Crypto ‘now a real asset class’ as LMAX sees volume double

Volatility stemming from the outbreak of coronavirus has contributed to an earnings increase at LMAX Group, an operator of foreign exchange and cryptocurrency trading venues.

The group’s earnings before interest, taxes, depreciation, and amortisation rose 13% to $13.5m in the first six months of the year, while gross profits grew to $28.9m for the six months to 30 June, up 10% from the same period the previous year.

David Mercer, LMAX’s chief executive, told Financial News that March was an “exceptional” month for the group.

“If you’re an exchange business, volatility helps… If you can’t print tickets when the market’s moving, you never will,” he said.

Financial markets experienced a period of pronounced fluctuation at the start of the Covid-19 crisis in Europe. The outbreak of the virus also sent the price of cryptocurrencies into freefall. The value of bitcoin, the original cryptocurrency, halved overnight in mid-March – but has since recovered to roughly the same price it was at pre-crisis.

Mercer said LMAX reaped the benefits of the volatility in crypto markets. The total value of cryptocurrencies traded through LMAX Digital, its crypto arm, more than doubled in the first half of 2020 – reaching a total of $36bn, and up 106% from the same period last year.

“It’s just a proof of concept that this is now a real asset class. Every month we on-board another six to 10 institutional players,” said Mercer.

But FX markets remain by far LMAX’s largest source of revenue. The company saw FX trading volumes of $2.3tn in the first six months of 2020, an increase of 33% from the same period in 2019. The company’s exchange in New York, which it launched roughly four years ago, notched a 165% increase in trading volumes compared with the first half of 2019.

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FN recently revealed that LMAX had launched a weekend trading service for foreign exchange. Mercer said it was too early to gauge the success of the new service, but added that he is certain there will be a seven-day foreign exchange market in the next decade.

“It’s just a matter of time before that becomes de rigueur in the market,” he added.

Europe’s major exchange operators are currently consulting on whether or not to shorten trading hours to promote staff wellbeing. The proposals seemed to be gaining momentum until The Federation of European Securities Exchanges said in a statement on 1 July that shortening the trading day “would be a move in the wrong direction and detrimental to European markets”.

“That’s an equities debate. All of us die-hard fixed income and foreign exchange people have always worked longer hours than the equities guys,” Mercer said of the proposals.

“My belief is that if you look forward a decade or two it will be the norm to rebalance your portfolio to trade your investment to manage your risk 24 hours a day, seven days a week.”

To contact the author of this story with feedback or news, email Ryan Weeks