we talking higher or perhaps lower than that? Secondly, were there any products that contributed to the exceptionally strong performance in the U.S. in the period? I guess I'm thinking specifically about the inverse VIX ETPs. Is that -- I'm kind of struggling to rationalize with that exceptionally strong performance in the period just based on volatility trends. And then just finally, the ratio of non-ETP Value Traded versus ETP Value Traded is perhaps a little bit higher than I might have guessed. I just wondered if you could provide a little bit more detail on why that's the case.

[Sjoerd Aalderik Rietberg, Co]

Thanks, Martin. To answer your question on the current NTI, I can only refer you to the current market information already available. So what we see is that market [indiscernible] is less than what we've seen on average in the first quarter. Also in terms of the values traded, I think the trends you see in March are more or less continuing in April. As for your second question, what kind of asset classes this contributes to our results actually. I will comment, of course, based upon the fact that we are providing liquidity in all asset classes around the globe. So good for us to see that actually all the regions showed really healthy performance with both an increase in market share in a market, which is also growing in different regions but at the same time, at even faster growth in our NTI in the -- also in the EMEA and APAC region and of course, from the exceptional results in the Americas. So it is really based upon the strategy by which we are providing liquidity in all different kind of asset classes and where we are able to capture also those opportunities that pass by that might lead to the exceptional results that we're able to show today. And the third question on the ratio of ETP versus non-ETP. I think it's important to realize that we have emphasized already several -- in several calls that actually, of course, with every ETP trade, we are hedging our exposure so that explains at least 1/4 of the volume we are trading. Furthermore, most of the ETPs we are trading also have a currency component in it. So that's another probably 15% of the 100% you are looking at. And indeed, we are, of course, also providing liquidity in, for example, index futures or even other financial assets, which are available in the over 140 venues we are connected to. So it makes sense that we do see that there is more than or maybe even a bigger chunk of non-ETP Value Traded than you would expect. And this actually also was the main reason to say that we wanted to make it more visible that we are also diversifying. And in fact, this diversification will of course lead to a situation that a lesser portion of our value traded is actually traded in the ETP segment. And of course it's important to emphasize this. And this is also, as mentioned, this is also why we let go of the revenue capture in the ETP space. And we're focusing more on the [ value traded ] versus our NTI, which, of course, remains our key metric. We're trying to optimize and maximize our net trading income. I hope this answers your question, Martin.

[Martin Price, Former Research Analyst]

That's very helpful. Just a quick [ clarification ]. Within the U.S., obviously in Q1, there was no kind of outside benefit from trading any single kind of ETF -- ETP products or maybe a small number of ETP products?

[Sjoerd Aalderik Rietberg, Co]

As mentioned, we have seen, in parts, of market turmoil, especially in February. So it makes sense that in these few weeks, we -- the biggest contribution was made to our NGI in this region. We were able to capture all these different opportunities from different kind of trading desks and different kind of quotes as well. I will not go into detail about the exact division of this net NGI contributions.

[Martin Price, Former Research Analyst]

Understood. And maybe just a quick follow-up. Can I ask if there was perhaps an unusually large gap in your ETP Value Traded or profitability of trades you were executing in the U.S. off-exchange versus on-exchange in the period, just to get a feel for where the demand for liquidity was?

[Sjoerd Aalderik Rietberg, Co]

In general, there was not really a big gap between different transactions. No.

[Operator]

Next question is from Mr. Michael Roeg, Degroof Petercam.

[Michael Roeg, Analyst]

I have a couple of questions on the Americas and one on the non-ETP Value Traded. First, with the Americas, you gained market share. Did you gain market share generally because your pricing strategy outperformed that of your peers? Or was there a large inflow of new clients in, for instance, the off-exchange segment where you penetrated last year? Then the second one on the Americas, what explains the exceptionally strong revenue capture? Could you give a little bit of feeling for what happened during the first weeks of February? And then the final question is on the non-ETP Value Traded. That is, just like my colleague mentioned, a bit larger than I had imagined. Is it already contributing to NTI in Q1?

[Sjoerd Aalderik Rietberg, Co]

Michael, thank you. On the first question on market share regarding the different -- why we gained market share actually in the U.S. It of course has to do with several investments we've made, both in people and making sure that all the organization is ready to capture market opportunity when they arise. It, for sure, also has to do with investments in technology and pricing. And actually, this enabled us to both gain market share. This increases the value traded and also gain market share actually on the on- and off-exchange trades we do in the Americas. So I hope that answers your first question. For the second question, yes, refer actually to the [ ultra ] [ already gave ]. So we've seen some questionable market turmoil in this first week of February, but in general also, the first quarter was -- yes, the quarter was quiet, some increase in market activity. We've actually seen an increase of Value Traded of USD 1,800 billion -- or euro actually in the Americas, which is of course a massive increase in an already massive market. So we've been able to capitalize upon that with our U.S. operations. And indeed, we are enabled to also create exceptional results there. And we are aware of this as well. At the same time, I want to reemphasize that also in the other regions, we have seen growth of around 80% in our net trading income. And we've been able to increase actually our market shares as well. So all these regions have been able to contribute to the results we've been able to present today. And then regard to your question on non-ETP Value Traded, as already mentioned, we are already the largest liquidity provider for a lot of index futures for other financial products around the globe. So these products are already contributing for years to the NTI. We are delivering. At the same time, of course, we have also the currency initiatives, and we are able to internalize the benefits from the internalization of these currency initiatives. And also we are able to not only benefit from these cost savings or reduction of hedging transactions, but we are also able to benefit and to extract NTI in order of magnitude of several millions in this quarter from this liquidity providing in currencies.

[Michael Roeg, Analyst]

Okay. Well, then I have some follow-ups on your answers. About the U.S. off-exchange in Q4, it was a bit of a slightly slower growth there. But did you see an acceleration in Q1 amidst these turbulent market conditions of new counterparties and counterparties you already signed that all of a sudden wanted to trade much more with you than in the previous quarters? Was there a clear improvement compared to, yes, just the sluggish Q4?

[Dennis Désiré Matthijs Dijkstra, Co]

I think -- commenting on the on-stream part, I think we would continuously add new counterparties in the U.S. As you might imagine, it's a big market, so there are a lot of counterparties to connect to. it takes some time to do the paperwork and the complete onboarding. So we continuously add new counterparties. And the counterparties that we trade is normally in line with the on-stream of the value traded. If the on-stream value traded goes up, the off-stream value traded goes up almost hand-in-hand. And then the same goes for Europe, for other regions by the way.

[Michael Roeg, Analyst]

Okay, good. Well, then -- well, again, while I understand that's revenue captured, it doesn't say all of it nowadays because there's a lot of non-ETP Value Traded. But still looking at the revenue capture of the Americas, it was phenomenally strong. And assuming that it was even stronger during February compared to, say, January or March, I'm still very curious to understand what happened in the market? Were -- was there -- yes, pricing must have been exuberant during those weeks and with -- well, have you seen something like that before in other events, like Brexit and U.S. elections and -- or even further back maybe?

[Sjoerd Aalderik Rietberg, Co]

Very interesting question. Of course, we have seen interesting market circumstances as well. So first of all, I already mentioned the difference in the main value traded and the massive growth in the value traded in the ETP space in the first quarter. But it might also be interesting to check the difference in the realized volatility in the different indices between the Americas region and the European region. And you will find out that U.S. markets actually post a far bigger realized volatility level than the European regions or the European, or even the Asian region. So this can also explain actually why we see this difference between the different regions. Why we see that the Americas can benefit even more from the movement we've seen. And to your question regarding other time periods we have seen this kind of movements, actually, the interesting part this quarter was that we have seen quite a bit of market movement in a roughly short period of time. So we're talking about that maybe the 2 weeks in February, we have seen markets move with several percentage points on a trading day. But for example, in the third quarter of 2015, we've seen a quarter in which a lot of geopolitical turmoil and also financial turmoil led to a very active quarter in terms of market activity and if we take a look at 2011, because the same is true. And even further back as I look at 2008, for example, we've seen also several months of market volatility where we posted very strong and very solid results. So actually, we've been able to capture a decent part of the pie in a relatively short period of time in this first quarter.

[Michael Roeg, Analyst]

Okay. Well, then my final follow-up, and then I'll let somebody else have their return. The split between the ETP Value Traded and the non-ETP Value Traded. Non-ETP Value Traded is already contributing to NTI, yes? Would you say that the majority of your NTI is still ETP Value Traded? Say, 75% or 80% is ETP, NTI, and the remainder is non-ETP. Is it already that significant?

[Sjoerd Aalderik Rietberg, Co]

It's hard for me to give you the exact split in terms of exact percentages. But I can say it's still the majority of our trading activity, which is related to ETP trading. And as you know, if we trade ETP, there's a hedge adjoined with, there's currency trading adjoined with. So it's also a bit harder to really assign parts of our NTI to very specific parts of our trade, especially given the initiatives we have on the currency trading where we internalize part of our hedging flow as well. That's also the reason again why we want to show our Total Value Traded because from that perspective, it's a complete figure, actually.

[Operator]

Your next question is Mr. Werner with UBS.

[Michael Joseph Werner, Executive Director and Equity Research Analyst]

Michael Werner here, UBS. I just have a couple of questions. We saw a quite good cost control in terms of year-on-year cost progression in Q1, 4% growth. How should we think about the guidance for full year cost growth of -- for 2018? Is there any changes there? And then going back to the capital disclosure that you provided today, thank you for that. Is there any reason to think that the period-end capital requirement is any different than say, for example, the average capital requirement throughout the quarter?

[Marcel C. Jongmans, Former CFO & Member of the Management Board]

Thanks for your questions. About the cost control and the guidance we have given to you over the last few months, we still keep the guidance of 50% maximum for 2018 and years beyond. So we will not change our guidance for this -- after this quarter. So that's one. Secondly...

[Michael Joseph Werner, Executive Director and Equity Research Analyst]

And just a quick follow-up on that actually. Was there anything in the quarter that was, I guess, unusual? Because we saw a pretty good expense growth, and you've obviously seen a bit of a deceleration in Q1. Is there anything from a timing perspective or a rollout perspective or an investment perspective that we should consider?

[Marcel C. Jongmans, Former CFO & Member of the Management Board]

Yes, still in the rest of the -- in the remainder of the year, they can still come some investments from a technology point of view. On the other hand, what we are seeing in the tech -- and as what we explicitly mentioned in the text we gave to you is that our technology costs are down this quarter. It means that this does not -- that we are not investing a lot in tech anymore, but the majority of our tech costs consist of people. And you have seen over the last few years that we have grown a lot in FTE and most there -- and the majority of that growth was in tech people. So we are -- I would say, it's not to say that we're not going to hire any more, but we are required [ to lessen number ] of tech people in our firm and on the other hand, skilled and data communication-wise have become a commodity. So a lot of costs we've made in the past were related to that item, and we do not see a lot of big increases in that item in our P&L anymore. And then on the capital numbers, it's noted that we have, I would say, tweaked the numbers at the end of quarter to a lower lever. If you look on average across the quarter, we still have quite stable numbers there. So it's not we have changed our book at the end of the quarter to come to fairly good numbers. It's quite stable across the board.

[Michael Joseph Werner, Executive Director and Equity Research Analyst]

And then just one follow-up, if you don't mind. In the press release this morning, you note how the activity for the company was concentrated, at least more concentrated this past quarter than the previous record quarter in Q3 '15. Is there any, I guess, guidance that you can give us as to how much of either the activity or your revenue generating capacity was concentrated in one of those 2 weeks in the beginning of February?

[Sjoerd Aalderik Rietberg, Co]

It's Sjoerd here. Well, it's hard to really pinpoint, but as you already mentioned, of course, at the beginning of February, we've seen most of the concentration of trade activities. It's almost more than 2-week period where we've seen some market volatility, and you will also see it's, as already mentioned, the differences between the realized volatility for the European and the American markets. We've seen that the realized volatility in the U.S. was not really quite higher than any European markets. And with that in [ indiscernible ], we've seen some exceptional opportunities in the U.S. markets we've been able to grab in this 2-week periods, where we have been able to materialize our NGI bond.

[Operator]

The next question is from Gregory Simpson, Exane BNP Paribas.

[Gregory Bickley Simpson, Financial Analyst]

Just two questions from my side. The first to be on the dividend policy, you've reiterated the -- that the guidance for a payout of above 50%. You're going to make a high level of profits this year. So I'm just wondering how you're thinking about using these profits at this stage between your returning to shareholders, maybe M&A or other investments. And then the second question would be those recent comments from a large U.S. investment bank about wanting to increase their market share or presence in European ETF market-making. Could you maybe share some thoughts around this? And what you've actually seen in the market in Europe post-MiFID II? Have you been gaining share from the investment banks as execution has been unbundled?

[Marcel C. Jongmans, Former CFO & Member of the Management Board]

Thanks, Gregory, for your questions. About the dividend policy, we are not going to disclose at the moment what we are going to do with the distribution of our profits. What we have reiterated during the call is that we stick to our dividend policy, where we pay out at least 50% and in what way we are going to pay it out, we are not going to disclose during this call.Coming back to your second question about the interest of some undisclosed U.S. investment bank, I think it's a confirmation of the size of the market and also the growth of the market going forward. So we foster competition. So that's positive. As said, I think [ indiscernible ], the barriers to entry remain very high, probably they are only going up. So -- and then again, this is about, I'd say, probably all products having the scale being independent, so we think it's a positive statement. Regarding how we've gained market share, that's difficult to assess. But we have been getting market share some on- and off-stream and also have continued, as we have mentioned, to convert counterparties with the help of the unbundling of research and vested securities, also variably, continue to onboard new counterparties even in the Europe. So that's positive.

[Operator]

The next question from Rosine Van Velzen, ING Bank.

[Rosine Van Velzen, Research Analyst]

Yes. Rosine Van Velzen of ING. The first question is on revenue capture. I do understand you want to move away from revenue capture. But if you calculate it for Europe compared to the U.S., for example, you do see the big gap. You have highlighted already the volatility was different there but also the exceptional circumstance, of course. So I -- my question is on the European revenue capture, is this more or less an average revenue capture for the given level of volatility as there has been less exceptional circumstances in Europe? And second, on the capital requirements, could you split it more in a fixed component versus a variable, which relates more to your trading positions?

[Sjoerd Aalderik Rietberg, Co]

First, to answer your first question on revenue capture in Europe, what we see in general is of course with a bit more active markets and an increased market volatility, we see revenue capture increase a little bit. And so now it also depends of course upon the product mix we are actively trading on the revenue capture risk. So this explains the move of our revenue capture over the different regions. So right now, we could see this increase as well in the European region. And it's mainly driven by these 2 factors, where market activity and market volatility probably plays also an important role.

[Marcel C. Jongmans, Former CFO & Member of the Management Board]

Okay. Rosine, going back to your second question about the capital that most part of the capital required has to deal with how your book is positioned and how you are hedged. So over 90% has to deal with the way we risk the positions. So there is not, I would say, a big part that you could consider fixed because it all has to deal with how you have hedged your book. And I must say that CRR is quite reasonable with fully hedged books.

[Operator]

The next question is from Mr. Anil Akbar, Kempen & Co.

[Syed Anil Akbar, Analyst]

I have a question on the fact that you just guided for that revenue capture is not very relevant to you going forward, especially since the [ blast ] portion of your trading also consists of non-ETP items. But how should we, going forward, look at sort of the elasticity of your sort of top line, given certain exceptional circumstances now for one thing, like in certain areas, it's way higher, as you could see like in Americas, especially given the exceptional circumstances over there versus Europe. But you also see that like given a period of very high volatility, there's exceptionally high elasticity of your model on the upside and then on the low side -- then on the downside. Could you guide a little bit about the elasticity of that basically?

[Sjoerd Aalderik Rietberg, Co]

Yes, thank you. First of all, I think it's important to mention that revenue capture for the ETF -- for the ETP part is less relevant. The prospects are not relevant anymore but it is less relevant given the [ diverse ] [ bifurcation ] of further importance of providing liquidity in other asset classes. So at the same time, we will aim to provide more insight in our total value trade and less in our ETP Value Traded. So make sure it's also on a region basis we provide insight in these values traded -- total values traded. So that enables you to calculate -- actually the revenue capture on a per region basis over the Total Value Traded. So it might give you a better metric for total activities. Your question regarding the elasticity of the revenue capture of the Americas and even this quarter, yes, I understand what you're saying. At the same time, you can also take a look of course at the European or the APAC regions and see what's happening there. And then given the fact that in the Americas, of course, both the realized volatility is so much higher than in the other regions and at the same time, also the growth in value traded increasing so much, you could, of course, use that as a kind of -- to create some insights in what the underlying market is doing. But from our perspective, it's really hard and it's what, of course, what you are looking at to give a guide -- insight in what a normalized level could be or would be compared to market activity defined as it relate -- relation between the volume trade and volatility. Because, it's really hard to give you some insights as well.

[Operator]

The next question is from Adedapo Oguntade, Morgan Stanley.

[Adedapo Olusola Oguntade, Former Research Analyst]

Just a few questions from me. Going back to revenue capture. Actually, the results declined post the strong increase in February. It kind of declined in March. If you could just maybe comment on what you've seen with respect to your revenue capture in March? As said, we did decline, especially in the Americas versus results you saw in February. Maybe if you could just also give some comment on what you have seen now versus Q4 levels as well. Just to have an idea of this revenue -- has there been any normalization in your revenue capture? And maybe the same questions for other regions as well.

[Sjoerd Aalderik Rietberg, Co]

Yes. It's hard to give exact insight on how the revenue capture moves over the different months. We also do not intend to give this. But I think it makes sense or it's fair to say that of course, in March, the revenue capture in the U.S. has been a bit lower than in the more active weeks of February so over the month of February in general. So that's all I can say about it right now.

[Adedapo Olusola Oguntade, Former Research Analyst]

Look, if you compare to Q4 levels, what will be your call on that?

[Sjoerd Aalderik Rietberg, Co]

Are you expecting me?

[Adedapo Olusola Oguntade, Former Research Analyst]

If you compared revenue capture in the Americas in March or what you are seeing right now to Q4 '17 levels, has there -- is it coming close after those levels or it's still significantly [ below ] Q4 '17?

[Marcel C. Jongmans, Former CFO & Member of the Management Board]

It's coming closer to these levels probably.

[Adedapo Olusola Oguntade, Former Research Analyst]

Okay. And does that also apply to Europe and Asia?

[Dennis Désiré Matthijs Dijkstra, Co]

To be honest, I don't have these numbers at hand here. I don't have these numbers here at hand, but, I guess, you can also have more or less derive at this on the previous analyst presentations.

[Adedapo Olusola Oguntade, Former Research Analyst]

Okay, fine. And then just going on to my next question. In terms of your non-ETP Value Traded, I was just wondering if you could be more specific on the percentage of total NTI that came from non-ETP products in Q1, more or less if you could maybe give me a range, is it between 5% to 10% or 10% to 15%, a range would be quite helpful. And I think you also said that going forward, you'll be providing the split of this by regions, maybe if you could just concern that. And then also in terms of -- in view of your diversification drive, where do you expect -- or what percentage of group NTI do you expect to come from non-ETPs by the end of the year. What's your income of expectation?

[Sjoerd Aalderik Rietberg, Co]

Okay, thank you for the questions. First of all, on the split of NTI, it's hard to give an exact split there. Still a majority trading, which is assigned through the ETP trading. So what you see is roughly is that the quarter of our Value Traded -- Total Value Traded is traded from ETPs. So more or less the same size will be hedging up the ETPs will be underlying and more or less, maybe another roughly 60% to 70% of the ETPs also has a currency component. You can determine that 2/3, roughly 2/3 our Value Traded is directly related to ETP liquidity providing. I cannot give you an exact insight in the NTI split of this. I can confirm that we will provide on a regional basis the Total Value Trade for the next analyst presentation, the next figures. So that's -- I hope that's okay. Sometimes, it's hard for us to give a kind of guidance on what this split will be of NTI by the end of the year. So I will not provide you with any numbers there because I cannot simply provide these.

[Adedapo Olusola Oguntade, Former Research Analyst]

Okay. One last question. So given MiFID II is kind of increasing your market share in Europe, just looking at pretty much the product mix in Europe, clearly the largest percent will be equities. What percentage of that product mix is still equities versus a [ indiscernible ] [ Marcel ]? And any significant change there?

[Sjoerd Aalderik Rietberg, Co]

As we have always mentioned, I think it's still true that we are providing liquidity for virtually all these different ETPs, all different kind of asset classes. So actually, the vesting we see in how the asset or management are divided that's also more or less our trading activity. So you can [ indiscernible ] imagine that this is also -- was the, to give you a hint, what the distribution of our NTIs. At the same time, it's important to realize that different product classes or different asset classes, the potential revenue capture might be a bit higher. You can imagine it for emerging market, high yield [ bourse ], the revenue capture can get even higher than the blue-chip equity in the ETFs. But we are trying to provide liquidity of all these different asset classes, where we want to be present everywhere. And that's -- I think that this is a good indication of how we -- how our Value Traded is divided and then combined with the spread of the different asset classes, you tend to be at least more or less to our NTI.

[Operator]

The next question from Mr. Ron Heijdenrijk, ABN AMRO.

[Ron Heijdenrijk, Analyst]

Actually, most of the questions have been asked, but one final confirmation. You said that you're going to report the non-ETF flows by region from next quarter onwards, from the half-year numbers. Could I maybe ask to disclose the history slightly earlier than that? Just that we have that in our numbers when the results hit because that will be quite handy, I think. And then secondly, thank you for the further clarification on the ETP-related NTI. So 2/3 of all trading at least is ETP-related. It's not necessarily NTI related. But it would be quite handy if going forward we would have the further 1/3 also split out and then have that in the NTI. Just for us as an investor community and an analyst community, if that would be possible.

[Sjoerd Aalderik Rietberg, Co]

Well, I can at least make you happy on 1 point. We will make sure that you will receive some history on non-ETP Value Traded. We will try to provide at least for 1 year, so February 2017. On the second part, it's a bit more complicated and it's hard for us to exactly provide this. It's also not our intention to provide it. Also because the product mix itself also has an impact on how the NTI is exactly distributed around the assets. So you can imagine that if you are trading an ETF with underlying equities and in conjunction with currency trading, which you are internally hedging, it has some impact as well on how you present your NTI or even how you present our Value Traded. So, of course, it's a bit -- it's also hard to really extract on a pure asset class basis or even a per trade basis what we exactly make on it. So we will make sure that you will get the total overview, including the total NTI, but the distribution of this NTI is not going to be provided soon.

[Operator]

The next question is from Mr. Werner, UBS.

[Michael Joseph Werner, Executive Director and Equity Research Analyst]

Just a real quick one. In terms of your capital calculation for the end of Q1, March 31, can you confirm that this includes the full earnings from Q1 but doesn't exclude any potential deductions from potential dividend payments that we could expect on those earnings later this year?

[Marcel C. Jongmans, Former CFO & Member of the Management Board]

Yes. I can confirm that we have included our revenues from the first quarter. That's right, and we only deducted the final dividend from our capital and not the capital we probably are going to pay in August.

[Operator]

[Operator Instructions] There are no further questions at this moment. Back to Mr. Serge Enneman for closing remarks.

[Serge Enneman]

Good. Thank you, operator. Thank you all for your questions and remarks. Please note that we will host our next analyst call after the first half 2018 results on the 27th of July, 2018, so you can mark the date already in your diary. We will now end this call. Thank you all for your attention, and have a good day.

[Operator]

This concludes the Flow Traders event call. Thank you for attending, and you may disconnect your lines.