Industry Updates

Flow Traders sees lowest ETP trading volumes since 2021

ETP trading volumes fell 32% year on year for April and May

Theo Andrew

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Flow Traders is bracing for a “significant” hit to its net trading income for the first half of 2023 as exchange-traded product (ETP) trading volumes hit their lowest point in almost two years.

According to a preview of Flow Traders half year results, net normalised trading income for the second quarter of 2023 is €49m, compared to €232.1m in the first six months of 2022, as it blamed a “cyclical correction” and the US debt ceiling crisis for keeping investors on the sidelines.

ETP trading volumes for April and May this year declined by 32% on the 12 months previous, coming in at €2.9trn and €3.4trn, respectively.

The figures were the lowest monthly recorded since August 2020 and 2021, both seasonally slow summer months.

It added overall ETP trading volumes fell faster than general fixed income and equity trading, which both declined roughly 30% year on year in Q2.

Eric Pan, investor relations manager at Flow Traders, said: “Trading volumes around the world across almost all asset classes declined significantly in the quarter while the decline in volatility translated to fewer dislocations in the market.

“Both have a direct negative impact on our business given our role as a market maker providing liquidity to these exchanges and platforms.”

Furthermore, net inflows into European-domiciled ETFs in May declined 46% compared to April, according to Vanguard.

“This is significant as ETP creation and redemption remain the core of our business,” Pan added.

Cryptocurrency ETP volumes were also hit this year, with the average daily volume declining from €100m in 2021 to €20m so far this year, with the industry still reeling from the FTX collapse last November.

Commenting on the business impact of declining volumes, Pan said: “The significant decline in market volumes year on year across various exchanges, trading platforms and asset classes around the world has a direct impact on our net trading income versus the same period a year ago.

“In particular, as the majority of our business comes from the European ETP market, the decline has a greater impact on our net trading income than what the overall or average market volume would suggest.”

The group is expected to publish its full half-year results on 28 July.

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