Good afternoon, ladies and gentlemen, and welcome to the Deutsche Börse AG analyst and investor conference call regarding Q1 2018 results. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Let me now turn the floor over to Mr. Jan Strecker.
Welcome, ladies and gentlemen, thank you for joining us today to go through our first quarter 2018 results. With me are Theodor Weimer, CEO, and Gregor Pottmeyer, CFO. Theodor and Gregor will take you through the presentation. After the presentation, we will be happy to answer your questions. The presentation materials for today's call have been sent out via email and can also be downloaded from the investor relations section of our website. As usual, this conference call will be recorded and is available for replay. Let me now hand over to you, Theodor.
Thank you, Jan. Welcome everybody, ladies and gentlemen. Today's focus is, of course, as announced on the first quarter results, were actually pretty good. I would like to take the opportunity, given we had to do an ad hoc yesterday evening on the roadmap, what we call Roadmap 2020, which are the strategic cornerstones of the next three years until end of 2020. I would like to take the opportunity to lead you through the key pillars of the strategy. Again, we should focus today on the first quarter results, and on May 30, when we do our capital markets day, you've got the opportunity to listen to us and to raise questions on this topic on a very special event. Our Roadmap 2020 has three main pillars. The first pillar is the improved and accelerated implementation of the existing secular and cyclical growth opportunities.
The secular growth opportunities are mainly based on industry trends, political developments, and new client needs. Amongst them are the expected shifts from the OTC to on exchange and the growing importance of the buy side. The most important initiatives are the generational opportunity to grow our OTC clearing offering, the further expansion of our commodities and the FX business, and improvement of our fund market through our IFS services, as well as further growth of our STOXX business, which is our index business. The second pillar is external growth with a programmatic approach. In an industry of scale such as ours, only a combination of both organic growth and external growth yields best results. With a more focused and disciplined approach, as well as better M&A processes, we would like to improve our track record significantly.
Our main goal for external growth is the expansion of selected existing assets in five areas. First, fixed income. Second, commodities. Third, FX. Four, investment fund services. Last but not least, as well as our data and index offering. On Monday, we already took a small step in this direction by announcing the full acquisition of Swisscanto Funds Centre Ltd. for a higher double-digit million EUR amount. This acquisition will complement our Clearstream fund services by distribution, contract management, fee management, and data provision services, which we then can also distribute to our existing clients. The third pillar of our Roadmap 2020 consists of higher investments in technology to tap into revenue opportunities and further increase the efficiency.
The four focus areas will be blockchain and distributed ledger technology, big data and advanced analytics, improvement in economies of scale through the use of software cloud, as well as robotics and artificial intelligence. We are already covering all areas with our existing initiatives, but in order to make progress, we need to step up investments by a reasonable amount. We will fully finance the additional investment needs for the accelerated implementation of the growth opportunities and the development of new technologies through the reduction of structural cost. Therefore, we are planning to reduce our annual operation cost until the end of 2020 by around EUR 100 million. For this, we expect one-off cost of around EUR 200 million, which will mainly occur in 2018. Altogether, we are now aiming at an organic increase of net revenue from secular growth opportunities of at least 5% per year until 2020.
Furthermore, we expect higher market volatility in the long term and, as a consequence, positive cyclical effects on net revenues every year in our planning period. Because of the scalability of our business model and an efficient management of our operating cost, we expect net profit to grow by an average of around 10%-15% annually until 2020. To be very clear, we think we can grow, and we can manage the secular growth. On the cyclical side, we are more dependent on the market. We think we expect we have a certain tailwind. We are still refining and defining some of the elements of the roadmap, so I ask you for your understanding that we cannot answer all your questions today. We want to keep something open for May 13. Having said so, we'll have more time for that at Investor Day.
Looking forward to see you on May 30th in London. With this, I move and hand over to Gregor again.
Okay. I would like to start with the key points regarding the first quarter results on page two. As announced during the full year 2017 earnings call in February, we have introduced a new system of financial segment reporting. Instead of previously four segments, we are now reporting nine segments. This improves transparency regarding net revenue and profit contribution of our key Roadmap 2020 initiatives. It also helps to further increase accountability within our organization. In the first quarter, secular net revenue increased by 7%. This is slightly above our guidance of at least 5% secular growth. In addition, the cyclically influenced net revenue benefited from stronger market volatility and higher U.S. rates, and therefore grew by 4%. I think we all agree that the first quarter saw a significant improvement of cyclicality compared to last year. Nevertheless, secular net revenue performance was better than cyclical performance.
This is also what we would expect in terms of the average development until 2020. Main contributors to secular growth in the first quarter were Eurex, including new products and our fast-growing OTC clearing activities. Our commodity business, EEX, the index business of STOXX, Clearstream, and investment fund services. Index derivatives and the net interest income from the banking business on the other hand, benefited from cyclical growth. As a result, total net revenue increased by 11%. At the same time, adjusted operating costs rose by 4%, which was mainly driven by additions to provisions for variable and share-based compensation in light of the business and share price development. On that basis, adjusted net profit grew by 17%. This excellent result demonstrates the scalability of our business model. Now I come to page three to show you the group financials. Net revenue increased by 11% to EUR 692 million.
As part of net revenue, the net interest income across the group rose significantly to EUR 41 million. Operating costs, adjusted for exceptional items, were up 4% as a result of higher variable and share-based compensation consolidation effects. Inflationary pressure were largely mitigated by efficiency gains. Exceptional items totaled to EUR 21 million, which among others included restructuring charges, M&A integration costs, and legal expenses. The adjusted EBITDA increased by 15% to EUR 438 million. The adjusted net profit improved by 17% to EUR 271 million, and the adjusted EPS amounted to EUR 1.45. I am now turning to the quarterly results of the new financial reporting segments, starting with Eurex on page four. Eurex now comprises our financial derivatives trading and clearing activities, including the OTC clearing offering.
Eurex development was mainly driven by a cyclical rise in equity market volatility, which resulted in double-digit growth of index and equity derivatives net revenue. We also achieved good secular growth in the first quarter. For instance, by more than doubling the OTC clearing net revenue and by a higher contribution of net revenue with new products. In total, net revenue in the Eurex segment stood at EUR 237 million, which an increase of 10%. The adjusted EBITDA amounted to EUR 166 million and the EBITDA margin stood at 70%. Our commodities business, EEX, was driven by favorable development in power spot markets as well as in gas markets, mainly relating to market share gains. In power derivatives, the consolidation of Nord Pool resulted in an increase of net revenue against the previous year. Underlying power derivatives in Europe saw a small volume decline.
However, it is encouraging to see that the market share has returned almost to the level of the previous year. The temporary effects relating to the price zone change have therefore almost entirely faded. In total, net revenue in the EEX segment stood at EUR 62 million, which an increase of 15%. Adjusted EBITDA amounted to EUR 30 million and the EBITDA margin stood at 48%. In the FX business 360T, average daily volumes grew by around 7% against the previous year. This was mainly driven by the continued process of buy-side client onboarding. In total, net revenue in the 360T segment stood at EUR 18 million, which is an increase of 7% as well. Adjusted EBITDA amounted to EUR 8 million and the EBITDA margin stood at 45%.
In our cash market, Xetra, order book turnover rose strongly by 33%. In addition to higher market volatility, we saw an increase of our market share from 64% to 68% compared to previous year. This is now the second consecutive year with market share gains. On the one hand, we attribute this to the more profit-oriented approach of our peers. On the other hand, this is a consequence of our improvement in technology with the introduction of the T7 system for our cash market. In total, net revenue in the Xetra segment stood at EUR 62 million, which is an increase of 16% over the same period last year. The adjusted EBITDA amounted to EUR 39 million and the EBITDA margin stood at 64%. At Clearstream, the custody net revenue increased slightly to EUR 95 million.
The settlement revenue declined to EUR 21 million because of the discontinuation of domestic settlement charges due to our participation in Target2-Securities starting in February last year. This was largely compensated through fees from new reporting service in the other line item. Despite a decline of the cash balances, net interest income improved significantly due to higher U.S. rates and a further increase in U.S. dollar cash balances. In total, net revenue in the Clearstream segment stood at EUR 179 million, which is an increase of 9%. The adjusted EBITDA amounted to EUR 116 million and the EBITDA margin stood at 65%. In the Investment Fund Services segment, both assets under custody and settlement transactions rose by double digits. The main driver was the growing number of mutual and hedge funds on the platform. In total, net revenue in the IFS segment stood at EUR 39 million, which is an increase of 12%.
The adjusted EBITDA amounted to EUR 19 million and the EBITDA margin stood at 48%. Repo outstanding in the Global Securities Financing business continued to be negatively affected by central bank monetary policy, which reduced the need for secured money transactions. In the first quarter, outstandings in securities lending also decreased slightly because of reduced lending demand at the beginning of the year. Therefore, net revenue in the GSF segment stood at EUR 19 million, which is equivalent to a decrease of 9%. The adjusted EBITDA amounted to EUR 10 million and the EBITDA margin stood at 52%. In the index business at STOXX, on the one hand, was driven by a cyclical growth of the number of exchange licenses sold primarily to Eurex. On the other hand, we saw continued secular increase of assets under management in ETFs.
Together, these trends boosted net revenue in the STOXX segment by 35% and made them reach EUR 34 million. Adjusted EBITDA amounted to EUR 23 million and the EBITDA margin stood at 69%. The primary driver of the data segment was an improvement of net revenue from regulatory reporting services. Most of those services address new MiFID requirements. We expect continued growth in this area. In total, net revenue in the data segment stood at EUR 43 million, which is an increase of 6%. Adjusted EBITDA reached EUR 27 million and the EBITDA margin stood at 63%. This brings me to our explanation of the year-over-year changes in net revenue and operating costs on page 13 and 14. With our secular initiatives, we generated around 7% net revenue growth across the group in the first quarter. This was slightly above our guidance of at least 5% secular net revenue growth for the full year.
The main contributors were Eurex, including OTC clearing and new products, the commodity business, the index business, Clearstream, and the cash market with the structural market share gains I've already mentioned. In addition, a more favorable cyclical environment, especially in the equity market and a further increase in U.S. rates were driving around 4% growth of net revenue in cyclical areas. Operating costs in the first quarter increased by around 4%. Excluding the consolidation of Nodal in May last year, operating costs were up around 3%. The main reason for the cost increase was higher variable and share-based compensation due to the strong business performance and the rising share price. Inflationary pressures were largely compensated by efficiency gains out of the continuous cost improvement process and delayering. With that, we ensured the full scalability of the business model and delivered earnings growth, outreaching our revenue gains.
Before we start with the Q&A session, I would like to briefly make you aware of the upcoming Deutsche Börse events. Our annual general shareholder meeting will take place on May 16th in Frankfurt. The agenda consists mainly of housekeeping items. We would very much appreciate it if you could all cast your vote through the established channels. If you have any questions, please do not hesitate to contact our IR team. As Theodor has already mentioned, we will hold our annual Investor Day on May 30 in London. The day will be hosted by Theodor and myself, and we will present our strategy and the Roadmap 2020 in more detail. The representatives of the different business segments will then present their areas of responsibility. The presentations will be followed by a question and answer session and lunch. If you have not registered yet, please do contact us.
This concludes our presentation. We are now looking forward to your questions.
Ladies and gentlemen, if you would like to ask a question, please press nine and star on your telephone keypad. We kindly ask all participants to limit their questions to one per person. Please press nine, star to state your question. The first question comes from Benjamin Goy.
Yes. Hi, good afternoon. Thanks for the new segment reporting. Now with more transparency on your nine segments. Just wondering on the businesses that have a below group EBITDA margin. These include actually a number of secular growth opportunities, namely EEX, 360T and IFS. Where you are most confident that you can reach or is it even possible to reach the group EBITDA margin in this business and over what time frame? Thank you.
Thanks, Benjamin, for the question. I think we are confident to increase our EBITDA margin in all of the three business, because specifically in EEX and 360T, we will benefit from the general trend from OTC to on exchange. We are quite advanced here already at EEX, where we have a market share on exchange on our platforms of even more than 30%, We expect that to continuously increase, That will also help to increase our revenues and also our margin. The same for 360T. We will finalize our technology and our processes for offering central limit order book functionality, clearing solutions, that we can start that kind of business in the second half year of 2018.
Here we do not expect a jump start, but we expect over the next three years that we will continue to improve our performance here, increase revenue and also our margin. Investment Fund Services, it's a great business. It's already today double-digit increase in net revenues. We have a strong customer pipeline. You have seen our recent acquisition around Swisscanto that will further strengthen our business. We have good opportunity to increase our efficiency, specifically in the hedge fund business. We are also quite confident that Investment Fund Services will be also able to increase margins over the next years.
Thanks for the comprehensive answer. Maybe one short follow-up on EEX. You mentioned more than 30% market share. Again, do you think there is a target market share or what's your feel on the need for bespoke products/OTC in this area here?
Yeah. We will see what does the market needs, but our expectation is that it won't end at that 30%. Whether it's 50% or 60%, we do not know. It depends on the market needs. In general, we think that we can provide good services on a standardized basis for our customers here, so that we have still good opportunities to further grow on our market share.
Thank you.
The next question comes from Arnaud Giblat from Exane.
Hi. I've got a question and a quick follow-up. Firstly, on Target2-Securities. The regulation's been in place for a few quarters with everybody live now, yet we've seen very little cross-border settlement in play. Why do you think that is, and when do you think that market share in CSDs could start shifting? My follow-up, sorry if I missed it, is on the cost cutting. You indicated EUR 100 million of gross cost cutting, which will partially be offset by investments. What is your guidance in terms of net cost growth we should be looking for over the next 2 years? Is the shape of the net cost growth still tied to how revenue growth shapes up as it used to be?
Arnaud. The first question, Target2-Securities. Maybe you have seen our announcement that in April we went live now with 5 new markets. We went live with the market in France, in Italy, in Belgium, in Netherlands and in Luxembourg. That is now the good start for us too, and we are the only one who really offers now cross-border opportunities into settlement process. We expect that over time we are able to gain additional market share. As you know, we own 40% of the euro liquidity in the Target2-Securities world. Our competitor owns 20%-25%. We are talking about the remaining 30%-35%. We do not expect a jump start here. It will take some time, but we are convinced that over the next 3 years, we will get additional market share, specifically in these markets.
Second question with regard to our cost cutting of EUR 100 million. Just to repeat and to make it clear again. We want to reduce our business as usual cost structurally so that we have more financial flexibility to invest in new growth areas and to invest in new technologies. It's a shift of costs. In principle, we won't give precise cost guidance. The cost guidance we give you is with regard to the scalability of our business model. To say it again, if revenue increased by 10%, then operating expenses can increase up to 5%. If revenues increase by 5%, then costs will be flattish. That's basically our guidance and our commitment from a management team perspective, that we do here a proactive cost management.
I think with the announcement of this structural cost-saving program, what's definitely new, what we did not over the last year, we get even additional financial flexibility.
Thank you.
The next question comes from Owen Jones from Citigroup.
Hi. Good afternoon. Thank you. I had a question on the Eurex segment. With the OTC clearing now being reported as part of Eurex, I was just curious, given the nature of the sharing arrangement and the incentive scheme that you put in place, how should we think about the underlying margin at Eurex, particularly within quarters such as the first quarter, where you have fairly significant increases in trading? What is the diluted impact of the OTC arrangement, given it is an EBIT sharing arrangement? How should we think about the underlying margin? At what point do you think the initiative would stop being so dilutive?
Okay. Maybe you have seen, our very successful numbers here. In March, we had EUR 80 billion ADV on the EUR clearing-denominated interest rates for business. We exceeded by far the threshold what we defined when our program is successful, of EUR 35 billion. Very successful. This more than EUR 80 billion translate in a market share of roughly 8%. We said our general target is 25%, that would translate in additional net revenues in 2020 of EUR 70 million. For this year, we expect some net revenues of EUR 20 million-EUR 25 million, and with more than EUR 5 million in the first quarter, we are perfectly on track. That is very positive. Your specific question with regards, when is it dilutive with regard to the sharing arrangements? At no point of time dilutive.
The more we do, the better it is. We have a certain threshold to cover our costs. On top, there's a proportional sharing of additional revenues with our clients.
What's the reason for? I guess the other way to think about it is what's the reason for the flat margin quarter-on-quarter given the performance of the segment?
What do you mean with flat margin? For the Eurex business in general, or?
Yes, sorry. The 70% EBITDA margin that you reported Q1 2018 was the same as last year. Just thinking, given the nature of the cyclical revenue and the cyclical uptick in trading, I would have thought that you would have been able to capture more of that activity as a margin benefit.
Yes. Part of that is also some investments we still do in that kind of business. That is one of the reasons. Then you have, between the products, some mix in our products. What is depending on the margin we have in the different products, more or less favorable. The product mix is also important dimension.
The reason we've mentioned for group cost development obviously also apply to the Eurex segment. The amount of variable and share-based compensation, for instance, has also gone up in the Eurex segment.
Allow me to add, as a CEO, we are operating here with a 70% margin, which shows the scalability per se. Of course, you could argue at the end of the day, we need to get up to 100% EBITDA margin, which is not feasible. We are already out maxed with 70%, to be very frank here.
Okay. Thank you very much.
The next question here is Anil Sharma from Morgan Stanley. Please go ahead.
Oh, hello. Just a couple questions, please. Just on the index business, the STOXX business, I just wanted to check, because I think in the last couple of quarters, you've talked about repricing activity in that segment. I just wanted to check, is that done now and in the run rate, or is there still a bit more to come? On the OTC clearing, I believe the revenue number includes net interest income. Could you try and give us a sense as to how much of that revenue is net interest income? What yield are you earning on that? Are you making a spread, or are you making sort of an absolute return, depending on the rate curve? If you could just help us think about that. Final one, if I could be so cheeky.
Just in terms of your EBITDA margins 70% that you're talking about there, what's the risk that the investment banks and the clients just push back now and start saying, well, the profitability here is too high, and they want to pay lower fees? Thank you.
Yeah. Your first question with regard to the repricing index of STOXX, that's now part of the run rate. Overall, it was a double-digit million EUR a mount in that index business, but that's now included in the run rate here. With regard to the NII at Eurex, overall we have currently EUR 25 billion customer cash balances, and so far we get some 10 basis points out of that. We increased our pricing with April 1st by another 10 basis points. That translate in another EUR 20, EUR 25 million. That's the sensitivity and also the impact of our pricing measure April 1st, 2018. With regard to the EBITDA margin and risk of pushback of customers, yes, you're right. That's also the reason why Theodor just mentioned that topic of 70% margin.
That is for Eurex and our index business, I think a very good matching. We have to formally conclude our bet when we talk about potential pricing measures.
To be also very clear from my side, ladies and gentlemen, it's very clear we have now reached a level of EBITDA, which shows that our model is scalable. On the other side, we need to focus on growth, and we will show during the Capital Markets Day, that we want to grow. We will show you where we want to grow, even if it's going to cost a bit of the EBITDA margins. Growth is at least as important as EBITDA.
Okay. That's helpful. Thank you. Just to confirm, you're saying there's still another EUR 25 million of revenues to come through in the OTC from NII alone on an annual basis, is that right?
Yes, that's correct.
Okay. All right. Thank you.
The next question comes from Philip Middleton from Merrill Lynch. Please go ahead. Mr. Middleton, your line is open now.
Thanks. That's really helpful. Could you talk a little bit more about 360T, please? Up till now you've talked about other product enhancements as well as offering central limit order book trading. Are you now simply focusing on central limit order book trading there in the medium term, or do you intend to broaden out the product set too?
No, we are really focused on getting something out of the OTC market. The OTC market is still 90%, and so 10% is traded on MTS, and 90% is OTC. Specifically with this clearing solution, we can offer a better risk management solution for our customers. We expect over the next years to get additional market shares, and we are able to move business from OTC to on exchange. Clearing is here really key as we learned that in the interest rate swap, as we learned that in the commodities area, and it won't be different on the FX side.
Okay. Thank you.
The next question comes from Michael Werner, from UBS. Please go ahead.
Thank you. I've got two questions, if you don't mind. One on the data segment. We saw revenues up 6% year-over-year, yet we saw the EBITDA margin fall by about 600 basis points. I was just wondering if the rise in cost in that division is tied to the investments in terms of the MiFID II related services that you're offering, or is that cost increase going to be prolonged over the next couple of quarters, if not years? Second on M&A, if you could just remind me what the dry powder for Deutsche Börse is in terms of the net debt/cash position, as well, the current buyback of EUR 400 million, how much of that has been executed to date? Thank you.
Okay. With regard to the data business, yes, it's right, EBITDA margin is reduced, the reason for that are additional costs out of building up our regulatory reporting hub. That is investment driven and also in the first quarter and maybe also still in the second quarter as we have to stabilize all the processes. There was a huge demand from our customers, that's a good thing. From an operational perspective, we still have to invest here, and to make sure that we can offer the quality what our customers expect. There will be additional costs for the full year 2018, I would expect that we won't have the same level within the next year. I expect that these additional costs will disappear in 2019 and 2020.
With regard to our dry powder, we have roughly EUR 1 billion as available cash. This will be obviously reviewed when we do our dividend distribution of around EUR 450 million. This will be also used by a EUR 200 million share buyback, what we will do until end of the year. Every month, obviously, we get some roughly EUR 50 million additional cash as we generate cash out of our operational businesses. With regard to the buyback, the first EUR 200 million are finalized end of March 2018. Until year end 2018, we will do another EUR 200 million.
Thank you very much.
The next question here is Johannes Thurnher from HSBC. Please go ahead.
Good afternoon, everybody. Johannes Thurnher, HSBC. Two questions from my side. First of all, regarding your restatement. The STOXX revenues which you have presented for Q1 2017 and 2018 look different to the indicative new segment reporting you sent out before. What has been driving those changes? Secondly, could you also probably send out a restatement for 2016 as other German corporates do if they restate, so we have a little more track record or time period from what you did? Secondly, regarding your restructuring costs, we have a multiple of two times for your restructuring costs despite the increase in headcount. What is driving, or the planned increase in headcount, these high restructuring costs? Are you killing any systems or what is for this high multiple? Just some more details, please.
Yeah. With regard to the second question. We plan to do structural cost improvements of EUR 100 million. For doing that, we need EUR 200 million for that kind of restructuring. So far, we have a certain view what we want to achieve, but the detailed measures are so far not finalized. Therefore, we still have to work now and to do the details. We will cover all cost categories. We look at our personnel costs, we will look on our IT operating costs, we will look on IT consulting, and we also cover all the potential cost levers. We still have to work on that topic to come up with a detailed plan. Our basic assumption is that we need roughly two times for restructuring costs and the majority of that will go for personnel costs. The first question?
Yeah, with regards to the new segment structure, you are right that a few numbers differ from what we sent out four weeks ago, and that is because of decisions that were taken as part of the closing process. We have changed a few details, and we are planning to provide you with a history also going back to 2016, roundabout at the time of the investor day.
Okay. Thank you.
The next question comes from Roland Fendler from Oddo BHF. Please go ahead.
Yes, thanks. Good afternoon. Two questions from my side. Coming back to the index business, could you speak about the competitive situation there, maybe also about alternative index providers? Are they increasing the competition landscape out there? Any information on this would be very helpful. Second question, looking at your business set up, are there any business units you could think of disposing in the future or reorganizing this in any way? Thank you.
Yeah. Starting with the second part. Yes, we are constantly considering our portfolio, and if we identify business and do not perform as they are promised and do not have the margins we expect, then we also consider that to stop or even to sell some kind of businesses. On the first hand, I would not expect something spectacular on that side. It would be smaller adjustments that we are able to reconsider that. With regard to the index business and the competitive situation here. Far we see a general trend to passive investments, and there's a strong need. That's a clear trend we see on our side, but we see a comparable development on the other index providers.
When we look at the numbers, then we are at least as good and in most cases, we are even better performing when you compare the assets under management from EURO STOXX perspective specifically in Europe. That's a general trend what will continue here.
Okay, thank you.
The next question comes from Martin Price from Credit Suisse.
Good afternoon. If I think back a couple of years, I guess one of the opportunities you were most excited about was collateral management and the global liquidity hub. I was just wondering if you could provide us with some more detail on how that's going, whether it's contributing much to structural growth at Clearstream, as it's, I guess, just not something you split out, so it's a little bit difficult to know what's going on there. Thank you.
Martin, you're absolutely right. Collateral management is currently under pressure, the main reason is a cyclical reason due to the central monetary policy. If you're basically flooded with money from the central banks, then there is less need to have efficient use of your collaterals. We expect that will immediately change when there is some discussion with the ECB and changing the central monetary policy. In general, we also think there is a demand for high-quality liquid assets. Therefore, there's a constant demand for what will also not disappear. The main driver for that business is basically the ECB monetary policy, and we will see nice increase here if that changes.
That is it. Thanks, Gregor.
Next question comes from Chris Turner from Berenberg.
Yes. Good afternoon. Thank you. You saw good revenue growth in your FX business, 360T, in the first quarter, but we also saw a large new entrant into that market with CME acquiring one of the largest spot FX platforms. How do you see that changing and shaping the competitive dynamics there? Is that an opportunity or a threat to 360T? Also, secondly, if I can turn over to the efficiency savings. A key part of that, or key aim of that, is to increase the financial flexibility of Deutsche Börse. From the outside looking in, I guess your main constraint financially is this holding company leverage constraint, the 1.5 times gross debt to EBITDA. Is that something that you have looked at, that you've considered? That's it. Thanks.
Okay. Obviously, we strongly consider what our competitors are doing. It's not completely unsurprised that CME has approached now on NEX. In general, with regard to our M&A strategy, we are very much open. Theodor, in his statement, already mentioned it very clearly. We have five segments where we also want to do M&A, and FX is definitely part of it. So far, with roughly EUR 70 million net revenues, we are too small in that business. Therefore, we are interested in doing M&A here to make our FX business more scalable and bigger. With regard to efficiency or financial flexibility around the 1.5 times gross debt to EBITDA number, yes, obviously, if we are able to increase our EBITDA and our cash earnings, obviously we increase our financial flexibility.
The cost debt EBITDA is currently at a level of 1.1 in the first quarter. That's clearly below the 1.5. Yes, it's obviously true and right that this helps us. That's a positive impact that we are also able to increase our financial flexibility. If we increase our efficiency, that will also help to increase our financial flexibility, and that's part of the overall strategy.
Very clear. Thank you.
The last question here for now is Gurjit Kambo from J.P. Morgan. Please go ahead.
Hi. Good afternoon, everybody. It's Gurjit, J.P. Morgan. Just one question. In terms of MiFID II, are there any businesses that you think perhaps have temporarily benefited or been disadvantaged by the implementation of MiFID II, and have you seen that perhaps in client behavior?
Yes, obviously there are many positive impacts for Deutsche Börse out of MiFID II. Just in my earlier answer, so I refer to the regulatory reporting hub, so there's an increased need for transparency, and that obviously helps Deutsche Börse, and we welcome all of these initiatives. Another point in MiFID II is the trading obligation for OTC-traded derivatives, so that it's the same level playing field like in the U.S. Far in Europe, you just have the obligation to use the CCP for OTC-traded derivatives, and beginning in 2020, there will be also the need to use organized trading facilities, so so-called OTFs for that. Obviously, Deutsche Börse will also benefit from that development. With regard to potential risks, so open access obviously is one of the elements.
Here, I think you are aware that all the markets use opt-out option not to introduce open access for 30 months now. We understand the regulators view that they're allowed to opt out of this open access provision because first, regulators want to see what is the final political decision with regard to EU and Brexit negotiation. After the political decision is clear, then we can talk about that open access provision again. For us, it's also very important that interoperability rule is not part of MiFID II, and that's clearly stated. So far on a net basis, we see more benefits for Deutsche Börse out of MiFID II.
Okay, thank you.
Thank you, Gurjit. With this, we would like to conclude today's call. Thank you very much for your participation, and have a good day.