TMX Group Ltd

TSX:X

Earnings Call Transcript 2018-Q2

[Operator]

Good morning. My name is Leandra, and I will be your conference operator today. At this time, I would like to welcome everyone to the TMX Group Second Quarter Results Conference Call. [Operator Instructions] Mr. Paul Malcolmson, you may begin your conference.

[Paul Malcolmson, Director of Investor Relations]

Well, thank you, Leandra. And good morning, everyone, and thank you for joining us this morning for the second quarter 2018 conference call for TMX Group. As you know, we announced our second quarter results last night. A copy of our press release is available on the website, tmx.com, under Investor Relations. And this morning, we have with us Lou Eccleston, our Chief Executive Officer; and John McKenzie, our Chief Financial Officer. Following opening remarks from Lou and John, we will have a question-and-answer session. Before we start, I'd like to remind you that certain statements made on our call today may be considered forward-looking, and I refer you to the risk factors in today's press release and also in reports filed by TMX Group with regulatory authorities. Now I'd like to turn the call over to Lou.

[Lou Eccleston, CEO & Director]

Thank you, Paul. Good morning, everyone, and thanks for dialing in. As Paul mentioned, last night, we released TMX Group financial results for the second quarter of 2018. John will take you through the results in a few minutes. But as most of you have read by now in the earnings release and in the financial statements, TMX reported another positive quarter, with record revenue and adjusted diluted earnings per share. As I stated in our earnings release, our record results were driven by strong performance across all the key growth areas within TMX's diversified Global Solutions business, and that includes Derivatives, Capital Formation and Data and Analytics. And as most of you are aware, recurring revenues now comprise more than half of our business. TMX's strong Q2 and first half of the year is indicative of the fundamental power of our business model and also of TMX's demonstrated ability to execute our strategy designed to deliver sustainable profitable growth. The determined progress we have made in our growth plan, coupled with our dynamic performance over time, has placed TMX near the top of our global peer group in terms of revenue growth and shareholder return over the last year. To be sure, the work we've done to redefine TMX and evolve the perception of this organization across the marketplace is far from over, but it is gratifying to see the valuation gap between TMX and our global exchange peers begin to narrow. Today, TMX is a global enterprise dedicated to serving markets and clients with excellence around the world. At the outset this morning, I want to highlight some of the key factors contributing to our recent success and update you on initiatives across our primary growth areas. Let's start with our Derivatives business, where again we have our sights set on expanding our global footprint to Montréal Exchange. MX set another new record for total volume, with 27.5 million contracts traded in Q2 '18, reflecting increased activity in our major products, as well as sustained growth in equity derivatives. Last month, MX announced the launch date for extended trading hours. This is an important initiative to align trading with the European time zone and enhance MX's competitive position among the world's leading derivatives markets. So beginning October 9, 2018, MX will open the market at 2 a.m. Eastern Time or 7 a.m. in London. Extended trading hours will enable domestic and international clients to manage their exposure and to execute cross-market strategies during nonregular Canadian business hours. Making our benchmark products available for trading during peak times for global markets will address the growing demand for Canadian-listed derivatives around the world and it will also have a positive impact on the growth of our business over the long term, increasing market participation, diversifying our client base and enhancing the depth of liquidity on our listed derivatives. That leads me now in talking about Capital Formation, another key growth area for us in 2018 so far, and a foundational element of TMX's success. We saw a continued upward momentum in the first half of 2018, largely driven by TSX Venture Exchange. Overall, new listings on TSX were up 56%, compared to the first half of 2017, driven by -- this is driven 61 new corporate listings, as well as another 42 capital pool companies, which is a very important vehicle for private companies to raise capital through a public listings. Financings on Venture totaled more than $4.4 billion in the first 6 months of the year, and that's up 17% from 2017. This is building on our global resource franchise. Toronto Stock Exchange and TSXV are increasingly the venues of choice for companies exploring the new frontier of cutting-edge technologies, and that includes blockchain and cryptocurrencies, as well as medical cannabis. In fact, for innovation listings, this is the strongest start to the year on record. Year-to-date through June 30, there were 33 new listings in the sector. The record year is 41, and that was set in 2016, so we are well ahead of that pace. And it's a diverse group of companies. Of the 33 new innovation listings, 9 are in medical cannabis, 10 are in blockchain or crypto, 9 are technology and then 5 are from other related areas. TMX actively supports all the sectors that make up our issuer base, and innovation's no different. We are working together with groundbreaking companies and future-focused entrepreneurs to help them achieve their growth objectives. And the pipeline remains strong, with a number of late-stage prospects growing steadily. As you heard me talk about in the past, we expanded our business development and sales teams and built a sophisticated new enterprise CRM system. This is driving more prospect engagements around the globe. The degree to which we are successful in attracting new issuers to our markets, in particular on the Venture Exchange, has a positive impact on multiple aspects of TMX's diversified and interconnected business. In particular, the onboarding of new companies has contributed to the sustained growth of TSX Trust, our transfer agency and corporate trust business. Revenues from TSX Trust grew 40% through the first half of the year, compared to 2017. And looking ahead, based on the business plans and early-stage initiatives we have underway, we believe the trust business has considerable room to grow over the long term. So now to close my remarks this morning, I want to spend some time talking about our Global Solutions, Insights and Analytics, or GSIA business. To remind everyone, GSIA has 3 main components. The first is our traditional or core market data offering, consisting of data generated from our trading venues as well as indices. The second is our analytics division, an early-stage enterprise offering, where we are bundling foundational capabilities in data mining to drive new solutions. And thirdly, Trayport, which now reports directly to me. The performance of our core market data business is tied closely to industry trends and throughout the first half of the year, continued to reflect market challenges and the resulting impacts on our clients' business. So those 4 explore innovative ways to drive growth in that business, in May, we placed data and analytics under new senior leadership. Shaun Mciver, TMX's Chief Client Officer, assumed overall responsibility for the Datalinx business, as well as advanced analytics sales. And we'll be announcing a new President of TMX Datalinx later this year, reporting to Shaun. Jay Rajarathinam, TMX's Chief Technology and Operations Officer, extended his mandate to take on product development and commercial planning for advanced analytics. Under Jay, we will directly integrate our efforts to develop analytics solutions with our ongoing work to deploy new technologies, such as machine learning and artificial intelligence. You will hear and see more from these teams and their progress in November at our investor update on growth initiatives. In June, we were advised that TMX will continue to operate the CSA-authorized information processor, which is a consolidated service offering both level 1, level 2 information for all Canadian equity marketplaces, through June 30, 2022. This is another clear sign of TMX's proactive leadership position in serving Canadian capital markets. So turning now to Trayport, we'll continue to update you on the 3 key metrics we've identified for the business, and those are: Revenue growth in the core business, and that includes the 3 primary customer segments of traders, brokers and exchanges; the second metric is the number of trader subscribers, this is a subset of the total subscriber base, but one which represents a significant portion of total Trayport revenue; and the third is the average revenue per user, which highlights the additional services being added by existing clients, such as charting and analytics. As we look at these 3 metrics for Q2, we saw strong revenue growth in the core business, which was up 10% over Q2 '17. There was an 8% increase year-over-year in the number of trader subscribers, and the average revenue per user increased by 9% over Q2 of 2017. And for TMX overall, this translates to an increased portion of TMX's revenue derived from recurring and global sources, which was, of course, a key strategic consideration in the acquisition. While the core of Trayport is growing, we do have plans to streamline the business by addressing a noncore area, and we've chosen to pursue a path consistent with how we addressed our noncore TMX businesses a couple of years ago. Contigo, acquired by Trayport in 2013, is an ancillary nonsubscriber-based risk application that represents about 4% of Trayport's revenue year-to-date. Because it is a standalone niche application and it needs separate integration with client systems, the sale cycles are long and complex, as with any similar application. We have started the process to divest the Contigo business, and we expect this to be completed by year-end, and this will provide us with additional investment for Trayport's growth and better management focus. Going forward, we will focus on adding applications and functionality that are integrated seamlessly with the Trayport platform. Now just to give you some color on how to think about our plans to invest in the growth of Trayport. We will center on capitalizing on 4 macro themes in the global energy markets that present growth opportunities in both new markets and in new services to existing clients. The first is taking advantage of the increasing demand for data and analytics to drive quantitative decision-making and to assist clients in meeting regulatory requirements. Trayport will provide a new rich analytic interface in new applications, giving clients the ability to mine critical datasets. Second, we will capitalize on the globalization of the world's gas markets by providing enhanced execution, data and analytics to existing clients as well as new clients globally who need access to these developing gas markets. As a result, Trayport clients will have one of the most complete views and trading access to the rapidly growing global gas market. Third, we will leverage new technologies to drive automation and efficiency as business processes become digitized. Today, a significant amount of brokerage trading volumes are executed via voice or instant message. Trayport will be the leading provider of hybrid tools to support brokers as their businesses become more digital, and this will in turn help traders with a more timely and complete view across markets. This initiative will also enable Trayport to deliver increased value along the full trade life cycle by increasing the data and analytics tools available for OTC markets and facilitating broker expansion into new asset classes and geographies. And fourth, the rise of renewable energy sources is having an increasing impact on energy generation and trading, and Trayport will help clients meet the demand in the spot power and gas markets with new trading tools. We will have the Trayport team here in person and walk through details of this plan, as well as plans for all of our growth initiatives, at our investor update on growth initiatives, which is going to be held on Thursday, November 29, from 12 noon to 4:30 in our Toronto headquarters at 100 Adelaide Street West. We ask you now to save the date, and we'll have provide more details as the fall approaches. With that, thanks for your attention. I look forward to your questions, and I'll turn the call over to John.

[John McKenzie, Senior VP & CFO]

Well, thank you, Lou, and good morning. I expect that most of you have been through our earnings release in which we once again reported record quarterly revenues and adjusted earnings per share. Our strong earnings performance in the second quarter of $1.71 in diluted earnings per share was bolstered by our gain on the sale of our interest in TMX FTSE of $0.48 per share. Adjusted earnings per share was a record $1.34, even after a charge of $0.06 per share related to lease termination following the consolidation of our real estate facilities. The record revenue, with year-over-year growth of 20%, was largely driven by the Trayport acquisition, but also by other parts of our business, including both Capital Formation and Derivatives. Organic revenue growth this past quarter, excluding Trayport and divestitures, was 5% over last year. Expenses were up by about $30 million year-over-year or 34%, driven by 3 large items: Trayport expenses were $19.2 million in Q2; a commodity tax provision of $7.6 million or $0.10 per share was taken, and this expense was added back in calculating our adjusted earnings per share; and finally, as I mentioned, we incurred lease termination costs relating to the consolidation of our real estate facilities of $4.5 million or $0.06 per share. Given that we will have an immediate savings from this initiative, about $2.5 million annually, we did not adjust our EPS of $1.34 for the $0.06 related to this item. As I mentioned, revenue was up in our key growth segments of Capital Formation, Derivatives and Global Solutions, Insights and Analytics, or GSIA, where we had a 53% increase in revenue due to Trayport, with $27.9 million of revenue in Q2. This was partially offset by a $2.1 million decrease in revenue from TMX Atrium, which was sold on April 30 of last year. We are continuing to provide a summary of Trayport subscribers, including those related to traders, since they drive over 50% of Trayport's revenue. We also published Trayport's revenue in sterling. And as Lou said, revenue in Q2 from the core subscriber business grew by about 10% over last year, and the trader subscribers grew by about 8%. As you also heard, we have many initiatives underway, which we believe will continue to drive further success at Trayport. In our Capital Formation business, revenue was up 12%, driven by a 16% increase in additional listing fee revenue and a 41% increase in other issuer services revenue. The higher additional listing fee revenue reflects the impact of a higher maximum additional of the listing fee on TSX, as well as a 5% increase in the number of transactions billed on TSX. The increase in other issuer services revenue was driven by TSX Trust, which had higher transfer agent service revenue and margin income. The 6% increase in derivatives trading and clearing revenue was driven by the record volume of 27.5 million contracts traded in Q2, up 5% over last year. Now looking at our results on a sequential basis, revenue was $209.5 million, up slightly from the Q1 '18 results, reflecting increases in Capital Formation and Derivatives Trading and Clearing revenue; and largely offset by declines in equities and fixed income trading, CDS and Global Solutions Insight and Analytics revenue. Operating expenses were up 7% over Q1 2018, reflecting the commodity tax provision of $7.6 million, the lease termination payment of $4.5 million and higher fees related to liquidity facilities in our clearing house. The increases were partially offset by a decrease in severance costs of approximately $2 million and a decrease in payroll taxes of about $2.1 million. Results in the income from operations decreased from Q1 to Q '18 -- from Q1 '18 to Q2 '18, due to higher operating expenses, again, largely due to the commodity tax provision taken and partially offset by the higher revenue. Turning to the balance sheet, and as a reminder, our Series A Debentures of $400 million come due this October. In June, we prefunded a portion of this through a Canadian private placement offering of $200 million of 3.779% senior unsecured tenure debentures, which received a credit rating of A [ high ] with a stable trend of from DBRS. This deal had significant amount of investor interest and was oversubscribed by about 5 times. The proceeds were used to reduce our Commercial Paper outstanding. And by the end of June, we had only 15 million of U.S. dollar CP outstanding and no Canadian dollar outstanding. Our current plan is to repay the full amount owing of the $400 million due in October, with a combination of excess cash and proceeds from the issuance of Commercial Paper. On a pro forma basis, including Trayport's adjusted EBITDA from the last 12 months ended June 30, our leverage defined by our debt to adjusted EBITDA ratio, was about 2.7x. We also held over $230 million in cash and marketable securities at June 30, over $60 million of which is in excess of the $170 million we target to retain for regulatory and credit facility requirements. In terms of CapEx, just an update on 2 items requiring cash outlays. This relate to the consolidation of our offices in both Toronto and Montréal and the integrated of our clearing houses, CDS and CDCC. We have now completed the consolidation of our Toronto and Montréal facilities. Approximately $17 million of capital expenditure was spent in 2017 and a further $12.1 million of capital expenditure was spent in the first half of 2018, just below our total estimate. On the integration of our clearing houses, our current estimate of the expected cash outlays remains at approximately $55 million to $60 million from 2017 to 2019. We spent about $9 million on CapEx in 2017. Substantially all the costs will be related to capital expenditures, and we expect that almost half the total spend will occur this year. In the first half of this year, we've spent $9.3 million, including $6.8 million on capital expenditures. The annual savings and operating expenses on a run-rate basis, compared with our current cost structure, are still expected to be in the $6 million to $8 million range, commencing in 2020. And turning to capital allocation. Our board declared a quarterly dividend of $0.58 per common share, to be paid on September 7 to shareholders of record on August 24. At 43%, this payout ratio is within the range of our domestic and international peers, and we remain committed to monitoring that range and maintaining that payout ratio, consistent with our peer group. At this point, I will turn the call back to Paul for the question-and-answer session.

[Paul Malcolmson, Director of Investor Relations]

Thanks, John. Leandra, could you please outline the process for the question-and-answer session again?

[Operator]

[Operator Instructions] And your first question comes from the line of Nik Priebe with BMO Capital Markets.

[Nikolaus Priebe, Analyst]

Just wanted to touch on other issuer services. Lou, as you have in your comments, it looks like pretty solid growth from the trust and transfer agent business. Just wondering how should we think about that growth profile going forward? It looks like you're continuing to capture a disproportionate amount of market share in that business. Should we think of that as a bit of -- kind of an annuity-style stream of earnings with a growing base? Just wanted to get us a sense of how sustainable that growth may be.

[Lou Eccleston, CEO & Director]

Yes, Nik, I think that's a great way to think about it. I mean, we're very positive on the business and are going to keep investing in it. As I said -- I mentioned in my comments, we think it's got a lot of runway. I mean, today, it's a small business but it's a really strong business, and it's become a key part of our issuer services value proposition. Now the fact that we can come in and talk about offering these kinds of services, the companies that are looking to list together as a value proposition, is really working out well. And they are winning a very large percentage of new deals. And as I said, we see that runway, it looks pretty long to us, so we continue to support and to grow that business and invest in it.

[Nikolaus Priebe, Analyst]

Okay. And then just moving over to Trayport. I know you kind of alluded to a new analytic interface that you're intending to introduce. Is that a feature that will be added sort of at an incremental cost to subscribers who would elect to access it? Or is that something that you would kind of roll out more broadly in the hopes of attracting a broader subscriber base?

[Lou Eccleston, CEO & Director]

Yes. There's -- it's a combination, really. If you look at where work has gone in at Trayport in the last few years, it's really been focused on traders. And they have put in place an entirely new trading system, Joule, that's the Joule trading system for traders. And you see what it's done for the trader growth projections, right? I mean, and revenue for traders as they've come onboard, because there was a lot more value. So part of it is simply an improved interface that allows you then to add applications into it. So it's really both. I mean, we'll work on a really much improved interface. And as you've heard in all of those macro trends, we're focused around data analytics, because that's what is happening to our clients' business. They need more data mining. They need better decision-making. They need to look at more data from around the world. So you've got to have a foundation, which is the interface and the fundamental system, and the broker part of that has not been invested in as we think it should or could be as the trader part has been. And so it will be a new interface to upgrade that platform. That then allows you to bring more applications in, which will be the revenue per user metric.

[Nikolaus Priebe, Analyst]

Got it. Okay. And then maybe one last one from me before I pass the line here. Wondering if you could talk about the status of efforts to track a greater number of international listings. It kind of seems like it's an exercise in educating some perspective issuers about listing in Canada and dispelling some of the myths out there. So are you seeing more interesting on that front? Just trying to get an idea of how the -- what the pipeline looks like.

[Lou Eccleston, CEO & Director]

Yes. Well, the answer is yes, we are. And you've heard me talk about, I've mentioned, our sales capabilities have been developed. We got people on the ground now around the world that we did not before. We've got several people in Silicon Valley, Tel Aviv, London, New York. If you look at the events we do, Ignite events for example, are done all over the world. I mean, we'll do an event in London and attract 200 people. And so we're all over the world telling that story. And as you know, in the last few years, we've been in the top of our peer group or at the top. And so far this year, we're third in the world in new international listings, according to LSE statistics. So we continue to focus on that, not at the expense of the Canadian marketplace, which also has an impressive pipeline. But what we now can see with the work we've done with our enterprise CRM, we can really focus on where these prospects are in the stages of the cycle -- of the sales cycle. And as I said, late-stage prospects are very strong. They continue to increase, and that pipeline keeps getting fueled by that, both in Canada and around the world. So very focused in international. And it's very much a part of where the innovation is happening and where the companies that are looking for capital are. No different, by the way, than when you look at the resource franchise, you'll see that more than half of the mining capital that's raised around the world comes from Canada, because it's a very international base. So if you really want to serve that, you got to do that and as I said a lot now, is that Canada is the address, but the addressable market is the world, so we're out there all over the world looking for prospects.

[Operator]

Your next question comes from the line of Geoff Kwan with RBC Capital Markets.

[Geoffrey Kwan, Analyst]

My first question was just on the market data subscribers that was down quarter-over-quarter both on the equity and the derivatives side. Just was wondering if there's any color on it, whether or not it was just maybe 1 quarter noise or if there's other factors that we should be thinking about?

[Lou Eccleston, CEO & Director]

Yes. Well, as I mentioned, we are -- that business today is very much tied to what happens with our clients since the core market data business is about selling to the users that are out there in the client base. And I think where we were fortunate to see that client base stabilize the last couple of quarters. And this quarter, I think we saw that drop mostly coming from outside of Canada. And so that -- it's really -- but it's really still a function of what's happening with our clients. And that's the reason I also mentioned that we've taken several steps now to look at where should that business go, what new data sets should we put in, what new functionalities should we be putting in. Should we think about other things we can do for clients, like around innovative pricing mechanisms, things like that. So that's why I mentioned under new leadership under Shaun. But also, there'll be a new President of Datalinx business coming in later in the year to look at some of those innovation ways. And I think John might want to add to that.

[John McKenzie, Senior VP & CFO]

Yes, the other color I'll add for you, Geoff, as you think about in -- always I guide people to look at both the sequential results with respect to subscriptions, but also year-over-year. Year-over-year, I think if you look at the total subscription base, you'll find it relatively flat. You'll actually see a lift in terms of derivatives subscriptions, offset by a slight decline on the equity side. And on a sequential basis, you'll often in years see a dip from Q1 to Q2, because the Q1 period, because of the higher equity volume basis, tends to have higher demand for subscription at the same time. And as the equity volumes drop off after Q1, that's a normal trend for it to have come down. So look at both the sequential and look at year-over-year as well.

[Geoffrey Kwan, Analyst]

And maybe just one other question tied to that was I know you mentioned some stuff around deployment outside of Canada may have been a factor there. When you kind of take a look at going forward in terms of your visibility there, do you think it has CapEx stabilizing result from the prior quarters? Or is there potentially, maybe for a little bit, more pressure on the sub side?

[John McKenzie, Senior VP & CFO]

I mean, obviously, we can't comment on what's going to be happening in terms of industry trends in other businesses or other regions. The focus we've got -- and it goes from the focus that Lou talked about and what our growth initiatives are, as we drive more global interest in our products, be it from international issuers that we list here, bringing on new traders that can trade those equities in Canada and the expansion of our derivatives franchise on a global basis by moving out our operating hours, all of these things are things that will create international demand for those data sets. So we are looking to create more demand and expand the usage of those products, but we were doing it through driving those growth areas of the business.

[Lou Eccleston, CEO & Director]

And think about it, Geoff, to John's point, just 2 things to mention quickly. One is when you expand your trading hours in MX, all of a sudden you've got a whole new trading set of data that's coming from Europe feeding MX, or things like when we talk about record listings and venture from the innovation sector, that nourishes your data set, too. So I think, as John said, it's -- look year-over-year as well, but also think about some of the new ways and new data sets that are going to be nourishing the market data.

[Geoffrey Kwan, Analyst]

Got it. Just the second question I had was around -- you're obviously integrating the Trayports, doing some of the systems changes. But on M&A capacity, can you talk about your ability to be able to pursue opportunities? Also, how is the landscape for what you're looking for out there? Are there assets that you have interest in? And maybe also, too, is whether those opportunities might be smaller bolt-on in size or whether or not there may be something that could be more significant?

[Lou Eccleston, CEO & Director]

Well, I think the way to think about acquisitions for Trayport is exactly the way to think about acquisitions for TMX. And the wherewithal Trayport has is the wherewithal TMX has, which are significant. And so the reason I mentioned that divesting Contigo is consistent with the approaches we've taken, it's exactly the same idea of thinking about Atrium and things like that, that were noncore, but acquiring something like Trayport, right? And we think of Trayport in exactly the same way. It is important though, as I mentioned, as we look at these things, if they're going to be a smaller application-oriented acquisition, then it's got to be, in my mind, seamlessly integrated with the Trayport platform because you don't want clients to have to incur integration costs and other obstacles like that. So it's got to be literally an entitlement to put it in there. And I think the direction, as you heard me talk about all of those themes involve data mining and analytics, and those are the kinds of things we'd be looking at. If things are out there, we'd rather bring them in rather than acquire them -- rather than build them. But also, it's going to still be very consistent with our organic strategy. Just like we did with Trayport, the idea is that we'll be looking for things and are looking for things that can accelerate our existing organic strategy. And that's why I wanted to lay out for you guys the macro themes, because that'll give you the guidepost for how we're thinking about the business and where we're going to invest. And then later on, particularly at the Investor Day, give you more detail on the actual plans and the investments themselves. But it'll follow those themes. So look, we've got the wherewithal to do a little bolt-in, add-on application for Trayport. But frankly, if we saw the right kind of acquisition, it wouldn't be limited to something that fits into Trayport. It could be bigger than Trayport if it helped Trayport. So we're not limited by that. The main focus for us is the value, what does it do for shareholder value, how does it accelerate the organic strategy.

[Operator]

Your next question comes from the line of Jaeme Gloyn with National Bank Financial.

[Jaeme Gloyn, Analyst]

So first question is just within the Trayport business, an uptick in comp and benefits as well a little bit in SG&A. Is that reflecting some of the initial investments that you spoke about as part of the macro themes and growth strategies there? Or is that something that is outside of those growth strategies? And I'm talking about quarter-over-quarter.

[John McKenzie, Senior VP & CFO]

Yes. And quarter-on-quarter, it's a combination of a couple things. So yes, we are investing in terms of the resource capacity to do what we want to do in terms of building that business. We've done some smaller restructurings as well in terms of changes around the team to get the right folks in place to support the business going forward, and that will result to some of that uptick in the quarter. And where I'd guide you to is the question that we often get around the Trayport business and how to think about the revenue and expense side is to what to think about in terms of the margins going forward. And our guidance has been to look at the historical margin trend of the business, use that as an indicator of our going-forward approach to that. Because as the business grows, we are looking to expand the investment into it to accelerate the business. We're not looking to deteriorate the margins. We're not looking to grow the margins at this point because we want to have it as reinvestment capital.

[Jaeme Gloyn, Analyst]

Great. Okay. So a little bit of some onetime stuff then, I guess in comp and benefits regarding -- related to severance, is that it? So we...

[John McKenzie, Senior VP & CFO]

Yes, that's the way I would think about it.

[Jaeme Gloyn, Analyst]

Okay, great. Going back to the trust business, it's a little bit of a source of a delta for me. Can you sort of talk about what TMX's competitive advantage is, what's driving the winning of new business and why it's sustainable versus what else is out there in the market?

[John McKenzie, Senior VP & CFO]

Yes. I'm going to talk about the 2 factors when we think about it. Now first of all, when you think about the competitive advantage we have in terms of where we are in the value chain and when you talk about a new issuer coming to market, the work that our teams are doing with new issuers, our view to the pipeline as we talked about, these are all new trust and transfer clients who have not yet made a decision as to whom to use as a service provider. So we're in there at an early stage to be able to show the benefits of using us as a partner. And you see that really in the win rates. So where our market share for transfer agencies specifically has grown from about 13% when we started or bought into business to about 20% today, our win rates on new issuers are anywhere from 40% to 50%, so roughly half the market in terms of new issuers coming in. The second piece, and I'm going to be anecdotal a bit about this and I'll ask you to ask our clients directly to confirm, but we win on the service side. And so in terms of the offering that we provide versus some of the incumbent players, we find that our clients find that we are a very strong service provider. And that leads to the sustainability of the revenue and the client relationships when they're in there. Once we get them, they're very sticky. And we have very few clients leave us, and that's about servicing the offering after we go forward.

[Lou Eccleston, CEO & Director]

And then the other thing I'd add, Jaeme, to that as well, on top of all that and what's really nice to hear, as John describes that, is that we're building this business and we are the nimble competitor -- service-oriented competitor in this business, which is why we're winning. We also won, though, the regulatory -- from a regulatory oversight group, that we can bundle our services and trust with ETFs. So we actually can present that as a package and that has helped as well on top of the service component.

[Jaeme Gloyn, Analyst]

Okay, that's interesting. And last one from me then. This is maybe a bit high level then, I'm just thinking more along the lines of the blockchain potential and we've -- you hear about ICE and their progress there in the U.S. around clearing and settlement. Where is that in terms of financial feasible for TMX and the potential benefits?

[Lou Eccleston, CEO & Director]

Well, there's 2 parts to your question, right? One is just in general, commercial viability of some of the blockchain initiatives we had. And then I'll let John take the clearing part of it, because that's based on what we're doing now and then what could happen from there. We are very engaged in several different initiatives for blockchain. And we've got to stay on top of it. And we think it's going to have a place, it'll play its part. But even in the projects like Jasper that we've worked with Payments Canada and Bank of Canada on, it's still in the learning phases. And we've gotten these prototypes, they're working. They're up and they're running. What's yet to be seen is where the big wins are financially for clients. And the -- as soon as you start to ask clients to reintegrate and spend money and do different things, you've got to really have those benefits well articulated and clear. And at the moment, probably we'll get more immediate benefit out of making sure that we've incorporated artificial intelligence and machine-learning analytics into our data capabilities that will probably show benefits before blockchain. But when we see those financial benefits from blockchain, we're ready to move and address it. John?

[John McKenzie, Senior VP & CFO]

Yes, the other piece I'll add in around clearing is -- I mean, we've talked in the past about the work we're doing on replatforming and modernizing the infrastructure for the clearing systems and bringing them on to a single platform, we're doing that with global partners, we're doing it with global-based products. And then our analysis of the space at that time was that the blockchain-based solutions, simply, the technology wasn't developed to the extent that it's ready for large-volume, large-value, high transaction capacity type systems like what we're operating. It will be at some point, and our approach is to work with the vendors that we've chosen in terms of putting the new systems to work with them on blockchain pilots of the next generation of their products. So when these systems become commercially feasible on the large scale, it can be the next-generation adaptation of what we're already installing.

[Operator]

[Operator Instructions] And your next question comes from the line of Marko Kais with TD Securities.

[Marko Kais, Associate]

Just wondering around your Trayport growth initiatives, wondering if you'll be able to rank them sort of in terms of which ones do you see is the biggest priority and what is most likely to drive growth going forward?

[Lou Eccleston, CEO & Director]

No, I think, Marko, the more important way to think about it is that we've narrowed down those 4 trends from many trends, right? So it's really together, those are the things that will drive growth from our 3 main segments of traders, brokers and exchanges. So I don't think it's about ranking one of the other, but those are the 4 that came out of 15 or 20 that we spent a lot of time working through. So it's really more about the fact that those are our priorities, not putting one subordinate to the other.

[Marko Kais, Associate]

Okay, got it. And -- but the divestiture of this platform, was this something you were trying to during the acquisition? Or have you decided to do this recently? Just looking for more color there.

[Lou Eccleston, CEO & Director]

Well, we always came in knowing, as we said, we'd have to dig in and spend time and really find out what the best areas were to invest in for the clients, and now we've had time to do that. So remember, it was a business that didn't get a lot of investment before we acquired it. And so we knew we'd want to invest for growth. Remember, the synergies here were not about costs, they were about growth. So we always expected to grow, it was just a question of the priorities, and now they're becoming clear.

[John McKenzie, Senior VP & CFO]

And the piece I'll add to it, just to add color for you in terms of the investment hypothesis when we bought the business, the piece that we're talking about, the risk platform, as Lou said, very small piece of the revenue, only about 4% today. Not a profitable component anyway, so it wasn't the component of our valuation anyway. So it really was ancillary to the transaction.

[Marko Kais, Associate]

Okay. And then just lastly from me. Was there any onetime tailwinds in the free cash flow this quarter? Or is this run rate repeatable?

[John McKenzie, Senior VP & CFO]

Sorry, can you repeat the question? I didn't quite hear it.

[Marko Kais, Associate]

Just on the free cash flows, wondering if there were any onetime tailwinds this quarter? Or is this kind of run rate repeatable going forward?

[John McKenzie, Senior VP & CFO]

So you're looking to onetimes in the free cash flow in the quarter?

[Marko Kais, Associate]

Just wondering if that was the case? Or can you -- just more color on the free cash flows.

[John McKenzie, Senior VP & CFO]

No problem. Yes, the key -- there are a few couple of things in the free cash flow that were anomalous in the quarter, the biggest one being the sale of our interest in the FTSE joint venture. So if you looked at that piece, we had incoming cash flow between the dividends and the sale of that asset about $78 million. We -- obviously, we've sold it, so we can't fill it again next quarter, so that'll be the anomalous piece.

[Operator]

And your next question comes from the line of Jaeme Gloyn with National Bank Financial.

[Jaeme Gloyn, Analyst]

Just one quick follow-up here on the Trayport and the investment in the new interface and new analytics theme. Is the interface, the current existing interface for traders, is that at its optimum level, and this is really just improving the interface for the exchanges and for other subscribers? Maybe just a little bit of clarity around what exactly is going to happen there.

[Lou Eccleston, CEO & Director]

Yes. There's been a lot of work done already on the trader interface, so that's in very good shape. And now were focused on the one for the brokers. The exchanges is about connectivity, but the work we're doing is really around the brokers. But understand the way -- the dynamic of the way it works is that the traders and the brokers are really working together across the platform to try and arrive at a transaction point. So all the improvement you do on the brokers' side is actually bringing it to a place where it helps the traders as well. So one of the things I mentioned was when you improve what a broker can show for markets and depth of market and breadth of market helps the traders as well. But the trader -- trading system is very well developed. That's been worked on for the last couple of years, and now we're focusing on the broker, which I think was the heart of your question.

[Operator]

And there are no further questions at this time, and this will conclude today's conference call. You may now disconnect.