Marex Group plc

Draken, Head of Investor Relations at Merix. Please go ahead.

Good morning, everyone, and thanks for joining us today for Merix's third quarter 2025 earnings conference call. Speaking today are Ian Lowett, Group CEO, and Rob Irvin, Group CFO. After Ian and Rob have made their formal remarks, we will open the call for questions. Paolo Tenucci, Chief Strategist and CEO of Capital Markets, will join us as usual for Q&A. Before we begin, I would like to remind everyone that certain matters discussed in today's conference call are forward-looking statements relating to future events, management's plans and objectives for the business, and the future financial performance of the company that are subject to risks and uncertainties. Actual results could differ materially from those anticipated in these forward-looking statements. The risk factors that may affect results are referred to in Marek's press release issued today. The forward-looking statements made today are as of the date of this call, and Marek does not undertake any obligation to update their forward-looking statements. Finally, the speakers may refer to certain adjusted or non-IFRS financial measures on this call. A reconciliation schedule of the non-IFRS financial measures to the most directly comparable IFRS measures is also available in Marex's earnings release issued today. A copy of today's release and investor presentation may be obtained by visiting the investor relations page of the website at Marex.com. I'll now turn the call over to Ian.

Good morning and welcome to our third quarter 2025 earnings call. I am pleased to announce another very strong quarter with our performance at the top end of the preliminary range we published on October 8th. As you will see, we have continued to outperform and in today's remarks, I will look to explain how we have evolved the firm to generate this growth and how we've increased our earnings resilience. In the first nine months of the year, we generated an adjusted profit before tax of $303 million, up 26% compared to the same period last year. This included $101 million in the third quarter, up 25% year on year. We have maintained our momentum from the first half of the year, despite the more challenging operating environment for some of our businesses. Given the slowdown in exchange volumes since April, some typical summer seasonality, as well as the distraction and disruption caused by the SALT report, we are extremely pleased to have delivered such a strong quarter, our second highest on record. We are grateful for the engagement we've had with our clients and investors and for their support during what has been a challenging period, one we are pleased to have put behind us as reflected in our performance. our clearing segment continued to perform very strongly. Average clearing client balances have increased every quarter since Q1 2024 and grew again this quarter up 4% from Q2, notwithstanding some modest impact from the short report, which has since normalized. We experienced one of our highest ever client onboarding quarters, converting several new large clients during the summer from the strong pipeline we previously highlighted. This reflected in increased commissions and higher clearing net interest income as growth-inclined balances offset the impact of lower rates. Our balances will, of course, fluctuate to some extent with asset prices and exchange margin rates, but we aim to deliver continued growth in balances to offset further anticipated rate cuts. Our prime services business continued to be a standout success and a driver of growth and margin improvement for our agency and execution segment. As a reminder, this is a business that had $85 million of revenue when we bought it from TD Cowan in December 2023. On the Marex platform, it has generated $171 million of revenue in the first nine months of the year. As the Prime business grows across each of its three components, outsourced trading, Prime of Prime, and on-balance sheet Prime, we remain attentive to the associated risks. The primary risk is client leverage, which we manage carefully and keep at a relatively low level. The on-balance sheet business is very diverse, both by client and the portfolio of positions. Our hedging and investment solutions business delivered a strong performance as market conditions became more supportive after challenging Q2. We also continue to expand our product capabilities and geographic reach to access more clients. All of this more than offset a weaker quarter for market making in what was a challenging market environment. We continue to see opportunities for growth through disciplined M&A and have an attractive M&A pipeline for the remainder of the year and into 2026. We recently announced the acquisition of Winterflood, which we expect will provide us with an opportunity to transform our existing UK equity market-making business. The ARNA and Hamilton Cord acquisitions are performing well, while AgriInvest is providing opportunities to expand our business more broadly in Brazil. These M&A opportunities, along with our organic initiatives, are contributing to our geographic diversification as our international investments are starting to bear fruit, particularly in the Middle East, APAC, and Brazil. Rob will provide more details on our segmental numbers shortly. We believe this quarter's strong results validate our strategy. On slide five, we have laid out some of the key metrics that we use to assess our performance. Third quarter revenues grew 24% to $485 million, delivering an adjusted PBT of $101 million, up 25% year on year. Revenues in the first nine months of the year grew by 23% to 1.45 billion, while margins expanded to 20.9%. Revenue per front office FTE increased to $1.31 million on an annualized basis. Our growth is driven by the addition of new producers, as well as our improvements in producer productivity. For the first nine months of 2025, productivity improvements accounted for around half of our growth. Looking now at the operating environment in more detail on slide 6. As I mentioned earlier, we are pleased that we've been able to maintain our momentum from the first half of the year, even in a more challenging market environment in Q3. In Q3, exchange volumes were down 8% year on year and 14% lower than in the second quarter. while volatility also declined to its lowest level in the past year. On the positive side, equity valuations were buoyant, with markets at all-time highs, which is supportive of our prime business and, to a lesser extent, our solutions business. With this backdrop, our third quarter profits were up 25% year-on-year and down just 5% compared to our record second quarter, which included record volumes in April. We aim to set up the firm to deliver growth through a variety of market environments, and our third quarter performance is evidence of our success. This is partly due to the evolution of our business mix, as I'll describe on the next slide. Over the past two years, we have looked to strengthen our earnings resilience through product and geographic expansion. Our evolving business mix is now more diverse than it was at the time of our IPO. In 2023, around 70% of our profitability came from clearing and agency and execution energy, both of which are strongly correlated with exchange volumes. An additional 10% came from agency and execution insecurities, which was also somewhat correlated with exchange volumes. While every area of the firm has grown since then, the share of profit that is strongly linked to exchange volumes is now around 54% today. As we've described in previous quarters, the most significant incremental contribution has come from prime services, which now accounts for nearly a quarter of our total profits. Prime profits are like clearing, recurring and dependable, and based on client balances. They are high-quality, durable earnings that generate high returns. Within agency and execution in securities, we have grown businesses such as FX, which provide trading revenues that are not captured in exchange volume metrics. These efforts to diversify our firm are not accidental, but rather a deliberate strategy to grow in a way that enhances our earnings resilience. It's also worth noting, as Rob will discuss in more detail, that within clearing, NII has remained essentially flat in the $50 million to $60 million range, despite rates being down 100 basis points from the peak in Q3 2024. Our ability to grow balances has offset those rate reductions, and commissions have increased with client balances. This helps explain our strong performance in Q3 and how we've been able to outperform during a period of somewhat lower exchange volumes. With that, I'll hand it over to Rob, who will take you through the financials in more detail.

Thanks, Ian, and good morning, everyone. We are very pleased with the strength of our performance this year. We generated $1.45 billion of revenue and $303 million of adjusted profit before tax in the first nine months of the year. As Ian mentioned, we achieved this performance despite operating in a less supportive environment for some parts of our business. In Q3, we delivered both revenue and adjusted PBT at the top end of our previously announced preliminary range. Q3 revenue of $485 million was up 24% versus last year. We saw continued strong growth in clearing and agency in execution, as well as a strong performance in hedging and investment solutions. Together, these more than offset a softer performance in market making, demonstrating the value of our diversified model. Total reported costs grew 24% in line with revenues. Front office costs were up 23%, reflecting strong revenue performance and continued investments in future growth. Control and support costs were up 26%, primarily driven by higher compensation costs tied to strong performance and investments in our support functions, which include investments relating to recent acquisitions and our compliance with Sarbanes-Oxley. Margins were broadly stable versus the third quarter of last year at 20.7%, delivering a adjusted PBT of $101 million, up 25% year-on-year. Our adjusted return on equity remained very strong at 27.6%, all of which meant we delivered an adjusted basic EPS of $1.01 per share, up 23% year-on-year. Focusing now on our segmental performance, We're showing performance over the last five quarters to give you a clearer sense of the trends within each business. Starting with clearing, which grew 14% versus the prior year, driven by growth across all revenue lines, record client balances, and higher volumes. I'd highlight the stability in clearing net interest income, despite the continued downward trajectory in interest rates, as we have grown client balances to more than offset this. and our new client pipeline for the remainder of the year remains strong. Adjusted profit before tax margins declined slightly to 50% due to continued investments in regional expansion, including APAC, South America, and continental Europe. Agency and execution continued to deliver strong growth with revenue up 52%, reflecting the breadth of our client franchise and strong client engagement. Securities was the largest overall driver of growth in this segment, with revenue up 82%, driven primarily by prime services. As Prime has become a more meaningful contributor, we're provided a quarterly revenue breakout. In the third quarter, Prime revenues rose to $57 million, reflecting continued client growth and momentum. Securities X prime also delivered strong growth, notably in equities, rates, credit, and FX. The acquisition of Hamilton Court, which completed on the 1st of July, contributed $20 million in revenue this quarter, in line with our expectations. Energy grew 7%, driven by the continued growth across our large oil, energy, and environmental desks. Versus the prior quarter, energy declined as activity in the third quarter moderated following record volumes in the first and second quarter. Adjusted profit before tax margins improved from 15% to 26%, driven by growth in higher margin activities, particularly prime services, and productivity gains from restructuring. Turning to market making, where revenue declined by 16%, reflecting challenging market conditions across different asset classes. Robust performances in securities and energy were offset by weaker results in metals and agriculture. Securities saw growth from equities, credit, and FX. This is also where you'll begin to see contributions from winter flood once the transaction closes. Energy performed strongly, benefiting from higher client hedging activity versus the prior year. Metals declined in the third quarter amid ongoing uncertainty surrounding global tariffs, as well as a tough comparison. Base metals, where we have significant footprint, were soft due to reduced client activity, and lower volatility, while precious metals, where we currently have lower exposure, perform well, supported by price strength in silver and gold. Agriculture remained under pressure as ongoing tariff-related uncertainty and elevated commodity prices, particularly in cocoa and coffee, which reduced liquidity and open interest. Our performance was broadly in line with the second quarter. Adjusted profit before tax margins reduced to 16%, reflecting lower revenues. Solutions revenues grew 36%, delivering its strongest quarter on record, with growth across financial products and hedging solutions. Hedging solutions grew 20%, driven by robust client demand and continued momentum in FX. Financial products grew 54%, reflecting strong performance in equity-linked structured notes. Margin rose to 25%, reflecting a strong revenue growth. Despite this margin improvement, we continue to incur elevated costs associated with platform investment and new hires to support future growth.

Now looking at the first nine months. of the year.

Clearing grew 15% on last year, with growth across all revenue lines. The addition of new clients has led to higher volumes in client balances. Margins remain strong at 50%. Agency and execution was the strongest performer, with a 51% increase in revenues and strong profit growth as margins expanded to 25%. This was driven by growth in both securities and energy. We saw strong performance in all asset classes within securities and strong demand in energy, reflecting record volumes in the first half of the year. Market-making revenues decreased by 6% as lower revenue in metals and agriculture were partly offset by growth in energies and securities. Finally, solutions revenue increased 10%, mainly due to growth in financial products, while margins were lower from the ongoing investment in our new technology platform. Previously, I've presented our volume data at this point. However, given the evolution and the mix of our business that Ian spoke about, we plan to update this as part of our year-end process. you will still find the exchange volume data slide in the appendix for consistency. Turning now to net interest income, NII for Q3 was $38.6 million, down $25 million compared to Q3 2024. Interest income was up modestly at $194 million, driven by total average balances growth of $4.8 billion, which broadly offset a 100 basis point decline in the average Fed fund rate. Interest expense increased to $155 million, as we had an additional $1.7 billion of average structured note balances and two senior debt issuance. We continued to hold significant levels of liquidity as we went through the third quarter, allowing us to position the firm strongly to support our clients and grow organically, which creates a headwind to NII. Compared to the second quarter, NII was up $4 million, driven by growth in average clearing client balances. Clearing balances increased to $13.3 billion as we continue to add new clients, resulting in stable clearing NII as this growth has more than offset the reduction in average Fed Fund rates. Looking now at our balance sheet. As a reminder, on this slide you can see that 80% of our balance sheet supports client activity. These are high quality liquid assets. Once we net off assets and liabilities by client activity, we're left with a corporate balance sheet that carries corporate cash and other assets against group liabilities, including our structured notes portfolio and senior note issuance. Total assets increased to $33 billion at the end of September, driven by growth in client balances and clearing, and growth in securities, which includes Prime. We continue to manage our capital and liquidity risk prudently, maintaining significant headroom above minimum requirements to ensure we are well positioned in periods of market stress. At the end of the third quarter, total corporate funding was $5.8 billion, up from $3.8 billion at year end, with $1.5 billion of surplus liquidity above our regulatory requirements. This also supports our investment-grade credit ratings from both S&P and Fitch. In September, S&P reaffirmed our rating, reflecting our robust performance and strong balance sheet. Finally, we announced a gain of quarterly dividend of $0.15 per share for the third quarter of 2025 to be paid to shareholders on December 3rd. We are a proactive and involved risk management approach at Marex. In market making, we are a client flow driven business and do not take a directional view on prices. However, we do carry a small level of inventory to source client demands and capture the trading spreads. Average daily bar was $3.9 million in the first nine months of 2025. and remains at a very low level relative to the growth in the overall business. In terms of credit risk, we had a realized credit loss of $800,000, representing just 0.1% of revenues and reflecting our proactive and disciplined approach to credit risk management. Now, I'll hand back to Ian for concluding remarks.

Thanks, Rob. So, in conclusion, At our investment today in April, we outlined our expectation of delivering sustainable profit growth in the 10% to 20% range. Around 10% of this is expected to be organic, with the remainder, which we estimated to be around 40% of our total growth, coming from inorganic opportunities. We have a strong track record on that front and remain confident that we can continue delivering given the pipeline of opportunities ahead.

on the fourth order commentary, noted off to a strong start. Maybe just if you could provide some color just in terms of where you're seeing improvement. Is it from an environmental perspective, client additions, or just some of the new acquisitions coming up to speed? Hi, Chris.

Yeah, look, I think we're seeing sort of strength across markets. Interestingly, all of our businesses, so we're actually seeing strength in clearing, we're seeing strength in prime, we're seeing strength in agency and execution, we're seeing strength in elements of our market making, and we're seeing actually record levels in our solutions franchise. So it really does have the feel of... All of the parts of the firm are sort of performing well. I mean, I think, you know, when you look at exchange volumes that are up marginally on sort of the prior month, so really it just feels like the momentum that we had as we came out of sort of Q3 has continued into Q4. You know, October was a record month for us. And I think, you know, on the basis of, you know, what we saw in October and what's continued, albeit it's only two days into November, I think we would be, you know, certainly expecting, notwithstanding the fact that we don't know what will happen in the last two months, you know, we would certainly expect on the basis of October to have a record quarter in the fourth quarter.

Thanks for that. And then just for a follow-up question, obviously you're seeing good client additions in a couple of different businesses. Maybe you could talk to the pipeline for clients specifically in clearing and prime in the months ahead.

Joe, let me take the question on clearing and then Paolo's here and he can sort of talk to the opportunities in crime on the client side.

I mean, what we're seeing is really just a continuation of what we've been describing

you know, our ability to bring on board, you know, some of the sort of largest, most sophisticated sort of players. And those have, you know, very long careers. lead times to them. Just in the last couple of weeks, we've brought on board one client that I think we've probably been talking to for almost a year. Very large client and they're just coming on now. The good side of this is you have a very accurate sense of the pipeline and it just feels like the same things that we've been seeing before are playing out, which is, you know, there are a bunch of large players that are looking to diversify their clearing. They're looking for, you know, a firm with the skill set that Marix has, its orientation around client service. And they find, you know, our offering sort of intriguing. And we're just having more and more great conversations with clients. And as we grow out globally and as we add more products, we can solve more of their problems. And we're winning more mandates. What would you add to that?

And just in terms of the prime business, similar to clearing, a very strong pipeline, probably as strong as we've ever seen. And the mix of those clients has also, I would say, sort of improved. So more interest from the sort of larger and more active clients. participants in the market. I mean, certainly, going back to your earlier point about what's driven performance, what's likely to drive performance, and certainly the fact that equity markets have been so buoyant has helped. But I suspect that actually most of the vast majority of our improvement has been driven by the incremental clients that we've brought on.

Thanks, guys.

Thanks, Chris.

Your next question comes from the line of Bamboodish with Barclays.

Your line is... Kieran, maybe my first question, it sounded like at the end of your prepared remarks you mentioned crypto as an emerging opportunity in addition to Prime and other sources of organic growth. Just curious, I think you do a small bit of that currently. Could you maybe just give us a little color on What your exposure is today and how do you think about that opportunity set maybe over the next few years as the regulatory environment is clearly changing in a more constructive way?

Yeah, I mean, I think we're actually... have built a lot of the building blocks that we need to be able to offer clients a pretty comprehensive set of services in the space. So, you know, the focus of our efforts to date has been around sort of clearing gaps crypto futures on exchange and supporting our clients with regard to that. And we've also provided our clients with a series of services around certain sort of settlement capabilities they've been looking for with regard to ETFs that they have launched, and that's been sort of another area where we've participated. You know, we're in a position where we can sort of cross-margin clients with sort of their crypto margin hosting together with sort of, you know, other products. And then within our solutions business, although it's not sort of a big part of what we do, you know, we needed to build up capabilities so as to, you know, sort of custody assets, you know, in part because while it's not a big part of what we do in structured notes, some of the structured notes issuance that we do has returns that are linked to crypto. So the opportunity that we really see for ourselves is essentially fleshing out the range of services that might loosely be termed

looking for you to be able to take on stable coins.

They're looking for you to be able to take stable coins or crypto as collateral. They're looking for you to be able to settle across multiple exchanges on their behalf, just as you would as a prime broker. They're looking for you to potentially be able to provide them with limited amounts of leverage. And I think that we're in the process of sort of building all of that out. And it's a very exciting opportunity. The market is changing. The world feels like it's moving to 24-7 trading, including sort of tokenized versions of treasury or equities. And it feels like a set of opportunities that on the back of our client relationships and the capabilities we have and our sort of skill as an organization that we'll be able to take advantage of.

All right, very helpful. Maybe just one follow-up. Just coming back to the prime side of all the extra disclosures and commentary, quite helpful. Can you just maybe talk a little bit about where the customers have been coming from? I think it's a lot of U.S. business, but have they been sort of cross-sells against the existing customer base? Has this been the result of maybe a business that needed some investment, which you've then done since you acquired that business a few years ago? And then going forward similarly, do you see this as a cross-sell opportunity? Is it organic, net new? How do you think about those bits and pieces in terms of go-to-market?

Yeah, yeah, thanks. Thanks, Ben. I mean, in terms of in terms of the geographic split, you know, the majority of the growth has been in the US. I mean, it's where we have a more mature population. the mix of some new clients versus existing clients that are being offered this service, there's actually been a pretty even split. A lot of our clearing, a lot of the relationships have been introduced by clearing. They're clearing relationships that have been servicing, you know, businesses that have, you know, needs for a broader sort of prime offering. So I would think half of our Half of our new clients have come from that source. The other half are sort of a mix of opportunities and relationships that have sort of been worked on for some time. And for a variety of reasons, we weren't able to offer the full experience. you know, set of services. Some of those are, you know, ETF managers. ETF managers have become, you know, an interesting sort of subsector. But the sort of traditional prime, you know, clients still represent the majority of assets under management. And that's just, you know, the sort of typical range of hedge funds, you know, and family offices, some trading groups, that we can now offer them a much more comprehensive set of products, I think, is the sort of main driver. And then the stability of, you know, our offering versus what they've sort of experienced in the last couple of years, I think, has been very helpful.

Great. Thank you very much.

Thanks, Ben. Your next question comes from the line of Alex Blasting with Goldman Sachs. Your line is now open. Please go ahead.

Hi, good morning. Thank you for the questions.

about connecting to some of the retail brokerage platforms where a lot of the activity obviously originates. So maybe help us kind of think about what you see the addressable market really here for your business and which part you're looking to participate in.

Yeah, well, I mean, I suspect that the opportunities are a little different in the different parts of that ecosystem. So if you're just talking about, you know, for example, you know, event contracts, you know, I think that this is a Yeah, it's an area that is generating quite a lot of interest and excitement. There's a lot of work that's going on with regard to potentially having some of those contracts listed on the actual exchanges, in which case there's sort of a requirement for an exchange clearer. So we're in discussions with some of our clients who are aggregators of retail flow, particularly the ones outside the US, who are interested in being able to offer those types of products to their clients. So just event contracts, either for financial instruments or if it evolves into a series of contracts that are broader than just financial instruments. They would want to be able to offer those, you know, to their clients, and that's the way in which we've chosen to participate, you know, with retail flow. So we are, you know, the clearer for a lot of the retail flow aggregators outside the U.S., and that's a way for us to participate in that.

I mean, in terms of, you know, for example, stablecoins as payment, you know, that, I mean, there may be a retail angle to that, helping them to provide those services. So I, you know, am...

I believe quite strongly that that will sort of take off over the near term and that will represent an opportunity for us. I mean, obviously, coming off stablecoin as a method of payment will be a view that people will want to have stablecoins available as a source of collateral. That creates sort of a set of opportunities, which is how do you convert a stable coin into something that generates interest if it's going to be utilized for the purpose of collateral. Then if you're dealing with that, there are a whole slew of additional prime opportunities. opportunities that I think sort of arise with that. But that is, that at least for us at the moment is much more of a sort of sophisticated financial player opportunity. So the retail stuff feels like it's around event contracts and we will be working with people who clear through you know, through Mareks to get, you know, access to exchange. And these other opportunities, you know, we're likely to pursue with some of our more sophisticated sort of financial counterparts. Did that answer your question, Alex?

Yeah, that makes a lot of sense. Thank you for all that color. Second question, I wanted to just follow up on the point made earlier around liquidity buildup. And you guys obviously issued a little bit of debt early in the year. you continue to, you know, utilize the structured nodes as part of the funding as well. Where are you sort of in building some of the maybe excess capacity? I don't know if that's a good way to frame it, but... ...the business over the next, call it, six to 12 months, or do you see yourself sort of coming back to market seeking incremental liquidity? I don't know if that makes sense, but that's the nature of the question.

Yeah, I mean... I mean, I'm very sensitive to the differentiation between sort of liquidity and capital. I think of capital as equity, so there's sort of a question about equity, and then I think there's a question about liquidity. So I think that where I think we are with regard to liquidity is the following. You know, we want to establish ourselves as a regular issuer in sort of the U.S., so that there's just sort of a broad understanding of our credit and broad acceptance of our name so that we are able to tap into that market if we ever want to. So if there was a big acquisition or whatever, that sort of tapping into a large investment-grade market tool is available to us. And that's a strategic objective that we have. And so, you know, this year we, you know, sort of issued, you know, into the U.S., even though we didn't have a specific need for the cash, we felt that that was something that we wanted to do. And I'm almost certain that we would look to sort of continue that into next year. So establishing a, you know, a debt program in the US, very important to us. And, you know, if you're not issuing sort of $500 million slugs, you really don't have the kind of size that's interesting to invest in.

And so, you know, sort of 25%.

And hopefully you have a sense from sort of the commentary that, you know, we're, pretty excited about sort of the prospects we have next year. And we recognize that as we grow, we want to maintain the firm as sort of super safe from a liquidity perspective. So I think you should expect that we will come to market for debt, notwithstanding the fact that we already have sizable surpluses, mostly because we're comfortable carrying those surpluses and we want to sort of be in the market and a frequent issuer. With regard to equity, We do recognize that as sort of the constraint. There has to be one on the firm, and it's equity. So we have to be very mindful of how we deploy it. We're running quite a bit above sort of the 10% strongly capitalized level on the RAC ratio, and that represents sort of excess that we are carrying, but we're still generating 27% ROE on average. And as we look to deploy in our equity, we really don't want to be dilutive. So we're looking for plus 20% returns when we're talking about acquisitions or internal deployment of that capital. And as we look in our budget process and we look at our opportunities next year, then certainly over sort of six months or longer, we are confident that we can continue to support that growth with the internal capital generation that comes with the level of earnings that we're also delivering.

Awesome. Great. That's very helpful. Thanks, guys.

Your next question comes from the line of Dan Fenn.

Success in adding clients and clearing balances. Just curious if you've seen any change in dealer behavior given the regulatory changes that are softening up for them, or any shift in the competitive backdrop as you think about the prospects of additional market share gains going forward?

I mean, it's sort of interesting.

I mean, this is sort of my perspective on it and then interested in Paolo's perspective as well. I mean, what we see from the banks is much more active involvement in trading and looking for us to help them access market liquidity, which is completely non-competitive activity and actually helps support our business. You know, what we are not seeing is a... sort of different level of competition for sort of clearing, which, again, as we've shared on some of these calls, is not a surprise to us because of sort of the very long lead time associated with clearing mandates, as well as the fact that, you know, you need to make a lot of investments, as well as the fact that, you know, you need to invest in organization and sort of capabilities. So we're not seeing a change with regard to that. And we're not really seeing a change with regard to pricing on structured notes or any of these other products. So at the moment, it does not feel as though the lower capital requirements that are being imposed on banks by this current administration's regulators is affecting our prospects.

I don't know what you... I'd agree with that. We've seen one or two spots disrupted. Our progress with acquiring prime clients, it has a sort of very marginal effect. You can see a little bit of that in the third quarter versus the second quarter, where there was a bit of rate compression, but very much at the margin. Beyond that, I think there's sort of the combination of expertise and the quality of the offerings remains a really important differentiator. And we typically are seeing, whether it's clearing or prime, pretty consistent It is competitive. It's not that we have a completely free field, but no one's sort of competing really on pricing other than, as I say, a little bit of sort of compression on some of the stock lending.

Great. That's helpful. And then just as a follow-up, you talked about an active potential M&A pipeline. I just would like to get a little more context around that. versus prior periods. And as you think the 2026, do you anticipate that being a more active year than what you guys have done so far or will do in 2025?

Yeah, I think, you know, it's all lining up to be a very active 26th. I think, you know, there's still a couple of months left in 25. So we're still hoping to sign at least, you know, a couple of sort of agreements. But 26 is really, you know, is lining up very well. I think, you know, the continued... the continued sort of interest from companies in, you know, joining the Samarix organization and being sort of part of our platform really has driven a lot of some of those, you know, even the competitive processes, you know, we often, you know, start, you know, in a very good position because of the sort of track record of successful M&A. So I think 26 will be, you know, will be a strong year.

Thanks for taking my questions.

Thanks, Dan. Your next question comes from the line of Bill Katz with TD Cowen. Your line is now open. Please go ahead.

Okay. Good morning, everybody. Good afternoon. Thank you so much for taking the question. Ian, just to make a qualifying question first, you mentioned that, obviously, we still have another two months to go, but it could be a record quarter. Is that revenue, volume, earnings, all of the above? I'm just sort of curious of where you – I just want to make sure I understand where the deeper momentum might sit. And I have a bunch of follow-ups. Thank you.

Yeah, I mean, just when I say records, I actually just care about profit. So when I say record quarter, it's a record profit quarter. That said, I mean, I think we'll be on track for a record revenue quarter as well. So it'll be a combination. But really, when I say record, my focus is on profit.

Okay, thank you. Maybe a broader question for you. A lot of my other questions were asked already. Just as we think through tokenization and blockchain technology, could you talk a little bit about maybe the pros that you could see for the business?

Does it unlock any efficiencies for you that could also potentially accelerate the M&A pipeline for you?

the big benefit is that these markets can sort of operate 24-7. And so in one form or another, we think that the way that it's likely to play out is that people will be able to transact not just sort of crypto 24-7, but there'll be tokenized versions of crypto you know, treasuries and equities and a range of other assets. And it's sort of hard for me to see how you do that away from sort of tokenization. So I think that that's clearly going to be an opportunity. And to the extent that there's sort of more activity in the world because people are trading, you know, more days and more hours, I think that's good for our business. I think that there's also sort of a tokenization opportunity around sort of stablecoins and Again, the fact that it's sort of 24-7 and it means that people can make payments over weekends, they can make payments at night, all of those kinds of things, I think will also add to the activity and out of payments in stablecoin will come a whole sort of slew of other services that people will look for with regard to stablecoin. And again, I think that that's additive to our business. In terms of you know, the concern that somehow we move to, you know, sort of tokenization for everything and that that, you know, potentially disrupts sort of clearing and the clearing ecosystem. I must express, you know, some level of sort of skepticism around that. I do think that, you know, the activity is going to sort of continue or a lot of that is going to continue to be cleared on exchange. You know, if we get... sort of our cash sooner rather than later.

That's a good thing rather than a bad thing. You've got to sort of keep track of more and more nodes and at some level that feels like

that should not give you economies of scale, but at some level, diseconomies of scale. So it's conceivable that there are changes to the exchanges and the exchange ecosystem, but we can't anticipate what those are. We don't see those as sort of being real changes What we do see, though, is a series of opportunities. And we believe that we're setting ourselves up to capture those. And we think we have the organizational nimbleness to position ourselves well. And critically important, you know, we have relationships with a series of the most sophisticated players in the space and we're working together with them. And that's an absolutely massive competitive advantage for us as we determine how these things are likely to play out because you're not sort of building things with a view that, at some point in the future somebody might find it useful or interesting you're engaging in things that sophisticated clients are talking to about today that would be very helpful and that they're willing to engage in in science okay if i can maybe squeeze the third one in i apologize for maybe overstaying my welcome but um just another big picture question for you as you sort of think through 2026 and very encouraged by the momentum of the business and the pipeline

It's maybe a two-part. Can you give us an update on just how things are progressing with Winter Flood, Valcourt, just in terms of initial expectations? I've had a little bit more time to work with those platforms a little bit. And then the broader question is, as you look to next year, how do you sort of see the interplay between revenue growth and margin opportunity? I appreciate that. Some of these deals come on at suboptimal margins.

It takes some time to get you there. But how do you sort of see the interplay driving it back?

Arna, which was the Abu Dhabi acquisitions, now Marek's Abu Dhabi, that's sort of on track. It's in line with expectations. I think the Hamilton Court acquisition has outperformed expectations, and they've had also a record month in October. I think we're starting to see some of the benefits of – linking that into our wider client base. And the margins there, you can see that will improve. Margins are somewhere in the sort of high 20s, low 30s. I think that that will sort of improve with revenue growth. as they settle into being part of the bigger platform. Winter floods, I expect, will show a similar pattern. From what we can see, although we don't have all of the details, it looks like they've had a very strong last quarter. Certainly it looks like it's, from a revenue perspective, one of the best courses they've had in the last three years. So we're quite optimistic that that business is actually building up some momentum and will accelerate that. But it will start a relatively low margin. We're not going to be getting a 30% or high 20%. I think from an ROE perspective, it will probably be quite accretive, though. So I'm optimistic about that. Valco is a small business, but where there's more value in the accounts that are opened up, and we're seeing that coming through. But that won't move the needle. That won't move the needle in terms of profit or margin. And generally, I think the trend that we're seeing has been an improvement in market share. from some of the new desks settling in and maturing. And we have had a large number of new desks. And as you've seen, we've become much more active in credit, much more active in FX. So I think you can expect some margin improvement, I think, from the sort of low to mid-teens up into the sort of higher teens. And that will drive the overall group's margin improvement because it's quite large. they're quite large revenue streams.

I mean, just sort of for clarity, we haven't closed winter floods yet, so we're waiting on... you know, approval from the regulators. But obviously, to the point of your question, you know, we are engaged with some of the folks there. And so, you know, we are learning, you know, more about their business. But obviously, that hasn't closed yet. We hope to close, you know, this year. But if that doesn't happen, you know, we would expect it to close, you know, early next year. You know, I think sort of with a sort of general point with regard to 2026, I think that, you know, as we've indicated, we expect that, you know, we're hoping the margins will improve, but we really are not looking to improve margins dramatically because we continue to invest. And we think that that's the right approach. decision to make to position the firm for long-term success. And so while we hope that margins improve, and they should, as a result of some of the things that Paolo was describing and other things that we have going on inside the firm,

to generate returns for us in the future.

And we're confident that that's the right way to sort of operate. So 26 would expect margins to get better, but not dramatically better.

Thank you for taking all the questions this morning.

Thanks, Bill.

Your next question comes from the line of Ben Budish with Barclays. Your line is now open. Please go ahead.

Ben?

Confirming that the line of Ben Burdish from Barclays is now open. Please, Ben, go ahead. It seems like Ben Burdish has disconnected. We'll go to the next question coming from the line of Carlos Gomez-Lopez with HSBC. Your line is now open. Please go ahead.

The first question is about the fact that you are a frequent issuer in the debt market. Have you considered to re-tap the 81 market as well? And what do you think of pricing in that space? Second, in terms of the long-term ROI of the business, when you went public, I think we were completely split at 20%. You are now comfortably around the 27%. I know that you are more focused on margin than ROI, but where do you think you will stabilize?

And you have things that we might do. I don't have a sort of current price of where we think we would be able to bring a 81.

I don't know, Paolo, if you have. We stay close to all of these issuances and processes. Prices are interesting. We don't need to issue at the moment. And we have a maturity in 2027, so we have a little bit of time before we have to make that decision. But we're certainly close to that market.

And then with regard to ROE, You know, I believe that we can continue to operate, you know, in and around. So the current levels of ROEs are somewhere between 25 and 30. I mean, as you say, we don't manage to it. So, you know, I'm comfortable, for example, that, you know, we're carrying, you know, some amount of excess equity, which is, I think, desirable and creates optionality for us. I mean, we could be driving up our ROE if we, you know, reduce the level of equity. But I think that... You know, equity represents – it's sort of critical to sort of support the growth of the firm, and so I think we're sort of happy to do that. But, you know, given the mix of what we do, which is essentially supporting flow rather than holding any positions, you know, that's an inherently high ROE activity, and – My hope and expectation is that we'll continue to operate in that 25% to 30% range.

That's very clear. And if I can follow up, and I'm sorry to ask this, but can you give us an update? We need to be updated. Thank you.

Yeah, I mean, I think that, I mean, one of the things that sort of happens with a short seller report is there are, you know, these class action lawsuits that sort of follow inevitably, you know, with those. You know, our lawyers in New York are extremely confident that, you know, that they will be able to get that dismissed because it's sort of groundless. You know, the costs associated with it are not... significant. And so it feels at least at this point more of a sort of distraction and sort of a nuisance more than anything else. And so I wouldn't draw much from it. It's just a natural consequence. The same law firm sort of follows all of these sort of short reports and sort of files these These class action lawsuits, obviously, you know, we don't know exactly how that plays out, but at least based on the advice that we've received so far, you know, it doesn't feel like it's sort of consequential.

Very clear. Thank you so much. All right. Thanks a lot.

All right. Well, thanks, everybody. Thanks for joining us. Thanks for all the questions. We look forward to continuing the conversation with the analysts and with investors over the next period. We're really, as you've hopefully got a sense of from... you know, from the answers to the questions, you know, sort of excited about our prospects, both in terms of sort of newer opportunities as our markets evolve, as well as the sort of standard opportunities that come from sort of share gains in our products. And so we're excited about and enthusiastic about where we think we'll end the year. And then, you know, our opportunity set in 26. So thanks for joining us.