Japan Exchange Group reports Q1 FY2016 earnings, quarterly net income drops 11%


Highlights and FY2016 forecast:

Revenues, particularly those from trading services, declined mainly due to a YoY decrease in cash equity trading value. Combined with an increase in depreciation cost accompanying the launch of new trading systems, quarterly net income fell 11.0% from last year.

Operating Revenue:

Information services revenue grew mainly due to an increase in market data fees and index licensing revenue related to TOPIX and JPX-Nikkei 400.
Other revenues also increased due to, among others, an increase in co-location and network (arrownet) usage fees.

Japan Exchange Q1 2016

Operating Expences:

Depreciation and amortization increased mainly due to accelerated depreciation for the old J-GATE derivatives trading system and depreciation for the arrowhead cash equity trading system, which was launched in September 2015.

Market Trend:

Cash equity trading value for April reached on average JPY 3.3 trillion per day, exceeding the JPY 3.1 trillion assumption in the earnings forecast. However, in May, uncertainty in the global economic outlook pulled trading value below JPY 3 trillion for the first time in 20 months. With the offset from April activity, daily trading in the first quarter of FY2016 was around JPY 3 trillion.

Average daily trading volumes of derivatives grew alongside greater volatility in the cash equity market, with TOPIX futures growing 4%, Nikkei 225 futures up 4%, and Nikkei 225 options rising 19% YoY.

Japan Exchange daily trading volume

Cash Equities:

ETF/ETN and REIT trading values grew, with daily activity expanding from about 8% last year to 11% of the overall cash equity market.

The number of IPOs on TSE fell slightly to 18 from 21 last year.

Derivatives:

Trading volume in the night session was around 33% of overall trading, almost the same ratio compared to the previous year.

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Japan Exchange Group reports Q1 FY2016 earnings, quarterly net income drops 11%

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