Flow Traders Ltd

F:O3I

Earnings Call Analysis

Flow Traders Reports Subdued H1 2023

In the first half of 2023, Flow Traders experienced significant declines due to lower market activity, with ETP value traded down by 22% year-on-year and normalized total income falling to EUR 158.9 million, a 32% decrease from H1 2022. The company managed to achieve a normalized EBITDA of EUR 52.9 million with an EBITDA margin of 33% despite low market volume and volatility. Flow Traders' trading capital decreased to EUR 574 million, though the return on trading capital was above 60% over the past years. An interim dividend of EUR 0.3 per share has been proposed, aligning with the policy of at least a 50% net profit payout.

Subdued Market Activity and Lower Volatility Impact Financial Performance

The first half of 2023 has been marked by decreased market activity and significantly lower volatility compared to the previous year, resulting in a 26% year-on-year decline in market ETP value traded. This downturn in market dynamism was particularly palpable in the second quarter, with ETP market value traded dropping by 28% compared to Q2 in 2022. Flow Traders experienced a corresponding 22% drop in ETP value traded year-on-year and 26% decline in the second quarter. Despite subdued market conditions, Flow Traders generated EUR 5 million in normalized EBITDA for Q2 and EUR 52.9 million for the first half of 2023. Normalized net profit stood at EUR 34.7 million with a normalized basic EPS of EUR 0.8 for the first half of the year.

Rising Operational Costs Amidst a Declining Headcount

Normalized fixed operating expenses for Q2 increased by 9% year-over-year due to a rise in employee headcount and salary adjustments from the previous year. However, compared to the last quarter, there's a 2% decline in normalized fixed operating expenses, reflecting a decrease in employee headcount to 653 full-time equivalents (FTEs). The company expects FTEs to remain broadly stable throughout 2023, with normalized fixed operating expenses projected to stay between EUR 175 million and EUR 185 million, consistent with previous guidance.

Healthy Capital Position and Dividend Policy

Flow Traders maintains a robust capital position with shareholders' equity of EUR 586 million after accounting for the 2022 final dividend. The return on equity has averaged nearly 40% since the IPO, while the return on trading capital has been consistently above 60% over past years. The trading capital stands at EUR 574 million at quarter's end. Reflecting confidence in their business model and capital allocation, Flow Traders has declared an interim dividend of EUR 0.3 per share for H1 2023, consistent with their policy of a 50% net profit payout.

Focus on Strategic Growth Opportunities

Flow Traders is looking to demonstrate the scalability of their business model over time, translating to attractive trading capital returns. The strategic refinement in the U.S. fixed income division aims to accelerate synergies between the index business and dealers for improved revenue capture. Moreover, the company continuously evaluates opportunities to add debt to their balance sheet that would be accretive to their lofty trading capital return goals, aiming between 60% to 80%.

Early Q3 Trends Mirror Subdued End of Q2

While the company refrains from commenting on ongoing quarterly results, the early trading pattern in Q3 suggests market behavior similar to what was observed in June. This continuation implies a persistence of subdued market activities noted at the end of Q2.

Cost Management and Capital Allocation

For 2023, significant elements highlighted in the company's finances include EUR 35 million paid out in dividends for FY 2022, EUR 23 million in cash taxes related to FY 2022, and additional EUR 7 million in taxes for the first half of FY 2023. These, along with CapEx and other miscellaneous expenses, comprise the primary uses of their trading capital.

Earnings Call Transcript 2023-Q2

[Operator]

Hello, and welcome to Flow Traders Q2 '23 results. My name is Melissa, and I will be your coordinator for today's event. Please note, this conference is being recorded. [Operator Instructions]

I will now hand you over to your host, [ Eric Penn ] Investor Relations Manager, to begin today's conference. Thank you.

[Unknown Executive]

Thank you, Melissa. Good morning, and thank you for joining Flow Traders Second Quarter and Half Year 2023 Results Call. As you will have no doubt already seen, we released our results first thing this morning. I am joined here on the call by Flow Traders CEO, Mike Kuehnel, as well as Chief Trading Officer, Folkert Joling, who will run through this results presentation. Afterwards, they will be happy to take any questions you may have.

Before we begin, let me draw your attention to the disclaimer on Slide 2. Please be advised that if you continue to listen to this presentation, you are bound by this disclaimer. Also, please note that the results we will discuss in this presentation are unaudited. With the formalities out of the way, I would like to hand over to Mike for his opening remarks.

[Mike Kuehnel, executive]

Thank you, Eric, and good morning, and thank you all for joining this call where we will provide additional color on our second quarter and half year 2023 results. The first half of 2023 saw a significant decline in the levels of market activity when compared to the same period in 2022 amidst the much lower volatility environment. Market ETP value traded decreased 26% year-on-year as there were fewer disruptive headline events compared to last year. The second quarter of 2023 was even less active than the first, and this was reflected in ETP market value traded declining by 28% compared to Q2 of last year.

Our own ETP value traded as a result, also decreased significantly in the first half of 2023 compared to the same period last year, down 22% year-on-year. The decrease accelerated in the second quarter, down 26% compared to Q2 of last year. Value traded across each of our 3 asset class pillars in the period saw corresponding declines in line with the market, with crypto seeing the largest decline year-on-year given the recent regulatory scrutinies facing the asset class. However, we believe more regulation in the near term bodes well for the asset class in the medium to long term and Flow Traders tends to benefit as a highly regulated market participant.

Consequently, this subdued market environment translated into normalized total income of EUR 47.3 million for the quarter. This comprises normalized net trading income of EUR 49.5 million and a net loss in other income of EUR 2.2 million. This is a deviation from the previously estimated EUR 2 million gain as new information were presented post the publication of our NTI preview on July 4.

As a reminder, the other income line reflects the performance of our strategic investments portfolio. The first half of 2023 saw normalized total income of EUR 158.9 million, which was 32% less than in the first half of 2022 as market turnover and volatility was significantly more elevated last year. Despite 1 of the lowest market volume and volatility quarters since before COVID, we were able to generate positive normalized EBITDA of EUR 5 million in Q2, given our flexible business model.

For the first half of 2023, normalized EBITDA was EUR 52.9 million. As a reminder, our normalized income statement presentation removes the distorting impact of IFRS II in relation to share-based payments and excludes one-off nonrecurring advisory costs in order to provide a comparable view of performance across financial periods. Q2 normalized net profit amounted to EUR 2.4 million with normalized basic EPS of EUR 0.01 for the first half of 2023, we recorded normalized net profit of EUR 34.7 million with normalized basic EPS of EUR 0.8.

We had 653 FTEs at the end of June versus 667 at the end of March, which is in line with our previous guidance of keeping our head count broadly flat for the year. Taking all of this into account, Flow Traders proposes an interim dividend for 2023 of EUR 0.30. This will be paid in mid-August.

We remain steadfast in implementing our strategic growth agenda during the quarter despite the subdued market environment, which we believe to be a cyclical correction to the elevated market volumes and volatility we saw last year. Folkert will now review recent ETP market dynamics on Slide 4.

[Folkert Joling, executive]

Thank you, Mike, and good morning all. As shown at the top left-hand side of this slide, ETP market value traded decreased significantly in the second quarter of 2023 compared to Q2 of last year, which dropped off further from the levels we saw last quarter, down 28% year-over-year. Implied volatility as represented by the FICC continues to decline in Q2 as there were a few headline events in the quarter.

ETP assets under management increased by 19% since the start of 2023 predominantly due to the broader market recovery, complemented by continued positive inflows. However, ETP philosophy continued to decline in Q2 across all regions. In summary, the structural trends across the ETP universe remains intact, while the market is going through a period of lower turnover and volatility.

I will now move into the dynamics within fixed income and crypto markets. As shown on the top left of the slide, the investment grade and high-yield bond markets have remained reasonably robust from a volume perspective in the quarter, roughly flat compared to Q2 of last year, but down quarter-on-quarter. Average credit spreads, however, were [narrow] compared to Q2 of last year. There has also been a corresponding narrowing of the fixed income ETF spreads during the same period.

From a crypto market perspective, bitcoin and other digital currencies saw further recovery in the second quarter, but is still down versus the same period a year ago. However, bitcoin volumes traded in the quarter were down 50% compared to Q2 of 2022, given the increased regulatory scrutiny in the U.S. As a result, global crystal ETP value traded were down by more than 2/3 in the quarter compared to Q2 of 2022.

Now I will review Flow Traders' regional performance. On this slide, we present an overview view on some of the key performance indicators for the second quarter as well as for the first half of 2023 on a regional basis. As Mike mentioned earlier, the subdued market activity and lower volatility in the quarter resulted in depressed NTI for all regions in the second quarter. In Europe, we maintained our position as leading liquidity provider in ETPs in the first half of 2023 amidst the broad decline in market trading volumes and volatility, which resulted in lower turnover and tighter bit of spreads in the quarter.

Our continued focus on further developing fixed income trading strategies resulted in an increase in euro investment grade average daily volume traded by more than 40% so far in the first half of the year. Within CCC, increased synergies between the currency crypto and commodities trading desks continue to support relationship expansion as exemplified by the 50% growth in CCC counterparty connectivity in the first half of 2023 and the provision of liquidity for the first European listed Bitcoin futures on Eurex.

Moving to the Americas. We refined our focus of the U.S. fixed income trading strategy and operations to drive increased systematic training, leveraging the growing [electronification] and automation trends of the asset class. We enhanced exposure to the counterparty and issuer network with a new office in Chicago and onboarded several new counterparties, bringing the number of U.S. counterparties to nearly -- nearly 500. And we further strengthened our existing footprint in the lead market maker space assisting with the launches and conversions of several fixed income ETFs focused on high yield and treasury ETFs as well as by offering with [athematic] ETFs of leadership piece with BlackRock.

Lastly, with respect to Asia, we strengthened the regional presence with the enhancement of the local leadership team in APAC, reflecting the importance of the hub in fostering training capabilities and partnerships.

We continue to build out our trading operation in China with new counterparty and issuer relationships following receipt of Flow Traders [indiscernible] license and the opening of the Shanghai office with the purpose of helping to develop the local ETF markets in making domestic and international industries more efficient and available to investors. We also started taking markets for the new RMB dual counter instruments on the Hong Kong Stock Exchange in the quarter, further underscoring the firm's strong commitment to improving the accessibility of these assets to investors.

I will now hand back to Mike for the next slide where we'll cover the cost base.

[Mike Kuehnel, executive]

Thank you, Folkert. As you can see, normalized fixed operating expenses in the quarter increased by 9% compared to Q2 of last year, primarily due to the increase in employee headcount and targeted base compensation increases implemented last year. Normalized fixed operating expenses declined by 2% when compared to last quarter. Despite the subdued market environment and significant decline in both market volume and volatility, the flexibility of our business model allowed us to generate a healthy normalized EBITDA margin of 33% for the first half of 2023.

Employee headcount declined by 2% in the quarter to 653 FTEs. While we remain committed to bringing on board additional talent and growth business areas, we continue to expect FTEs to remain broadly flat during 2023 given expected efficiency gains. Similarly, we continue to expect normalized fixed operating expenses for the year to be between EUR 175 million and EUR 185 million, in line with our former guidance.

Now I will take a closer look at Flow Traders' capital position. We show Flow Traders shareholders' equity on the top left-hand part of the slide, given we are no longer subject to CET1 regulatory requirements at the parent company level. After accounting for the 2022 final dividend, shareholders' equity remained strong at EUR 586 million, and our normalized return on equity has averaged nearly 40% since our IPO.

On the top right-hand side of the slide, you can see our trading capital position. Trading capital is a large part of our business and has the ability to generate attractive returns, as shown on the chart. Our trading capital declined to EUR 574 million at the end of the quarter after the payment of the final dividend and cash taxes related to 2022. It is also worth noting how the return on trading capital has consistently been in excess of 60% over the last few years.

Considering all these developments and the growth opportunities we very much see ahead Flow Traders has set the interim dividend for H1 2023 at EUR 0.3 per share, a payout of 55% and in line with our dividend policy of paying out at least 50% of net profit. With regards to share buybacks, given the subdued market trading environment in the quarter, the period of execution for the EUR 15 million share repurchase announced on the 27th of October 2022 will be extended by 12 months.

Moving to the next slide, we will discuss now market trends, our strategy and recent achievements. On this slide, you can see the support of megatrends, which we outlined at the Capital Markets update last year remain very much intact. These 4 key megatrends continue to shape our market environment, acting as tailwinds to our business and offer increased commercial opportunities. Crucially, these trends all feed into and reinforce each other, particularly relevant to our core business is the ever increasing acceptance of ETPs and growth in passive investing.

Total industry ETP AUM is projected to grow 2.5x from today's USD 10 trillion to USD 25 trillion by 2030, which underscores the strength and importance of the ecosystem we are a key part of. Electronification of trading is critical for all of our activities, but in particular, it is within our fixed income business, where this is the key structural trend in corporate credit and emerging market sovereign bonds. Increasing adoption of electronic trading ties into our core technology-enabled competency set.

As we highlighted in our recently published fixed income white paper, credit [algos] have comprised almost 50% of executed volumes in Euro credit in the last 2 to 3 years, particularly in the sub-1 million ticket sizes. Fixed income ETF AUM is also projected to triple from USD 2 trillion today to USD 6 trillion by 2030. Despite the recent market events, there are still considerable assets invested in cryptocurrencies, about USD 1.2 trillion as of today, with the first European-listed Bitcoin future already live and the largest ETF issuer in the world, BlackRock recently applying for spot Bitcoin ETFs in the U.S. for the first time. Moreover, digital assets remain a long-term growth opportunity with the underlying technology expected to drive significant transformation across global financial markets in the coming years.

Lastly, regulation continues to support our business in terms of creating a level playing field from the aspect of execution transparency as exemplified by the recent proposal to adapt to consolidated tape in the EU. In addition, increased regulatory adoption of digital assets will also create more opportunities for our firm, and we are an active participant in accelerating these discussions with regulators.

I will now hand over to Folkert to review our strategic objectives for 2023 and beyond.

[Folkert Joling, executive]

Thank you, Mike. With those key market trends in mind, our strategic goals and objectives across the 3 asset class pillars are fully aligned with the ambitions outlined in the Capital Markets update. We made significant achievements in the first half of 2023 and have clear focus areas for the rest of 2023 and beyond. Again, these are all entirely consistent with our long-term strategic outlook. From an equity standpoint, we continue to deepen our product coverage and geographic footprint to align with structural industry growth.

In the first half of 2023, we grew our counterparty base even further and traded on a large array of venues. We also increased onshore trading in China, which is a significant component of our broader Asia expansion plan. For the rest of the year, we will continue to focus on enhancements; two, an expansion of our global core ETP business and expand our activities in China. Within fixed income, we have further expanded and diversified our trading activities during the first half 2023. We increased our average daily deployment trade in European investment-grade bonds of 40% and a single bond market-making proposition has grown globally in the past year.

We will continue to develop our single bond market-making capability and onboard additional fixed income institutional counterparties for the second half 2023. In terms of CCC, the focus here remains to grow our presence and participation in digital assets, FX and commodities. We retain our long-term conviction around digital assets and accordingly, have continued to grow our presence in the global crypto financial ecosystem.

We continue to expand our coverage of crypto ETPs and make markets on numerous of crypto ETP launches. Work will continue in the second half of 2023 on expanding our footprint in ETP, spots and derivative products as well as expanding the OTC bilateral counterparty business across CCC as a whole. To complete this picture, our strategic ecosystem approach is complemented by Flow Traders Capital, which is covered in more detail on the next slide to be covered by Mike.

[Mike Kuehnel, executive]

Last year, we announced the establishment of Flow Traders Capital, our strategic Principal Investment unit, which is the core part of our broader ecosystem strategy. Tremendous amount of innovation continues to unfold across global financial markets. Given our position within the ecosystem, we believe Flow Traders can play a critical role in driving this change. Yet at the same time, we believe that single firms acting alone cannot accomplish this and that there are opportunities to collaborate. Flow Traders' capital partners with ambitious entrepreneurs to build technology businesses that lead to innovation within the financial services industry to accelerate our overall strategy by driving themes of electronification and transparency.

Flow Traders Capital holds over 20 strategic investments, which has a current portfolio value of EUR 30 million. This slide illustrates the focus, size and target stage of our investment strategy. I do not propose to run through each initiative shown on this slide in turn. But as you can see, our focus is split across platforms, connectivity, data and digital tokens. Interest in strategically partnering with Flow Traders remains high. And while the pace of new investment activity has reduced, the pipeline for new investments in both digital assets and traditional finance ecosystems remain strong.

I will now hand the call back to Eric.

[Unknown Executive]

Thank you, Mike. This now concludes the formal part of our presentation. We would now like to open up the floor for any questions you may have. Operator?

[Operator]

[Operator Instructions] Our first question comes from Reg Watson of ING.

[Reginald Watson, analyst]

Good morning, all. I had a couple. One relates to the other income line. So I think, Mike, you just finished the presentation on that strategic capital. How are you valuing on these assets because obviously, there's quite a significant swing from 1 period to another. So that's question one.

And then question 2 is, obviously, I understand that the low level of cash generation has led to delay in your deadline for the share buyback, but how did you arrive at 12 months rather than just pushing out, let's just say, a quarter given that you've had a weak quarter this quarter and the second quarter this year?

[Mike Kuehnel, executive]

So let me start, Reg, with the second question. So the share buyback is fully embedded in our, let's say, capital allocation strategy and plan. And given the fact that we want to remain as flexible as possible in making sure that we dedicate our capital to the most, let's say, economically attractive path we wanted to ensure that we have a high degree of flexibility, irrespective of market evolution and impact on our business.

At this point in time, it's hard to predict. And as done in the past. We have never provided any outlook on market's sentiment and evolution. But we feel that the current sentiment requires a high degree of flexibility on our side to make sure that if a more favorable market environment would come back, generating significantly higher NTI, then depending where the share price stands, we want to remain the flexibility over a longer period of time to become active again on the share buyback. So that's to your second question.

On the first question, I think there are 2 points to highlight. As I pointed out, the other income line relates to the performance of our strategic investments portfolio. So on the normalized other income line, we have different valuation techniques or levels, the equity investments at fair value through P&L, equity investment at fair value through other comprehensive income and results from equity-accounted participation. I think the key highlights to make here on this front is that whenever we do a valuation, we are looking for plausible events. So refinancing, for instance, in order to then have another data point, as you might not be surprised to hear, we are in close collaboration on these points with our auditor, making sure that we are following existing rules and create the highest level of transparency.

As the business has grown or the venture business has grown over time, we also made sure that from a valuation perspective, we bring back the key pieces of information to give you clarity, A, on the evolution of the size of the portfolio and also as much as possible on the composition thereof. Under IFRS, the other income line only includes equity investment at fair value through P&L. I think that's also important to highlight. But in Q2, specifically, the discrepancy between the number we gave with the preliminary release and the final number related to additional information we got that then led to a revaluation of the entire portfolio. So the latest number is a reflection of those latest valuations we did for the portfolio.

[Reginald Watson, analyst]

Okay. That's good. That's very clear. And if I may be greedy and take a third question relating to revenue capture in Americas, Obviously, for a period of time that had been depressed due to your desire to gain market share in fixed income. I thought we had seen a recovery in Americas revenue capture as you've sort of taken your foot off of gas on that initiative and have succeeded in winning share. But I note that the revenue capture is down again in the quarter. I just wanted to check whether or not that's just simply market related or whether you are undertaking more initiatives in trying to win new markets there?

[Folkert Joling, executive]

This is fully market related. So we did refine the strategy in fixed income in the U.S. that comes down to accelerating reaching synergies. So effectively merging index business and the dealer to a better extent. But in terms of the revenue capture in Q2. This is fully a combination of the lower volatility, lower volumes given our capability set and profile. And the KPIs are broadly in line with what we expect. So there are no unusual patterns to be found, which means on the stronger areas, the KPIs are broadly similar.

Obviously, with slightly lower volatility the competition element and the execution impact increased a bit, which usually leads to a slightly lower market share on exchange. But if we would compare to off exchange, those market shares are stable or maybe even net positive, but would call them the same.

[Operator]

Our next question comes from Julian Dobrovolschi of ABN AMRO and ODDO.

[Julian Dobrovolschi, analyst]

Hello. Good morning, everyone, gentlemen, and thanks for the presentation. I have a couple of them, quite small so probably we can go through a couple of these rather quick. Maybe to start with, I have a question on the one-off -- EUR 1.9 million. If I understand correctly, this again kind of relate the balance sheet optimization. I'm just kind of wondering if there is something that will be growth, let's say, foresee and have it in our numbers. So this kind of came out of the, let's say, out of the blue? And if that happened, what can we see for the H2 as well in terms of the one-offs? And then I can go to the other questions as well.

[Mike Kuehnel, executive]

Yes, Julian, thank you so much, and good morning. Very happy to take this one. So as shared before and starting last year, we diligently started preparing for a potential debt raise. And we have been vocal that we have been predominantly looking into what peers did in the past and are still doing -- focusing on the U.S. TLB market. As part of these preparations, there were different components, which we had to embrace, one being rating, another one related to an external legal counsel for the underlying documentation and the contracts. And last but not least, also advisory services. However, this was just a smaller portion.

And from an IFRS perspective, there's a possibility to capitalize these costs. But then from quarter-to-quarter, there is a test across these components with our auditor to look at what is still related to the planned and upcoming debt raise and what is related more to general advisory services. And this discussion and decision making them that to a release of some capitalized cost, which now hits the P&L for Q2. As to your question on outlook, the remaining part of capitalized cost is minor. It's less than EUR 1 million. And more importantly, and that was, as I understood it's more broader question, we are not anticipating any additional extraordinary costs at this point in time.

[Julian Dobrovolschi, analyst]

Understood. And I think you also touched upon on the potential debt rate. So if you just look at the debt rate -- sorry debt trade discussion that you just also touched upon. Can you give us a bit of the current state of affairs. So how do we look at it at this point in time? Is it a good market to take the debt or it's probably a bit wise to wait a bit.

[Mike Kuehnel, executive]

Yes. Thank you so much for the question. I think there are 2 components to that question, which I would like to highlight. The first is -- the reason for originally looking into a TLB raise on debt rate and more specifically, the continued logic to it. And this then immediately relates to the scalability of our business. So we are still very much committed that there are structural opportunities for us and also tactical opportunities in putting debt onto our balance sheet and bringing it into play and into play, meaning making it accretive given our trading capital return 60% to 80%. So that's a message we can still give back. We still stick to that logic and premise.

The second is then the timing and I've been vocal about that in the past. So we are monitoring 3 things. One is what's happening in the secondary and primary markets. And it seemed as if there was still specifically in the U.S. pressure on the primary markets and specifically for, let's say, one's more opportunistic or onetime first-time issuers. The second and third is then the prevailing spread levels and the OID levels. And what I highlighted in the past is we want to make sure that we catch the best window of opportunity. And this then needs to come across as attractive from a spread level, attractive from an OID level, and more importantly, also a good point in time to really start initiating a strong credit story around our company.

So there's a strong link in our mind between our prevailing equity story and the growth opportunities around these and the buildup of a credit story, which is very much coming back to the first point. We very much believe and want to demonstrate over time the inherent scalability of our business model at very attractive trading capital returns. So this is currently being monitored Julian, as we speak. And I think the second half of the year will give us more data points in order to properly do this assessment.

[Julian Dobrovolschi, analyst]

Understood. Then switching to the Chinese -- China on-trade trading operations. I think Folkert highlighted that this is definitely positive and if I remember correctly, based on the discussions that I had with you guys, you basically assume to 2023, zero NTI contribution from China. So it seems to be definitely a positive surprise in my view. Just 2 questions on this level. If you can quantify how much of that NTI from China was basically contributing to the total NTI in Q2? And maybe the second one, how much visibility do you actually have here in terms of growth, but also perhaps at the onboarding counterparties and so on and so forth.

[Folkert Joling, executive]

The contribution in Q2 was insignificant sort of close to 0, but there is a positive -- a small positive P&L. I think for the full year, anticipating not completely 0, but it's a buildup to [indiscernible] few million, but not significant enough to mention. So I think you rounded it to 0 because of that. The way that we look at the full opportunity, roughly speaking, if you look at all the volumes that are trading and the type of products and the growth that you see in those products, then applying a traditional market share, which we usually capture, you can make some expectations on what the potential is. So we're also looking at that to realize it. There are multiple aspects that need to come into play, which also includes relationship building with the issuers because of the recreation and redemption mechanisms and getting full connectivity with the local infrastructure that just takes a bit more time than we cannot fully do that overnight. So that's the reason that we built it up. And then in terms of trading strategies, we are already developing those along the way.

[Julian Dobrovolschi, analyst]

Okay. Good to see that happening. Then also another question on the Flow capital [indiscernible] portfolio. Currently, this looks to be at about EUR 30 million. If I recall correctly, the maximum size was set at EUR 50 million and by now, you have more than 20 investments. If you just look at the investment portfolio, can you roughly say how much of that is into all of the 4 investment themes that you have, so platforms connectivity that and tokens.

[Mike Kuehnel, executive]

Think the prevailing themes are platform connectivity and tokens at this point in time. But I think the key message to share here is the relevance or growing relevance of the DC investment for our core business. So what I said before, when we shared it when we hit the implementation of it, that we are seeking investments that are immediately relevant for spurring growth in our core business. So this is the key area of focus. The point why we wanted to be multifaceted across the scenes is that we believe our core capabilities and insights on technology and trading capabilities, make it very relevant in these 4 buckets in order to also be perceived as 1 of the best players in the market, end of day we can really provides significant benefits to these investments.

So I wouldn't say that we are seeking a very specific, let's say, contribution on equal levels across these 4 teams. It's more I would say, a team filter to make sure that we are sticking to what we do best in bringing our capabilities to those investments and are able to lean in. It's also fair to say this is very much driven by market dynamics, and we had and still have a situation where there is a right of platforms and new market participants trying to establish more aggregated and integrated business proposition, specifically on the crypto and digital asset side.

I would expect that this is going to continue and might even accelerate down the road. So given that we have built a track record even on a global basis, could lead to more activity on that front. And I'm also a big believer if you really dive into a global financial market evolution over the next 5 to 10 years, data, for instance, and connectivity as to interoperability of liquidity pools will remain a very important ingredient of the equation. So in a way, we are looking into these 4 fields to make sure that we understand how businesses are being built around us. And clearly, we have a perspective on the viability of these businesses and their ability to also then scale over time because that's clearly also the intention that through our buy-in and the contributions of our capabilities, these opportunities become very significant in terms of size and impact on the ecosystem. I think that's a fair reflection on how we start to [sit] at these.

[Julian Dobrovolschi, analyst]

And maybe a final one, quick to wrap up. Is it possible to get a bit of a, let's say, sneak peek understanding of how trading early trading in Q3 is going? Do we see a bit of a pickup in recovery across all the markets? Or it's still kind of following on the June trend.

[Folkert Joling, executive]

We're not going to comment on Q3 on our results, obviously. Roughly speaking, the markets are behaving similar to what we saw in June. Summer is approaching slowly, so the statistics are more or less -- the market statistics more or less continuing the end of Q2 part.

[Julian Dobrovolschi, analyst]

And so I think we can just like leave it at here. And yes, enjoy the rest of the summer.

[Operator]

Our next question comes from Amit Jagadish of UBS.

[Unknown Analyst]

Just 1 for me. Going back to Slide 8. Could you give some color on the major pieces that resulted in the drop in the trading income in the quarter?

[Folkert Joling, executive]

Other than the arguments we already provided it's mostly related to the market activities being lower and the volatility, lower the volumes lower. Do you want to have some specifics, which were not discussed yet.

[Unknown Analyst]

Sorry, I think I missed that part of the call. Could you just remind quickly the 4 points you just mentioned.

[Mike Kuehnel, executive]

Sorry, Amit, in Slide 8, which particular graph are you referring to?

[Unknown Analyst]

The trading capital.

[Folkert Joling, executive]

The trading capital Okay.

[Mike Kuehnel, executive]

So we have for 2023 year-to-date, a few portions to highlight. So one is we paid EUR 35 million in dividends for full year '22 and EUR 23 million in cash taxes related to full year '22. And then on top for the first half of '23, EUR 7 million in taxes for that period. And the rest is related to CapEx and other miscellaneous expenses. But the 3 or 4 big portions are the dividends and the cash taxes for last year and then for the first half of '23 and CapEx being the rest.

[Operator]

[Operator Instructions] And we have no further questions coming through. I'd like to hand it back over to [Eric Penn].

[Unknown Executive]

Great. Thank you, Melissa. We would like to thank the analysts for participating in today's call. Please note that we will host our next analyst call when we release our fourth quarter and full year 2023 results in February of next year. Details and timing for this call will follow in due course. Our third quarter trading update is scheduled to be released on the 26th of October 2023. This now ends the call. Thanks again, and have a great day.

[Operator]

Thank you. That concludes today's conference. You may now disconnect.