In periods of uncertainty, investors alter their portfolios more often, and this increase in trading volume has helped London Stock Exchange Group (LSEG) increase its full-year guidance.
Higher interest rates have increased trading activity in the bond market, and as a result LSEG’s fixed income and derivatives revenue rose by 14.4 per cent. This was driven by strong trading activity on its Tradeweb service, where daily average volume increased by 22 per cent year on year to $3.2tn (£2.4tn).
In total, including equities, the markets business grew by 12.5 per cent as customers looked to access liquidity and manage risk.
Trading activity is inherently cyclical and the company needs a stable base. This is why LSEG’s subscription businesses – data and analytics, FTSE Russell and risk intelligence – which make up almost two-thirds of the business and grew by 6.6 per cent year on year in the quarter, are so important.
It is expanding its data business with the $3.5bn acquisition of Octus, a New York-based private credit markets intelligence provider. LSEG already has a strong offering on public bond market data, and this deal will expand its provision to all types of debt.
For the group, organic revenue increased by 8.8 per cent, and this strong performance has led management to upgrade its full-year sales expectations, with it now guiding for “at least” an 8 per cent increase in revenue and a 100 to 120 basis point expansion in cash profit (Ebitda) margin.
LSEG’s shares are flat over the past year, and its continued earnings growth means its forward price/earnings ratio has fallen to a manageable 18. Trading might be volatile, but its growing data analytics business will provide security when the downturn comes.