Flow Traders Ltd

F:O3I

Earnings Call Analysis

Strong Earnings and Strategic Growth Drive Increase

Flow Traders reported a substantial 48% increase in total income to EUR 76.2 million for the second quarter, despite mixed market conditions and lower volatility. Trading income surged, leading to a six-fold increase in EBITDA to EUR 21.1 million, and a profit of EUR 12.8 million. The company is implementing a capital expansion plan, including a EUR 25 million bank loan and suspended dividends to boost retained earnings. They aim to solidify their market position and enhance trading capabilities, with fixed operating expenses slightly declining and a projected strong EBITDA margin of 40% for the first half of 2024.

A Dynamic Market Environment

In the second quarter of 2024, Flow Traders faced a mixed trading environment. The total market ETP (Exchange Traded Products) value traded increased by 12% year-over-year but saw a decline of 9% from the previous quarter. Despite the selective growth within their trading activities, volatility levels remained subdued, decreasing by 15% when compared to the same quarter last year. Notably, Flow Traders’ own traded ETP value grew by 4% from last year, but fell by 15% in the quarter-to-quarter comparison.

Impressive Earnings Results

Flow Traders reported a total income of EUR 76.2 million for Q2 2024, highlighting a significant 48% increase from the same period last year. Their trading income was EUR 79.5 million, slightly offset by EUR 3.3 million in losses from other income, which reflects movements in their strategic investment portfolio. Notably, the company achieved an EBITDA of EUR 21.1 million, representing an extraordinary six-fold increase compared to the same quarter last year, yet this achievement comes amidst declining volatility levels.

Navigating Market Trends

The firm continues focusing on diversifying its asset classes and geographic reach. The mixed trading environment saw fixed operating expenses slightly decline, while revenues (NTI) grew by 29% year-over-year, producing a robust EBITDA margin of 40%, up from 27% last year, indicating effective cost management and operational efficiency. Their workforce was trimmed to 635 from 646 at the end of the previous quarter, continuing their commitment to enhancing efficiency.

Future Growth Strategy

Flow Traders has embarked on an ambitious plan to expand its trading capital, securing a EUR 25 million bank term loan as part of this initiative. The firm is focusing on retaining earnings rather than paying dividends to bolster capital for growth. This strategic shift aims to enhance their liquidity and market positioning, targeting significant returns on their trading capital, which has historically shown returns of around 80%. Notably, they plan to suspend regular dividend payments as they believe this will accelerate the trading capital expansion, yielding long-term shareholder value.

Addressing Competitive Pressures

Despite recent reductions in market share within the ETP sector—dropping to 25% from over 27%—the firm anticipates recovery as it increases its trading capabilities with the new capital. Management emphasized that having greater capital reserves will allow them to be more active across various segments, adapting to competitive pricing pressures that have affected both their liquidity and overall performance. With this capital increase, Flow Traders aims to reclaim its position in the market and ensure better future growth.

Key Mega Trends Supporting Growth

Significantly, Flow Traders is bullish about the long-term growth in the ETP market, estimating that total industry assets under management will double to USD 25 trillion by 2030. They also noted the growing adoption of electronic trading and the regulatory advancements surrounding digital assets, which promise enhanced institutional adoption in an evolving market landscape. The firm highlighted the transformation opportunities presented by digital assets, recognizing this as a substantial area for future growth.

Commitment to Transparency and Performance Metrics

Flow Traders has acknowledged the need for enhanced transparency regarding their capital management strategies. The key metric going forward will focus on the return on trading capital, a measurement that they believe aligns closely with shareholder interests. Management is committed to reporting these figures diligently, indicating a recognition of past investor concerns regarding performance metrics.

Closing Thoughts

In summary, Flow Traders has demonstrated resilience and strategic foresight amidst a dynamic trading landscape. Their focus on capital expansion and market diversification positions them well for future growth, despite current challenges. Investors should watch closely how management navigates competitive challenges and leverages increased trading capital to capture market opportunities in evolving sectors such as digital assets.

Earnings Call Transcript 2024-Q2

[Operator]

Hello, everyone, and welcome to Flow Traders Second Quarter 2024 Results Conference Call. Please note that this call is being recorded. I'd now like to hand over to Eric Pan. Eric, you may now go ahead, please.

[Eric Pan, executive]

Thank you very much. Good morning, and thank you for joining Flow Traders second quarter and first half 2024 results call. As you will have noted or already seen, we released our results first thing this morning. I am here on the call by Flow Traders CEO, Mike Kuehnel, as well as Global Co-Head of Trading, Coen van Sevenhoven, who will run through this results presentation. Afterwards, we will be happy to take any questions you may have.

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 by this disclaimer. Also, please note that the results we will discuss in this presentation are unaudited.

Formalities out of the way, I would now like to hand over to Mike for his opening remarks.

[Mike Kuehnel, executive]

Thank you so much, Eric, and good morning to everyone. The second quarter of 2024, saw a mixed markets trading environment, as total market ETP value traded was up 12% when compared to the same period a year ago, but declined by 9% quarter-on-quarter. Volatility remained subdued and was down 15% when compared to the same period last year and relatively flat quarter-over-quarter. Our own ETP value traded tracked relatively in line with the market, as it increased by 4% in the quarter compared to the same period last year, but decreased by 15% when compared to the last quarter.

Value traded across each of our 3 asset class pillars in the quarter saw corresponding movements that were largely in line with markets with crypto seeing the largest increase year-on-year, but decreased compared to the last quarter given the slowing of fund flows into spot bitcoin ETF U.S. in the second quarter.

Total income came in at EUR 76.2 million for the second quarter, a 48% increase compared to the same period a year ago. And trading income came in at EUR 79.5 million plus other losses of EUR 3.3 million -- other income, excuse me. As a reminder, the other income line item reflects unrealized gains and losses of our strategic investment portfolio.

Despite subdued volatility levels that declined a further 15% when compared to the same period a year ago, we were able to generate EUR 21.1 million in EBITDA, which is more than a six-fold increase compared to the second quarter of last year. And profit for the period amounted to EUR 12.8 million in the period with a basic EPS of EUR 0.03. The solid results this quarter serves, as further validation of our growth and diversification strategy, as we continue to focus on implementing our strategic growth agenda over the last 12 months amidst the subdued trading environment across most asset classes.

I will now hand it over to Coen, our Global Co-Head of Trading, to review recent ETP market dynamics on the next slide.

[Coen van Sevenhoven, executive]

Thanks, Mike, and good morning, everyone. As shown at the top left-hand side of this slide, ETP market value traded increased by 12% in the second quarter compared to the same period a year ago, but decreased by 9% compared to the first quarter. Implied volatility in the quarter, as represented by the VIX, decreased by 15% when compared to the same period a year ago and was roughly flat compared to the last quarter.

Total ETP assets under management increased by 13% in the first half of 2024 to over EUR 12 trillion, given the strength of the overall market and continued net inflows in ETPs. ETP velocity declined broadly across all regions in the quarter compared to both last quarter and the same period a year ago. In summary, despite the currently muted market activity, the secular industry trends across the ETP universe continues to be strong.

I will now move on into the dynamics within the fixed income and crypto markets. As shown on the top left of the slide, trading volumes in the investment-grade and high-yield bond markets increased when compared to the same period of a year ago, but decreased when compared to the first quarter. Volatility levels were down both on the year-over-year and quarter-on-quarter basis, while credit spreads narrowed by almost 20% when compared to the same period a year ago.

Trading volume and volatility in digital assets was up significantly compared to the same period a year ago, but declined by double digits in the quarter compared to the first quarter.

Global crypto ETP market value traded elevated when compared to the same period a year ago, but declined by about 30% quarter-over-quarter, given the slowing of fund flows into the U.S. spot bitcoin ETFs in the quarter.

On Slide 6, we present an overview of some of the key performance indicators for the second quarter, as well as for the first half of '24 on a regional basis. As Mike mentioned earlier, market ETP value traded improved in the second quarter compared to the same period a year ago. However, value traded figures were down quarter-on-quarter given the seasonality in our business.

In Europe, we maintained our position, as a leading liquidity provider in ETPs in the first half of 2024, amidst a muted market environment, which saw volatility decline by double digits compared to a year ago.

Our investment in the digital asset space over the past 7 years, along with our ability to rapidly shift capital to segments of the market allowed us to capture opportunities in asset class during this period.

Moving to the Americas, we assisted our partners in the U.S. with spot bitcoin ETF launch in the half, as a lead market maker, reflecting our long-term commitment to supporting the continued evaluation of crypto and digital assets. The improved regulatory sentiment and increased institutional adoption of digital assets in the U.S. confirms our long-term investment strategy in the asset class.

Lastly, with respect to Asia, we continue to see growing contribution year-over-year from our China operations following the approval of our [ QFII ] license and opening of our Shanghai office back in November of 2022. We also received market access in the quarter to begin trading commodity futures in China.

I will now hand it back to Mike for the next slide.

[Mike Kuehnel, executive]

Thank you, Coen. After a few years of rapid expansion, we continue to focus on cost and operational efficiencies, while implementing our growth strategy at the same time. And as this slide shows, fixed operating expenses in the first half of this year declined slightly, while our NTI increased by 29% year-over-year. We achieved strong margins in the first half of the year, as an upturn in revenues delivered a 40% EBITDA margin compared to 27% in the same period a year ago.

We ended the quarter with 635 FTEs down from the 646 FTEs at the end of the fourth quarter, which is in line with our guidance of flat to down for the year, given expected efficiency gains, while we continue to bring on board additional talent in growth business areas.

Our guidance on fixed operating expenses remains unchanged, as the firm remains fully focused on operating and cost efficiencies across the business, while implementing our growth and diversification strategies.

Coming to the next slide. over the past 18 months as CEO, the company has made a concerted push into new markets, asset classes and geographies with considerable success. Following the arrival of the newly constituted board, we have conducted a broad-ranging strategic review and concluded that we have a significant opportunity to capitalize on this period of development and move the company into its next phase of growth. A critical element of this development will be the expansion of our trading capital base especially given the significant returns we have generated on trading capital historically.

Following a review of the various options to achieve this, we are implementing a wide-ranging trading capital expansion plan. As the first element of this, we recently secured a EUR 25 million bank term loan, and we are looking at several other ways to increase external financing.

We also concluded -- we have also concluded that a central pillar of the plan and the most cost-effective way of increasing our trading capital is to increase the level of retained earnings in the business. Accordingly, we are suspending regular dividend payments until further notice, the move that will accelerate the expansion of the trading capital base and the Board -- and that the Board is confident will generate long-term value for the shareholders.

We do believe that the firm's new trading capital expansion plan and the continued expansion of our diverse set of existing and newly emerging trading strategies will deliver significant returns and further strengthen our company's role, as a leading global trading firm, providing liquidity and efficiency across a wide range of financial markets.

Moving to the next slide, I will discuss market trends and our strategy. On the next slide, you can see that the support of mega trends, which underline the firm's strategy remains very much intact. These 4 key mega trends continue to shape our market environment, acting as tailwinds to our business and offer increased opportunities. Crucially, these trends all feed into and reinforce each other, as highlighted before.

Especially relevant to our core business is the ever-increasing acceptance of ETPs and growth in passive investing. Total industry ETP AUM is projected to double from today's USD 12 trillion to [ $25 trillion ] in 2030 and underscores the strength and importance of the ecosystem we are key part of.

Electronification of trading is critical for all of our activities, but in particular, it is within the fixed income asset class, where this is the key structural trends in corporate credit and emerging market sovereign bonds. Increasing adoption of electronic trading ties into our core technology-enabled competency set.

As highlighted in the fixed income white paper we published last year, credit algos for instance, have comprised almost 50% of executed volumes and euro credit in the last 2 to 3 years, particularly in the sub-1 million ticket sizes.

Fixed income ETF AUM is projected to triple from USD 2 trillion today to USD 6 trillion by 2030.

With the recent regulatory developments regarding digital assets, there's growing institutional interest in this asset class and total assets invested in cryptocurrencies more than doubled from the second quarter of '23 to around USD 2.5 trillion today. With the regulatory approval of the first spot Bitcoin ETFs in the U.S. in January of this year and the approval of spot Ether ETFs, we anticipate growing investor demand for digital assets. This class remains 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. We continue to work with the regulators around the world to drive the increase in transparency and improve liquidity across all markets and asset classes.

Now moving to the last slide, on this slide, I outline the firm's 4 key strategic pillars to grow, strengthen and accelerate our business. The first is to optimize our core and grow our trading capital. This means building an increasingly resilient and efficient business model through a dedicated optimization of the firm's trading cost, while simultaneously growing the firm's trading capital base to accelerate the monetization of all existing and new trading strategies across asset classes and regions.

The second is to expand and enhance trading capabilities, as such, we will and build out -- we will leverage and build out our proprietary infrastructure capabilities and expertise to expand into adjacent products and enhance existing trading strategies.

The third is to increase our research capabilities and speed of iteration. We will further adopt emerging technologies to enhance automation and efficiency, increase our reporting and tracking ability to improve pricing, hedging and automation and deploy a global competitive research framework to improve modeling and trading strategies.

And last but not least, we seek to diversify our business and explore adjacent growth opportunities, and as such, we will invest in adjacent business propositions related to connectivity platforms, data and tokens [ via ] dedicated partnerships, aims to explore growth opportunities adjacent to our core. We want to grow our role, as a globally leading market maker by driving innovation across financial markets and to diversify existing revenue streams.

I will now hand back the call to Eric.

[Eric Pan, executive]

Great. Thanks, Mike. This 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] We have our first question coming from Reg Watson from ING.

[Reginald Watson, analyst]

Apologies for quoting your words back to you. But in your statement today, you have said that you've concluded that the central pillar of your capital management plan and the most cost-effective means of increasing trading capital to increase the level of retained earnings in the business. But when I look at the balance sheet, retained earnings since 2020 have risen by 8%, the trading capital has declined by 24%. So despite an increase in retained earnings, trading capital continues to decline. And I'd like to understand the mechanics behind that and why you feel suspending the dividend will change that particular dynamic?

[Mike Kuehnel, executive]

Yes. Thank you so much, Reg, for the question. So part of our internal exercise, we very much looked into the accumulate this dividend paid since IPO. And you might have seen that number in our power points relating to EUR 746 million in dividends paid since IPO. And this relating then to the, let's say, trading opportunities we see emerging and very much different now with the meaningfully broader sets of global reach and asset class coverage.

We feel that there's a distinct opportunity [ for the firm ] to really bring in more capital and also attract external capital, as indicated by the EUR 25 million bank term loan B now initially put onto our balance sheet in order to drive our profits. So I see the gist here for us very much is that there is an opportunity cost embedded in our business. This relates both to structurally building our trading strategies, but this also relates to market anomalies occurring around us, where an ability to deploy more capital clearly will drive P&L.

[Reginald Watson, analyst]

Okay. That's clear. And then obviously, the EUR 25 million bank loan is just a start. Where do you see your capacity to increase that? Where is the upper limit of what you're comfortable and what your lenders are comfortable with in terms of how much debt you can take on to the balance sheet?

[Mike Kuehnel, executive]

I'm glad that you asked that question because clearly, we want to be and remain highly conservative on this. So as it stands now, the EUR 25 million is indeed just a starting point. There is the intent to look into either upsizing this tranche or tapping into alternative source of financing. I think a good reference to give you a more tangible perspective on what we mean by being conservative is the amount of our trading capital.

So we would like to be quite cautious in upsizing it, while at the same time, bringing back the clear proof points that the incremental capital being retained in the company delivers attractive trading capital returns. I'm quite mindful that we [ related fact ] that over the last years, our trading capital return and even since IPO has been strong, close to 80%. Our intent is that we scale up the incremental capital coming from the outside that we are able to demonstrate a healthy return on trading capital nonetheless.

And then coming back to the trading capital, as a reference rate. So if you take a reference from the U.S. TLB market, just as an example, where it's prudent to leverage your balance sheet up to half of our trading capital. I think that's more or less a good indication. But I think the more relevant point in my mind is that we want to collect the data points needed, so that you understand that the increased leverage has an immediate impact in our profitability over the years to come.

[Reginald Watson, analyst]

Okay. Thanks, Mike. And I'm glad you mentioned that you're taking it cautiously and that you're requiring proof points internally. Obviously, I don't expect you to show [indiscernible]. But it would be useful for us externally as both analysts and I think your shareholders would like to understand what proof points you will be disclosing to us to show that this strategy is actually delivering because I know some -- in some quarters, there was a lot of disappointment that you dropped the market share metric. So what do you plan to propose, also what do you plan to replace that with?

[Mike Kuehnel, executive]

Yes. So I think one key message is that we listened and understood the perspective on increasing transparency. There is a clear point that the return on trading capital for us is the key metric to look at. And as I say, if the strategy deployed now gives us a, the opportunity to attract more capital and b, make a point that it will be impactful for our return on trading capital with outsized returns, that's clearly the intent.

The fact that we are bringing back the regional breakdown is a recognition of the level of transparency you need, the internal discussions data centers around how can we add more insight without revealing competitive intelligence around our [Technical Difficulty]. But also, as discussed before, this is a continued process on our side, and we'll make sure that there's an increased attention to the trading capital return pattern across the firm.

[Reginald Watson, analyst]

Okay. And then, Mike, what do you think a reasonable through the cycle return on trading capital is?

[Mike Kuehnel, executive]

First, it's hard to predict the future, as stated before. But I'm quite confident just looking back the last 5 years or even since the IPO we're seeing that we have at the bare minimum demonstrated returns of slightly above 50% and then with spiking moments, which are part of our business returns of well above 80%. So I feel quite comfortable saying that this is a region we feel comfortable about with even more capital coming to offer.

And let's just let me take one step back. The reason why I'm saying that is that, a, we have meaningfully increased our scope, and sometimes I relate to it as the radar screen. So we see a significantly higher number of opportunities around us. And now with the broadened infrastructure, we are able to act upon it. I did mention in the past, if you remember, our ability also to shift capital left and right to these opportunities in order to benefit from them. So this gives me a deep confidence.

And secondly, also look at a very talented trading leadership team and trading team in order to be able to be in these moments able to act, and this brings me then back to the opportunity cost. So with more capital, we will also, just by default, able to capture more for rising opportunities, where at least until today, there was a natural just relatively spoken, a limit on how far we could go.

So that does not imply any change in our risk management or risk appetite, but it really relates to our opportunity with more capital. And by the way, this should be an exponential curve, as there's a compounding effect in capital being retained in the firm and [ seeing the ] trading opportunities should give us a significant chance in quite accretively.

[Reginald Watson, analyst]

So -- and Mike, on previous calls, you've highlighted the fact that you've lost share in some of your core markets because of more trading capital being deployed by your key competitors in these areas, that has necessarily driven down returns and share. If you're also increasing your trading capital, doesn't this just lead to a war of capital and simply a diminution of returns?

[Mike Kuehnel, executive]

Yes. I'm glad that you highlighted. But if I take really a step back and look at the, let's say, differences in trading capabilities, I think it's fair to say that we have a very distinct trading capability sets. So very much able to embrace fragmentation, very much able to benefit from market circumstances better hard to model from a prediction point of view. And then having more trading capital, I feel we can act in a protected set of markets with attractive returns nonetheless.

But I do strategically want to add the decision to now also dive into a multifaceted capital plan is the gist of what matters for us. So it's not about the EUR 25 million or any kind of debt capital increase intention for the next 18 months. What we feel is this is a significant milestone for the firm to really transform the company over the next 3 years to 5 years into a powerhouse related to the core capabilities we developed.

[Operator]

Our next question comes from Julian Dobrovolschi from ABN AMRO.

[Julian Dobrovolschi, analyst]

Hello. Good morning, gentlemen, once again, and thanks for the presentation. A couple of questions across a couple of topics. Maybe the first one also to follow-up on the trading capital upsize of EUR 25 million. Just a really quick one. Do you already see any clear -- like are you thinking in terms of like clear pockets of growth that you can provide this additional capital and maybe areas, where you feel you are currently underrepresented. And maybe I just want to kind of couple this question with the fact that market shares in EMEA dropped in the ETP business to 25%, where it was [ above ] 27% at the end of Q4, 2023 and obviously 30% and above even before that. So I believe in the past, you highlighted the fact that the reason that's happening is just because you're basically facing higher competition on pricing, and you basically are not having in a way enough capital to basically play all the strategies. Now with this EUR 25 million upsizing, even though I appreciate it's not too much, should we expect a bit of a recovery in the market shares in EMEA as well?

[Coen van Sevenhoven, executive]

Hi, Julian, Coen. I'll take this question. So yes, correct. Like Mike alluded to earlier, like being constraint in capital means that yes, we have to pick, where we deploy it at any given point in time. And by definition, having more capital allows you to be active at more areas at the same time. So as part of our global diversification strategy, we're right across regions and asset classes, of course. So having more capital will just allow us to [ employ our full resources ] and attention to do more areas at the same time. And Europe, of course, being a key area for us. Well, yes, this will definitely help us to maintain our leading position in Europe. The more capital, the better for us.

[Julian Dobrovolschi, analyst]

And at what cost can you deploy this EUR 25 million? Is it literally at [ 0 ] cost. So we can basically assume all the NTI that we generate would drop [ EUR 3 million if it's ] the net profit line?

[Mike Kuehnel, executive]

Well, excluding the interest rate, obviously.

[Coen van Sevenhoven, executive]

Sorry. Can you repeat the question?

[Julian Dobrovolschi, analyst]

What is the cost of the additional EUR 20 million of trading capital that, I would say, the debt portion that you took from the issuers?

[Mike Kuehnel, executive]

It's fair to say it's slightly below 10%. And if I compare that to the earlier [Technical Difficulty] on the expected return on trading capital, you see that [ economic stems ]. It is highly accretive. When we look into then the upscaling and looking into alternative sources of debt either in the TLB market or the private credit facility market, I think it's fair to say that the [Technical Difficulty] is in a broad range between, let's say, around 12% plus minus.

And clearly, as shared with you before, Julian, we are quite dedicated to really bring this across as a multiyear plan related to the idea to and the intent to create a bit of a benchmark effect. So that over time just being able to deploy more capital and bringing in more capital that our interest rate on these debt facilities will decrease over time, which is good news for shareholders clearly.

[Julian Dobrovolschi, analyst]

Yes. That's -- I appreciate the answer. Thanks, Mike. I'm also trying to kind of connect the discussion more on the fact that, obviously, maybe not now, but the more you grow the trading capital, and I believe you also alluded to numbers like even, let's say, EUR 1 billion and even higher than that. Obviously, one cost element would be the interest on this, let's say, debt portion. But the other cost, in my view would be the fact that you have to scale up the trading capabilities, maybe even the infra, but definitely the number of traders. Did you run a bit of a sensitivity exercise, let's say, on a run rate figure, where you would do land in terms of EBITDA margins, if trading capital would go all the way to, let's say, EUR 1 billion -- sorry, EUR 1 trillion.

[Coen van Sevenhoven, executive]

Hi, Julian, maybe I'll answer the first part of this question. So obviously, as we are a company [ just ] trading ETPs, we are already connected broadly across the globe to different regions, asset classes to [ trade our ] ETPs. So for us to deploy into new strategies, this will go incremental. It's not that we need enormous investments in order to try to deploy new strategies or try to develop them. So I think that's a big benefit of state of our business.

So I think, like as we will expand our capital and some expenses in our cost base, this will only happen if the NTI will [ follow-up ]. So it won't be necessary to make large investments in our space before we can see results in NTI. So in that sense, I think this is a very low-risk, high-reward path that we're embarking upon.

[Julian Dobrovolschi, analyst]

Okay. Then on the competition. So I think, yes, you kind of discussed briefly about the fact that, obviously, you might kind of -- there is a potential running into diminishing returns given the fact that everybody is fighting for more trading capital. But now that you're moving from, let's say, core ETP trading into kind of being a proper multi-asset market making firm running a couple of strategies across different asset classes and obviously across many regions. Just wondering how do you look now at the competitive environment? I just want to leave it a bit of a [ loose ] question. So just curious, how do you look at that?

[Coen van Sevenhoven, executive]

[ But ] I think as you alluded to, our competitors have -- some of them have larger capital [ bases ]. So I think, if anything, this is us creating a more level playing field. So I only see this as a positive development. Other than that, it's hard to comment on the activities of our competition. But if I look at our internal road map, the boost the trading capital we have now, and if I just this morning walking across the floor, feel the excitement and the positivity of the whole trading floor with this announcement of the increased trading capital. I'm very, very confident that, yes, we are on a strong growth path there.

[Julian Dobrovolschi, analyst]

Looks like there are some [indiscernible] for capital. So that's good news. And maybe a final one. It's something that I've noticed a couple of quarters ago, but I kind of missed asking this. I did notice that you changed the vesting of the remuneration pool from 4 years in the past to 3 years now. Why? And what kind of effect this might have on the attrition of stuff.?

[Mike Kuehnel, executive]

Yes. So this is -- that's an important point. So we are constantly reviewing the attractiveness of our broader com packages. And clearly, we are not ignorant of the global dynamics we see also from competition. And this was one piece embedded in making sure that we remain competitive. I shall say this was not an isolated effort. So we -- as I said, we are constantly reviewing these elements, but it was important for us to make sure that with increased competition, specifically in core parts of the global industry, New York as a highlight, we found effective ways to remain competitive.

And then in terms of attrition, I only can echo what Coen highlighted. So today is -- for us as a firm a significant milestone. We come out of a very in-depth review of where we stand as a firm and how we see the different growth opportunities emerging. And today is the day marking a significant point into being perceived as a gross stock and us embracing these opportunities with more capital. That's truly exciting. And I can see that inspiring many of our staff and becoming part of it. So as such, I think this is also -- is a more qualitative piece that we are mindful of competition, but also feel that there are very specific elements, as to our strategy and as to our culture, where we are proud of and these elements helping us to drive our growth.

[Julian Dobrovolschi, analyst]

All right. I appreciate the answers. And obviously enjoy the summer holiday.

[Mike Kuehnel, executive]

Same for you, Julian. Thank you.

[Operator]

[Operator Instructions] As of right now, we don't have any raised hands. I'd now like to hand back over to the management for the final remarks.

[Eric Pan, executive]

Great. Thank you, operator. We would like to thank all the analysts for participating in today's call. Please note that we will host our next analyst call when we release our third quarter trading update in October. Details and timing for this call will [ follow ] in due course. This now ends the call. Thanks, again. Have a great day.

[Operator]

Thank you, everyone, for attending today's conference call. You may now disconnect. Have a wonderful day.