Good afternoon, ladies and gentlemen, and welcome to the Deutsche Borse AG Analyst and Investor Conference Call regarding Q1 2018 Results. At this time, all participants have been placed on a listen only mode. Let me now turn the floor over to Mr. Jan Strecker.
Welcome, ladies and gentlemen, and thank you for joining us today to go through our Q1 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 e mail 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 Q1 results, we're actually pretty good. But 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 3 years until end of 2020. I would like to take the opportunity to lead you through the key pillars of the strategy.
But again, we should focus today on the Q1 results. And on May 30, when we do our Capital Markets Day, right, you've got the opportunity to listen to us and to raise questions on this topic in a very special event. Our roadmap 2020 has 3 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 shift 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 stocks 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 and 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 5 areas: 1st, fixed income 2nd, commodities 3rd, FX 4, investment fund services and last but not least, as well as our data and index offering. On Monday, we already took a small step into this direction by announcing the full acquisition of Swisscanto Fund Centre for a higher double digit €1,000,000 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 3rd pillar of our roadmap 2020 consists of higher investments in technology to tap into revenue opportunities and further increase the efficiency. The 4 focus areas will be blockchain and distributed ledger technology, big data and advanced analytics, improvements 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 SEK 100,000,000. For this, we expect one off costs of around €200,000,000 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% to 15% annually until 2020. To be very clear, we think we can grow and we can manage the secular growth. And on the cyclical side, we are more dependent on the market, but we think we expect we have a certain tailwind.
We are still refining and defining some of the elements of the road map. 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 the Investor Day.
Looking forward to see you on May 30 in London. And with this, I move and hand over to Gregor again.
Okay. I would like to start with the key points regarding the Q1 results on Page 2. As announced during the full year 2017 earnings call in February, we have introduced a new system of financial segment reporting. Instead of previously 4 segments, we are now reporting 9 segments. This improves transparency regarding net revenue and profit contribution of our key Roadmap 2020 Q1, secular net revenue increased by 7%, which 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 Q1 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 Q1 were Eurex, including new products and our fast growing OTC clearing activities our commodity business EEX the index business of stocks 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 3 to show you the group financials. Net revenue increased by 11% to €692,000,000 As part of net revenue, the net interest income across the group rose significantly to €41,000,000 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 €21,000,000 which among others included restructuring charges, M and A integration costs and legal expenses. The adjusted EBITDA increased by 15% to EUR 4 €38,000,000 The adjusted net profit improved by 17% to €271,000,000 and the adjusted EPS amounted to €1.45 I am now turning to the quarterly results of the new financial reporting segments, starting with Eurex on Page 4. 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 Q1, for instance, by more than doubling the OTC clearing net revenue and by higher contribution of net revenue with new products.
In total, net revenue in the Eurex segment stood at €237,000,000 which is an increase of 10%. The adjusted EBITDA amounted to €166,000,000 and the EBITDA margin stood at 70%. Our commodities business, EX, 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 Nodal resulted in an increase of net revenue against 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 62,000,000 which is an increase of 15%. Adjusted EBITDA amounted to €30,000,000 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 €18,000,000 which is an increase of 7% as well. Adjusted EBITDA amounted to €8,000,000 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 2nd 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 €62,000,000 which is an increase of 16% over the same period last year. The adjusted EBITDA amounted to €39,000,000 and the EBITDA margin stood at 64%.
At Clearstream, the custody net revenue increased slightly to €95,000,000 The settlement revenue declined to €21,000,000 because of the discontinuation of domestic settlement charges due to our participation in Targa 2 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 100 and €79,000,000 which is an increase of 9%. The adjusted EBITDA amounted to €116,000,000 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 €39,000,000 which is an increase of 12%. The adjusted EBITDA amounted to €19,000,000 and the EBITDA margin stood at 48%. Repro 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 Q1, 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 €19,000,000 which is equivalent to a decrease of 9%. The adjusted EBITDA amounted to €10,000,000 and the EBITDA margin stood at 52%. In the index business, Ed Stocks, 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 stock segment by 35% and made them reach €34,000,000 Adjusted EBITDA amounted to €23,000,000 and the EBITDA margin stood at 69%.
The primary driver of the data segment was an improvement of net revenue from regulatory potting 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 €43,000,000 which is an increase of 6%. Adjusted EBITDA reached €27,000,000 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 1314. With our secular initiatives, we generated around 7% net revenue growth across the group in the Q1. 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 markets and the further increase in U.
S. Rates, we are driving around 4% growth of net revenue in cyclical areas. Operating costs in the Q1 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 and A session, I would like to briefly make you aware of the upcoming Deutsche Borse event. Our Annual General Shareholder Meeting will take place on May 16 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. Furthermore, as Theodor has already mentioned, we will hold our annual Investor Day on May 30 in London. The day will be hosted by Theodora 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 at lunch. If you have not registered yet, please do contact us. This concludes our presentation. We are now looking forward to your questions.
First question comes from Benjamin Goy.
Yes, hi, good afternoon. Thanks for the new segment reporting. Now with more transparency on the on your 9 segments, just wondering on the businesses that have a below group EBITDA margin, These include actually a number of off secular growth opportunities, namely EX, 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.
Yes.
Thanks, Benjamin, for the question. I think we are confident to increase our EBITDA margin in all of the three business because specifically in EX and 360D, we will benefit from the general trend from OTC to on exchange. So we are quite advanced here already at EAX where we have a market share on exchange on our platforms of even more than 30% and we expect that to continuously increase and 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 center limit order book functionality, clearing solutions and so that we can start that kind of business in the second half year of 2018. So and here, we do not expect a jump start, but we expect over the next 3 years that we will continue to improve our performance here, increase revenue and also our margin.
Investment Fund Services, it's a great business. So 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.
So we are also quite confident that investment funds 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 or is there a target market share? Or what do you feel on the need for these bulk productsOTC in this area
here? Yes. So we will see what does the market need, but our expectation is that it won't end at that 30%. So whether it's 50% or 60%, we do not know it depends on the market needs. But 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 in our market share.
Thank you.
The next question comes from Arnaud Giblatt from Exane.
Hi. I've got a question and a quick follow-up. Firstly, on targeted securities, the regulation has been in place for a few quarters with everybody live now, yet we've seen very little cross border settlements in play. So why do you think that is? And when do you think that market share in CSDs could start shifting?
And my follow-up, sorry if I missed it, is on the cost cutting. You indicated €100,000,000 of gross cutting, which will partially be offset by investments. So what is your guidance in terms of net cost growth we should be looking for over the next 2 years? And is the shape of the net cost growth still tied to how revenue growth shapes up as it used to be?
Yes. I know. The first question targeted to securities. Maybe you have seen our announcement that in April we went live now with 5 new markets. So we went live with the market in France, in Italy, in Belgium, in Netherlands and in Luxembourg.
So that is now the good start for us to and we are the only one who really offers now cross border opportunities and into settlement process. And we expect that over time, we are able to gain additional market share. As you know, we own 40 percent of the euro liquidity in the target to securities world. Our competitor owns 20% to 25%. So we are talking about the remaining 30% to 35 percent.
So we do not expect a jump start here. So 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. 2nd question with regard to our cost cutting of €100,000,000 So just to repeat and to make it clear again. So 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. So it's a shift of cost.
In principle, we won't give precise cost guidance. So the cost guidance we give you is with regard to the scalability of our business model. And to say it again, so if revenue increased by up to increased by 10%, then operating expenses can increase up to 5%. If revenues increase by 5% then costs will be flattish. So that's basically our guidance and our commitment from a management team perspective that we do here proactive cost management.
And I think with the announcement of the structural cost saving program, what's definitely new, what we did not over the last year, so we get even additional financial flexibility.
Thank you.
And 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 what is the given the
nature of the sharing arrangements and the incentive scheme that you put in place, how should we think about the underlying margin at Eurex, particularly within the quarter such as the Q1 where you have fairly significant increases in trading. What's the dilutive impact of the OTC arrangement given that it's an EBIT sharing arrangement. So how should we think about the underlying margin? And at what point do you think the initiative would stop being so dilutive?
Okay. Maybe you have seen our very successful numbers here. So in March, we had €80,000,000,000 ADV on the euro clearing denominated interest rates for the business. So we exceeded by far the threshold what we defined when our program is successful of €35,000,000,000 So very successful and this more than €80,000,000,000 translate in a market share of roughly 8 percent. So we said our general target is 25% and that would translate in additional net revenues in 2020 of €70,000,000 So for this year, we expect some net revenues of €20,000,000 to €25,000,000 And with more than €5,000,000 in the Q1, we are perfectly on track.
So that's very, very positive. So your specific question with regards when is it dilutive with regard to the sharing arrangement, so at no point of time dilutive. So the more we do, the better it is. So we have a certain threshold to cover our costs. And on top, there's a proportional sharing of additional revenues with our clients.
Okay. So 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. So the 70% EBITDA margin that you reported in Q1 2018 was the same as last year. Just thinking given the nature of the cyclical revenue or 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. So that is one of the reasons. And then you have between the products some mix in our product but it's depending on the margin we have into different products more or less favorable. So the product mix is also important dimension here.
And the reason we've mentioned for group cost development obviously also apply to the Eurex segment. So the amount of variable and share based compensation has also gone up in the U. S. Segment.
And allow me to add as a CEO, we are operating here with a 70% margin, which shows the scalability per se. And of course, you could argue at the end of the day, we need to get up to 100% EBITDA margin, which is not feasible. So we are already out next with 70%, yes, to be very frank here.
Okay. Thank you very much.
And the And the next question here is Anil Sharma from Morgan Stanley.
Just a couple of questions, please. Just on the index business, the stocks 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? And then 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? Is it are you making a spread? Or are you making sort of an absolute return depending on the rate curve? So if you could just help us think about that.
And 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.
Yes. So your first question with regard to the repricing index of stocks, so that's now part of the run rate. So overall, it was a double digit €1,000,000 a month for the index business, but that's now included in the run rate here. With regard to the NII at Eurex. So overall, we have currently €25,000,000,000 customer cash balances.
And so far, we get some 10 basis points out of that. And we increased our pricing with April 1st by another 10 basis points. So that translates in another €20,000,000 €25,000,000 So that's the sensitivity and also the impact of our pricing measure upgraded 1, 2018. With regard to the EBITDA margin and risk of pushback of customers, yes, you're right. And that's also the reason why Theodor just mentioned the topic of 70% margin.
So that is for Eurex in our index business, I think a very good margin. And so we have to firmly consider that when we talk about potential pricing measures. And 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 there will and we will show during the Capital Markets Day, right, 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, right, because the growth is at least as important as EBITDA.
Okay. That's helpful. Thank you. So just
to confirm, you're saying there's still another €25,000,000 of revenues to come through in the OTC from NII alone on an annual basis. Is that right?
Yes, that's true.
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? Because up till now, you've talked about other product enhancements as well as offering central mid order book trading. Are you now simply focusing on central mid 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. So the OTC market is still 90%. So 10% is traded on MTF and 90% is OTC. And specifically with this clearing solution, we can offer better risk management solution for our customers.
And we expect move business from OTC to on exchange. And clearing is here really, 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 Mike Werner from UBS. Please go ahead.
Thank you. I've got 2 questions, if you don't mind. One on the Data segment. We saw revenues up 6% year on year and yet we saw the EBITDA margin fall by about 6 100 basis points. And 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?
And or is that cost increase going to be prolonged over the next couple of quarters, if not years? And then second on M and A, just if you could just remind me kind of where what the dry powder for Deutsche Borse is in terms of the net debtcash position and as well, what the current buyback of $400,000,000 how much of that has been executed to date? Thank you.
Okay. So with regard to the data business, yes, it's right. EBITDA margin was reduced and the reason for that are additional costs out of building up our regulatory reporting hub. And that is investment driven and also in the Q3 and maybe also still in the Q2 as we have to stabilize all the processes. So there was a huge demand from our customers, so that's a good thing.
But from an operational perspective, we still have to invest here and to make sure that we can offer the quality what our customers expect. So there will be additional costs for the full year 2018, but I would expect that we won't have the same level within the next year. So I expect that these additional costs will disappear in 2019 2020. With regard to our dry powder, so we have roughly €1,000,000,000 as available cash. So we and this will be obviously reduced when we do now our dividend distribution of around €450,000,000 and this will be also reduced €200,000,000 share buyback what we will do until end of the year.
But every month, obviously, we get some roughly €50,000,000 additional cash as we generate cash out of our operational businesses. With regard to the buyback, so the first €200,000,000 are finalized end of March 2018. So until year end 2018, we will do another €200,000,000
Okay. Thank you very much.
And the next question here is Johannes Thormann from HSBC. Please go ahead.
Good afternoon, everybody. Johannes Thormann, HSBC. Two questions from my side. First of all, regarding your restatement, the stocks revenues, which you have presented for Q1 2017 2018 look different to the indicative new segment reporting you sent out before. What has been driving those changes?
And secondly, could you also probably send out a restatement for 2016 as other German corporates do and then if they restate, so we have a little more track record or time period from what you did? And secondly, regarding your restructuring costs, we have a multiple of 2 times for your restructuring costs despite the increase in headcount. What is driving or the planned increase in headcount, what is driving these higher restructuring costs? Are you killing any systems? Or what is for this high multiple?
Just some more details, please.
Yes. With regard to the second question, so we plan to do structural cost improvement of €100,000,000 And for doing that, we need €200,000,000 so 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. And therefore, we still have to work now and to do the detail and we will cover all cost categories. So we look at our personal cost.
We will look in our IT operating cost. We will look on IT consulting. And we also cover all the potential cost levers. So we still have to work on that topic to come up with a detailed plan. But our basic assumption is that we need roughly two times for restructuring costs and the majority of that will go into for personnel costs.
And the first question? Yes.
And with regards to the new segment structure, you're right that a few numbers differ from what we sent out 4 weeks ago and that's because of decisions that were taken as part of the closing process. So we've 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 Pfender 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 setup, are there any business units you could think of disposing in the future reorganizing this in any way? Thank you.
Yes. 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. But on the first hand, I would not expect something spectacular on that side.
It would be smaller adjustments where we are able to reconsider that. With regard to the index business and the competitive situation here, so far we see a general trend to passive investments and there's a strong need. So that's a clear trend we see on our side, but we see a comparable development on the other index providers. But when we look at the numbers, so 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 stocks perspective in specifically in Europe.
So that's a general trend what will continue here. Okay. Thank you.
The next question comes from Martin Preis 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 because it's just not something you split out, so it's a little bit difficult to know what's going on there?
Thank you.
Yes, Martin, you're absolutely right. So collateral management is currently under pressure and the main reason is a cyclical reason due to the central monetary policy. So if you're basically flooded with money from the Central Bank, then there is less need to have efficient use of your collaterals. And we expect that that will immediately change when there is some discussion with the ECB and changing the Central Monetary Policy. And but in general, we also think there is a demand for high HQLX high quality liquid assets.
And therefore, there's a constant demand what will also not disappear. But the main driver for that business is basically the ECB monetary policy and we will see nice increase here if that changes.
Understood. 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 Q1, but we also saw a large new into that market with CME acquiring 1 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?
And then 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 Borse. But 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 and it's not completely unsurprised that CME has an approach now on NEX. In general, with regard to our M and A strategy, we are very much open and Theodore in his statement already mentioned it very clearly. We have 5 segments where we also want to do M and A and FX is definitely part of it. So far this roughly €70,000,000 net revenues, we are too small in that business.
And therefore, we are interested in doing M and A here to make our FX business more scalable and bigger. With regard to efficiency or financial flexibility around 1.5 times cost debt EBITDA number. Yes, obviously, if we are able to increase our EBITDA and our cash earnings, obviously, we increased our financial flexibility. So the cost of EBITDA is currently at a level of 1.1% in the first quarter, so that's clearly below the 1.5 and just it's obviously true and right. This helps us and that's a positive impact that we are also able to increase our financial flexibility.
And if we increase our efficiency, so that will also help to increase our financial flexibility and that's part of the overall strategy.
Very clear. Thank you.
So the last question here for now is Gurjit Kamal from JPMorgan. Please go ahead.
Hi, good afternoon everybody. It's Gurjit, JPMorgan. Just one question. In terms of MiFID II, are there any businesses that you think perhaps have temporarily benefited or be 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 Borse out of MiFID II. And I 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 further 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 of claim fees like in the U. S. So far in Europe, we just have the application to use the CCP for OTC, traded derivatives. And beginning in 2020, there will be also the need to use organized trading facilities, so called OTF for that. And obviously, Deutsche Borse will also benefit from that development.
With regard to potential risk, 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. And 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. And 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 Borse out of MiFID II.
Okay. Thank you.
Thank you, Gautje. With this, we would like to conclude today's call. Thank you very much for your participation, and have a good day.