Salam Alaikum everyone. Good afternoon, and welcome to Derayah's earnings call to discuss their first half of 2025 results and Q2 results. I am very pleased to welcome with us Derayah's management, joined by Mohammed AlShammasi, the CEO, and Bilal Bushnaq, the CFO, as well as Ghida Obeid, the Chief Investor Relations Officer. We will go through the results with Derayah's management, and then we will open the floor for Q&A later in the session. Without further ado, I will hand it over to Derayah's management to take you through the financial results.
Thank you, Waleed. Thank you and good afternoon, everyone, for joining us for the second quarter 2025 earnings call. Joining us today are Mohammed AlShammasi, our CEO, and our CFO, Bilal Bushnaq. We are overly excited to share another strong quarter of performance at Derayah, a clear testament to our resilience, agility, and consistent execution, even amid a market environment defined by volatility and uncertainty. In Q2, we delivered record results, with total operating income reaching SAR 235 million , a robust 11% growth year-over-year.
This was driven by continued momentum across our brokerage and asset management businesses, along with notable success in our investment strategy. Our operating profit for the quarter surged 37% year-over-year, while core operating profit, net profit climbed to SAR 145 million, a solid 36% increase, further reinforcing the strength and sustainability of our core business. I will now hand over to Mohammed and Bilal, who will go over the drivers behind our performance and what lies ahead for Derayah, after which, as usual, we will open the floor to your questions. With that, I will hand over to Mohammed.
Thank you, Ghida. Thank you, HSBC, for hosting the call. Ladies and gentlemen, good afternoon. We are very excited to be presenting to you our first half earning presentation. This is a very exciting moment for the company. As far as I remember, this is, excluding the bank, basically, results, I think this is the highest quarter and record we have as a company.
So this is really, as Ghida mentioned, I would like to reiterate, this is really a testament of our ability and resilience really to weather all of these storms. In quarter two, I think we have witnessed a massive number of events, starting with U.S. administration announcing a trade war, basically. Then I think we had the escalation in the region, continuing of that. And toward the end of the quarter, we had the Israel-Iran war that really sent shockwaves across the region.
At the domestic level also, we had a number of major events in the quarter, mainly the reforms happening in the real estate sector. All of these have really impacted the market significantly, and we have witnessed significant volatility of the market. Having said that, all of these negatives did not really stop Derayah from really continuing to perform extremely well during the quarter and delivering an excellent set of results.
We have mentioned a number of data points here. I will go over the most important ones. Our customers continue really to grow. We are now around close to 600, actually. We continue to see strong momentum in our customer. Our AUMs, despite all the decline in the local market, and the majority of our AUMs are linked to the local market, performance remains stable.
We were able to raise significant amount of fresh money, but certain valuations of existing equity mandates have resulted in a stable AUMs for the quarter. Our assets under custody, again, which is the majority of that is composed of local securities, continue to show growth year-over-year. Having said that, we have been very innovative with our customer acquisition.
Over the quarter, if you have noticed, we have done a lot of campaigns. We have really tried so many new ways of attracting clients, launching different campaigns, targeting different segments of the market. I would say the result has been very encouraging for us in terms of customer acquisition and trying new ways using our digital marketing tools.
With that, we focus a bit on the brokerage side of the business, where we continue really to process significant volumes of around SAR 120 billion during the quarter. Our value traded increased by around 20% for the first half of this year. We continue really to see customers benefiting from the volatility happening from time to time in the market. But also we see that customers are directing their trading where they see the opportunity and where the market activity is heating up. We have witnessed a lot of activity in the western side of the world, mainly in Europe and U.S., where we see a lot of activity happening. I think this is in line with the overall market trend. Despite local market is not showing the strong momentum when it comes to trading volumes.
We have witnessed a significant drop in the local trading volumes, but Derayah as a platform, and we continue to reiterate that Derayah as a platform continue really to benefit from our position as a global broker offering access to 40 markets. Customers naturally trade where they see opportunity, and we were able to benefit from that opportunity.
Our total operating income for the first half is around SAR 444 million, a growth of around 2% year-over-year. Our cost has been well under control with a cost-to-income ratio of around 38%. This is a very good and very efficient operating ratio for the company. We continue really to put a lot of emphasis in our cost side and not really to improve our spending as these markets continue really to be quite volatile. Most of the spending we have done this quarter mainly addressing technology and addressing marketing.
These are the two areas that we have put a lot of emphasis and spending during the quarter. Our operating profit reached around SAR 270 million. Excluding the bank effect for the whole first half, we have recorded around SAR 276 million, around 8% year-on-year, and we continue to boost a very strong ROE. Remember, this is not even taking into consideration the dividends that was distributed subsequent to the quarter close, which would even bring the ROE to a higher figure.
Our client assets really continue and arise. We reached more than SAR 50 billion of combined assets under custody and assets under management for the company. As you see also, our customer accounts continue to grow. In subsequent slides, we will talk about major developments that we have in the company and talk about general themes that we see happening in the market.
On the left-hand side, you see the local trading volume. If you compare first half of this year compared first half of last year, you see a 33% decline in the trading volume. Quarter two versus quarter two of last year, there is a 27% decline. This is a significant decline. Despite all of that, our volumes really continue to expand, and we have been processing a higher number of volumes at Derayah.
The international trading, this is really based on public disclosures of the Capital Market Authority. We see that over the Q1 versus Q4, there is a 50% growth in the international trading originated from the Saudi market. Q2 disclosures are not out yet, but we expect really to see a continuation of what we have seen in the first quarter of this year. Next slide, please.
Also, there are a number of major developments that we think worth highlighting. I think most important one is a new set of regulations announced recently by CMA allowing for GCC-based foreign investors. People residing in U.A.E., Kuwait, Bahrain, et cetera, they are now allowed to own and trade directly in GCC. This is really a very significant change, and I think completely changes the addressable market that we are targeting.
Previously, we were targeting only GCC citizens or nationals. Now this opens the door for a much bigger target audience or target market, including the expats living in other GCC countries. We think this is a continuation of CMA's policy to open and liberalize the market. A few years ago, they started with swaps and P-notes, then they started with QFIs. Now we started to see opening for non-GCC residents, non-GCC citizens.
I think sometime in the future, most likely we will see the opening of the market to the rest of the world, even retail investors globally. This is very important development, and I think this is opening a new distribution channels for capital market participants in Saudi market. Second major development is the netting regulations, which we think is also very important and will help in fostering the initiatives that we have spoken about previously, mainly the SBL.
It will reduce the credit risk on the market and enable the companies to operate without really the strict limits imposed by the previous mechanism. This, I think, will enable us also to work closer with our prime brokers and other participants in the SBL market to expand that business. We have a specific slide to talk about this business, and we will talk about next.
On the real estate side, I think we have a number of changes happening in the market. Number one is the opening of the market for international investors. So within 180 days, we will see non-local investors, international investors are allowed to invest directly and own real estate in Saudi market. At the same time, we had a new set of regulations targeting really the White Land Tax.
The implementing regulations was only disclosed a couple of weeks ago, and we think this now will remove the uncertainty that really happened with the real estate market for the past maybe three, four months. Now I think it will open more the door wide open for more development to take place in the market. Next slide, please. Talking about the securities borrowing and lending.
We have mentioned previously that this is one of the major initiatives we have been working on. We are very happy to report that we have completed the MVP phase, for which we have rolled out around 220 securities in the portfolio today, out of which around 100 securities are quite unique to Derayah. So Derayah is the only lender of these securities in the market. The portfolio size today stands around SAR 200 million, which represents around 8% market share. We continue really to build in this product. MVP is completed. We are now in phase II of this product, and we see the team is really continuing the automation of different processes, ensuring that our systems are integrated with each other. We are also able to speak effectively with the prime brokers who are the direct borrowers of these securities.
At phase III of this project, which is hopefully fourth quarter or first quarter of next year, we will be rolling out this to the mass market through our platform. So we have been really quite positive on this project. All the early signs of this has been really quite appealing and interesting to invest more time and effort and energy in that product. We think this is very profitable business that we are venturing into. Next. In our asset management, we have been working a number of initiatives, total of new five funds that we are expecting to launch from now until the end of the year. We just completed the first, the initial closing of a credit income fund. We have completed this last week.
We have raised around SAR 200 million and will continue really to achieve our target of between SAR 100 million and SAR 150 million before end of this year. We are targeting a smaller fund focusing on AI and frontier technologies, mainly in the international side. We are working on a local private credit fund, hopefully to be launched before end of this year, and two real estate funds capitalizing on the clarity now that we have in the regulatory framework. We expecting to launch these during this quarter or early next quarter. So we continue really to see a very fair momentum in the development side of the real estate, and we are building on that moment. Next. On the wealth management, again, this is one of the initiatives we have spoken about.
We have launched a new application for our digital wealth management services, which is only targeting the digital wealth. We think this is a segment that prefers simplicity, prefers something that is quite basic, and they do not want really a complicated app that really puts trading and investing. So we have created a very simple application for these users. The initial results of that also has been very positive. We have massive number of new downloads for this application, and we continue to put campaigns targeting the mass segment of the market, and the result has been quite phenomenal. The market has been receiving this fairly well. Next, Bilal will walk you through the financial results in more details. After that, we will be very happy to take some Q&A.
In summary, we have witnessed that our core engine is functioning extremely well despite all the headwinds that we have witnessed on the second quarter. We were able to weather that storm. The core engine continued to work extremely well. The early results that we have seen in the first month of third quarter, in July, has been very positive and hopefully this will be a continuation for the rest of the year. We are quite interested about the new initiatives that we are launching in the business, either in the SBL, the digital wealth, all the new funds that we are launching. We will keep you updated about the progress during the end of the quarter. Thank you, and to you, Bilal.
Thank you, Abu Abdullah, and thank you everyone for providing us with the chance to share our robust performance throughout the first half of 2025, which again proves our resilient and diversified model that we are implementing. As we can see in this slide, despite the injection of new fresh money into the overall market. However, with the decline that happened in the overall market cap, we were able to stabilize our total assets under management.
As Abu Abdullah said, the indication we are seeing in the first month of the second half is positive, and we expect a lot of money is going to jump into the market. Therefore, this number is expected to grow in the second half of 2025. This is as well applied on the assets under custody. We have, Alhamdulillah, achieved a 16% growth in the first half of 2025.
This was a result of the continuing attraction for the clients, and this will continue as we can see that our marketing campaign is helping us to attract new clients. Providing them with our services has enabled them and convinced them to invest more and more with using our platforms. We have seen this with the growth of overall non-margin trading, as we can see in the coming slides.
Next slide, please. In the overall operating income, it has increased year-on-year in the first half by 2%. That mainly was supported by the increase of our investment, private investments, and the increase on the overall brokerage revenue. On a quarter-on-quarter, for on the second half, Alhamdulillah, we have achieved an 11% growth that was mainly driven by the increase in the brokerage business.
The increase in the brokerage business and our investments has offset the decline in our weaker asset management and the weaker special commission. Now we will go into the details and clarify to you the reasons for the increase or the decline that we have seen in the asset management and the special commission as well. Next slide, please. On the non-margin trading, for those who are attending our call for the first time, the brokerage revenue we present, it is divided into two mainstream. The non-margin trading, which is the revenue generated from the trading in the local market and the international market, and the margin trading, which is the margin in the local market.
On the non-margin trading, despite the headwinds that we have faced with the local market due to the circumstances that Abu Abdullah has clarified, whether on the, let us say, the geopolitical situation that has impacted the market negatively. However, and proven our resilient approach, we were able to take advantage of the other market by providing our investors with a chance to trade an overall market. So we can see that the traded value for Derayah has increased over 80% quarter-to-quarter.
This is, in terms of the brokerage, considered one of the highest, and this again and again proves that the approach we have adopted is generating a positive revenue for all of our investors and confirmed the message that we have delivered to our investment throughout the road shows that Derayah will always be there to take advantage of whenever there is an opportunity to generate revenue to its client. The non-margin revenue has increased quarter on quarter to 20%, and our implied net commission still within the guidance provided to our investor, which is 9 bps-10 bps. Next slide, please. On the margin revenue, for those who, again, I will continue to clarify the margin approach that Derayah is taking.
This is an off-balance sheet margin that is provided by a fund, was founded in 2011, and this was one of the innovative product for Derayah, utilizing investors' money to provide margin for the margin traders and sharing the revenue with the investors. Despite, again, the headwinds in the market, Derayah continued to create a stable revenue from the margin business with an overall, let us say we are stable compared to the first quarter, compared to the same quarter of last year, a 4% decline that was mainly driven by the decline in the fund size.
However, and again, like Abu Abdullah referred, we are seeing a pickup that is happening with the first month in July, and we expect this is to continue going forward. Next slide, please. On the asset management fees, as we have shared for our investors that there is a part which is the performance fees. As a result of the decline on the overall assets of the overall market and the overall cap, no one in the market, and we are all within the same industry, was able to generate any positive performance on the assets under management.
This is expected to pick up soon, and the contribution of the new funds that Abu Abdullah drove you through, which is in the real estate and in the private equity and on the private funding, that we will expect to continue to increase our revenue from the assets under management and to increase the overall margin. However, on the management fees, we continue to achieve 62%, which is above the market average of 59.
As provided to our investor, the guidance was around 100 bps today with the two funds that already established and will start the contribution to the revenue in the second half with the other funds, which is expected to be completed before end of this year. This percentage will grow as we go forward in the second half of 2025. Next slide, please. On the special commission, the main decline, despite the increase on the overall assets under custody, the main decline was because of the interest rate that happened during the fourth quarter of 2025, 2024.
However, with the introducing of the share borrowing and lending, which is continuing to go in full force in the end of third quarter in 2025, we expect the special commission will go back to the normal level in the next quarter and quarter four, and to generate a margin of close to 50 bps and above. On the other part, and one of the reasons that we have faced, which is the decline in the share borrowing and lending in the international market, that was a result of the geopolitical situation, and that has impacted that part of the business. However, we started to see the pickup on the first month of July and over the first month of the second half. All that being said and being from an accounting background, we always say that the revenue is out of our control. However, the expenses.
Derayah continued to monitor its expenses thoroughly to control the spending, to be efficient in spending, despite the increase on the personnel cost. For those who didn't attend the previous call, the reason for that increase came from the implementation of the ESOP program to retain the skilled people. Derayah reduced the overall expenses and continue to achieve a very efficient cost-to-income ratio at 38%.
Next slide, please. The overall performance, the overall income generating, the robust management of our balance sheet has increased our total equity to reach to SAR 1.1 billion and increased the capital adequacy, which provide our investors with the comfort to feel that Derayah has all what is required to face any unforeseen challenges going forward. Next slide, please. In this slide, we will go into the waterfall and the movement of our core income.
Again and again, our core income, we are talking about our everyday business, excluding the factor of the investment in associate. As we can see, our revenue has increased from SAR 254 million reaching to SAR 275 million, mainly driven by the revenue from brokerage and our increase on the investments has offset the decline that we have faced on the special commission, as well as the efficient spending monitoring has offset the decline that we have faced on the assets under management.
Overall, the achievement has been 8% increase. That is from a dollar value amount. Again, our approach and model has enabled Derayah to generate a net income margin of 46%, which is considered the highest within the industry and within the market overall. Next slide, please. This slide we continue to present it for who did not attend our previous call.
In this slide, we are providing a guidance for our investors, and so far that was provided for the investor throughout the road shows, and so far we do not believe that there is any reason to revisit any of these guidelines. Our revenue from brokerage is expected to grow at 7%-8% in the medium term. Our assets under management is expected to grow from 22%-24%, and our special commission is expected to increase by 7%-8%.
Derayah's cost-to-income ratio is expected to be from 38%-40%, and we promise, Inshallah, our investors, to continue to generate return on equity above 40%. The dividend ratio, as promised to our investors, we will continue to provide them and to distribute more than 60% of our net income. Whoever who is an investor in Derayah, we congratulate him for receiving the second quarter commission today. Thank you very much. Now we are open for any Q&A or any clarification you would be looking for.
Thank you, Bilal. Thank you, Mohammed. Waleed, I think we can open the Q&A session now. Thank you.
Thank you so much. We obviously will have the chat box where you can ask your questions, or you can raise your hand, and then we will take some questions. Michel, you can go ahead and unmute yourself.
Thank you. Thank you for the presentation, and congratulations on the results. Am I audible all right?
Yes, please go ahead.
Yes. Thank you. Perfect. A couple of questions. The first one regarding the brokerage business. We have seen the strong performance. I would like just to understand how much of the 10% or the growth reported on the brokerage side is coming from the SBL. Within the core non-margin portfolio or revenues, any indication how the market share is evolving locally and internationally? It seems like international is doing quite great, given how you managed to record such revenues despite drop in trading volumes in Saudi. This is my first question. Second question regarding Let me ask the second question after you answer the first.
On the first question, if I understand this correctly, you are asking how did we manage to achieve this growth despite the challenges in the local market. Yes, we have been always communicating that Derayah is a partially delta of what is happening in the local market. But overall, we are a global player in the brokerage scene. Our platform provides access to around 40 global markets, which enables investors to trade flexibly across Asia, Europe, and U.S.
The strong momentum that we have seen in European and U.S. market have led significant flows in that part of the business, and hence we have seen an increase in the brokerage commissions. I think the second question was related to where we book the SBL profits, and Bilal, I think, can answer this.
Yes. On the SBL profit, whether from the local and international, it is booked within the special commission. The special commission contributes mainly from interest earned on the client money, share borrowing and lending in the low, net part, of course, Derayah portion of the share borrowing and lending on the local and international market.
Because I thought at a certain point, because it was brought up during the brokerage conversation, the brokerage revenue or income do not include any income from the SBL.
Yes. Just to clarify, this is for classification purposes. From a general concept, we all understand that any revenue generated from the share borrowing and lending and the interest earned, it is part of overall from the brokerage. However, from a classification point of view, it is part of the special commission.
Okay, perfect. How big it is within the special income?
We did not share. Our guidance was clear, which is margin net of overall assets under custody, including the cash and the shares as well.
Sure. Okay, perfect. Thank you so much, and congratulations again.
Thank you very much.
Thank you again. Please feel free to raise your hand or use the chat box. We do have two questions in the chat box. We have one question asking: When do you expect D360 losses to peak?
We have recently participated in the capital raise of the bank. The bank is at the build-up phase, and, as you can see, the company is using the equity method to account for our stake in the bank. This resulted in roughly, I think, SAR 65 million, SAR 64 million, Bilal, correct me
SAR 62 million. SAR 62 million for Abu Abdullah
SAR 62 million of losses that we have carried throughout the first half of this year as a result of the bank. The bank is continue to incur losses as they are now in the build-up phase. We communicated before that we expect the bank, and according to the business plan, to break even around end of 2026 and start making money around sometime in 2027.
We still look at more than a year of expecting to continue in that direction of burning money. This is a very usual or a normal behavior of any company in their early years, and they will have to go through the J-curve eventually and start really making money. The positive side of the bank, we started to see a lot of demand for their products and services. The customer acquisition engine is working extremely well.
They have reached 1.2 million customers almost in what, seven months now since they started their commercial operations. This is really phenomenal by all means. As we speak, they are now launching new lending products, this will enable them to ramp up their revenue in the near term, and hopefully they can build a loans book that will sustain them in the future.
If you allow me, if, I think if I got the question properly, he asked when are the losses expected to peak. Logically, we think this year is the peak. We are not expecting the losses to continue at this level going forward. As Abu Abdullah referred, they are at the client acquisition phase. They are doing an excellent work. They are achieving a tremendous figure and tremendous number of clients.
Thank you. We do have a couple more questions coming through the chat box. We have Yasser asking, how do you look at derivative for growth and brokerage? In terms of technology, are you ready to launch the derivative product, or is it live already?
On the international side, both actually, both international and local side, we operate within the derivative space, and we offer this in a completely digital fashion. If you are a user of Derayah, Yasser, you can trade local derivatives or international derivatives in our applications.
One more question on trading commission. This is asking, what led to the fall in trading commissions from 14 basis points to 10 basis points quarter-on-quarter? Is it due to different mix of geographies or products? Which clients traded this quarter?
Bilal, would you take this please?
Yes. You've correctly mentioned, it's a two factor. The first one, it's a different geography, different security. The change in mix between geography, securities, and of course, the discounts that we always make sure to provide to our clients to make sure that they're getting the best service at the most efficient cost. It's a factors of three. It's a discount rate, that change in mix in geography, that change in mix of securities as well. As you know, its partners part of our equities and the international trading is provided at zero-based trading.
What we have provided guidance, during the IPO process, and subsequently, we have spoken about between 9 to 10 basis points, as trading commissions, and we are within that range.
Another questions we have asking, can you provide an update on your progress towards achieving Sharia certification and an expected timeline?
Thank you for raising this because we have been receiving a lot of questions on that. Derayah uses Sharia historically in its funds business and lending business, but we have never thought previously to get ourselves certified as Sharia. As we progressed into listing, this actually became a demand by investors. We took that very seriously, and we appointed two set of advisors, one to help us really in planning for that transition into a Sharia compliant company.
We have announced recently our new contract with Shariyah Review Bureau, and appointed three fiqh scholars, led by a very well-known scholar, Sheikh Mohammed El-Gari, to lead the committee. We are now in the process, actually, of developing the plan with them. I do not really have an exact timeline. We are still in the planning phase with them, but what we are doing now, we are looking at each and every product, where are the pain points when it comes to Sharia, and accordingly, we should be communicating a plan sometime in the future.
Just to confirm on that part, in addition of the consultants or the scholars hiring, we have a consultant who is working with the team on day-to-day to provide the plan and to make sure that we are on track. Just to confirm and to provide the assurance, once this plan is produced, it should be approved by the scholars, and it is going to be on track to deliver, Inshallah, a fully Sharia compliance company.
Thank you. We have two more questions coming through the chat box. Have you launched any product in collaboration with D360?
We have spoken about working together and creating cross-selling opportunities. Unfortunately, until now, we have not really launched that. I think the priority for the bank now is to ensure they have the right technology in place and they launch their core products, like the lending and other related banking products. I think after that, we will be in a much better position to launch.
Mohammed, your voice suddenly disappeared.
Okay, let me just repeat that. The bank is currently quite occupied with the fact that they need to launch more core banking products. I think, in the near term, we should be able to launch new products in collaboration with D360 or capitalize on existing products that Derayah offers for the use of D360 customers. Beside that, and this is something we have mentioned in the past, we would like really to make some banking products available for Derayah customers, and this is still in the planning phase with our colleagues at D360.
Thank you. We have question from the participant. Rahul, please go ahead.
Hi, am I audible?
Yes, please go ahead.
Yes, Rahul.
Yes. Good day. Congrats on the good set of numbers. Just a quick question on the trading pattern that you see of your clients. What are they seeing in global markets when they trade? Are they looking at momentum, sort of a trading pattern, which is like, say, the Magnificent Seven in the U.S., or maybe some momentum moves in European stocks?
Or are they looking at value? Just trying to understand the sentiment of retail investors when they move away from Saudi and, say, invest in U.S. or global stocks. Are they looking at dividend yields? Because that is pretty attractive. It is in several Saudi stocks currently. So are they buy and hold or are they trading? So if you can just give us some color on that, please. Thank you.
We appreciate the question. I do not have exact details of what they are trading from names exactly. But what we see in terms of a behavior, we see generally speculative behavior, for the most part. Our investors, that really creates the additional or the incremental volume, I would say, mainly are speculative in nature. People look for new opportunities outside, and based on that, they mobilize their purchasing power from Saudi to international markets.
While the core trading and long-term investment is still there as a behavior, and we continue to see that, but the incremental volumes that we have witnessed, I would say, mainly is a short-term liquidity driven by markets performing extremely well, as we have seen European and U.S. market registered new highs during the quarter. As a result, we see a lot of customers, mainly in the retail and high-net-worth individuals, trying to capitalize on that behavior of the market.
Very clear. Very helpful. Just to follow up on that. Again, maybe not getting into specifics, but would you know if these trades are actually profitable for the retail investors? Do they actually make money in these trades? Or do you have any insights on at what level of losses or how many trades they make losses and thereafter they exit? Maybe too soon, but just to understand a general sense. Thank you so much.
It really depends on the asset class. In derivatives market, which I think is a very normal behavior, you see customers are not making money, the majority are not as proficient as you would expect them really to behave. In the equity space, I think we see more professional behavior from our customers, and hence they are making money.
Very helpful. Thank you so much, and all the best.
Thank you. We will go to Sultan. Please go ahead.
Can you just introduce your name and the company you are coming from? So I think for future communication, and we understand from an investor relations, who are really interested in learning more, and we keep the momentum of communication with them. It will be very helpful for our investor relations function.
Okay. We will come back to Sultan. He is inaudible at the moment. You can go ahead, Sultan.
We can't hear.
We can't hear you. Okay.
He can print it in the chat box if he's not audible.
Yes. We have a couple more questions coming from the chat box. One asking, any app development plans. Are you considering consolidating Derayah's app and Derayah Global?
We have been working on a number of improvements on our application. Most recently, we have launched a major revamp in the application, and this is a continuous process. We are working on unifying the trading and bringing one user experience in one platform, and make it more sleek for users to just use one application. This is really under development.
One more question asking, what is the update on the launch of the institutional desk? Can you shed some light?
We continue to invest in that area. Part of the mandate that was given to the institutional desk is the launch of securities borrowing and lending, and the team continue to perform very well on that. We have highlighted previously. If you go back, Ghida, to that slide. We are continuing to expand on that business. Our current portfolio is more than SAR 200 million in value, more than 200 securities being lent out in our institutional desk.
Adding to this, another initiative we have spoken about previously is the algo trading. We have completed the certification with Tadawul. We have now our service and the co-location with Tadawul's Wamid platform. We are now able to offer the algo trading to algo users. The institutional trading desk is moving as planned.
Thank you. We have one question asking, can you give us a sense of how you are planning to capitalize on the change in regulations allowing foreign GCC residents to invest directly into Saudi? Have you already taken initial steps to address this new market?
We are looking at this seriously. Our teams are looking at new technologies to enable us really to expand and adopt the current account opening processes. This is step 1 in making this available for non-GCC. Sorry, for non-Saudi. Today, the account opening process is really designed for Saudi investors with access to government authentication services. Now we need to add other authentication services to serve the non-Saudi residents looking to open accounts with Derayah. I think phase II of that is really to build the marketing arsenal around that and how to reach these users in different markets.
Very clear. I see Sultan posted his question on the chat. This is Sultan Alarifi from Riyad Capital. He says, "I wanted to ask about the AUCs assets under custody. We saw a drop quarter-on-quarter even with better volumes. Is it because of higher international share of assets and international is with a collaboration with IB?
The overall decline, Sultan, was as a result of a decline in the market cap. Eventually, even though the client's asset has increased in, let's say, in total number of shares or in total whether on the local and the international. But as the local part and the assets under custody represent a major part, and there was a decline in the overall market cap, that has impacted the AUC in the second quarter.
Thank you. We will take one more question from the chat. This is Mohammed Siddiqui asking, "Can you share some details regarding the current status of international zero commission, and through which products you were able to generate the additional international revenues?
Derayah launched Derayah Global Light, which is a zero commission offering in the international side. We continue to offer trading for ETFs and cash equities for free using that product. Having said that, there are number of ways that you can make money. One is payment for order flow, the revenue you generate from SPA activities, the revenue you generate from idle cash exposure, international markets. All of these are ways that you can make money in the equity space. Other avenues of revenue in the international markets is our operations within the derivative space and fixed income space, which is, again, quite sizable in nature.
If you allow me as well, in addition to what Abu Abdullah has mentioned, when we provide zero-based trading, it is provided within a certain condition, which is you have to deal within the market hours using the application. Utilizing the premium services like calling broker before or after, or calling the broker at any time or dealing through post market or pre-market, this is fully chargeable as well.
Great. We have a question asking, have you explored opportunity for you to distribute insurance?
While I would love really to look into this is not really in our near-term plan. Our focus is really to expand in the verticals we mentioned, like digital wealth management, institutional trading, and expanding the asset management business. These are the main verticals that we are putting a lot of emphasis on. Insurance directly, I do not think this will happen anytime soon with Derayah.
Great. Then we have a question asking, are there any regulations in place to share the revenue made from idle cash back to the client?
The regulations was updated last year. In the past, we were not allowed as authorized or licensed entities to share any of that revenue generated from idle cash. The regulations was updated last year to include a provision that the broker or the licensed entity may or may not share the revenue generated from idle cash with its customers.
Our thinking here that customers will only come to harvest the highest value. If you are offering them a cheap discount in the local market and you are offering them a zero commission in the international side of business, we do not see a reason for customers, for example, to demand return on idle cash. At the end, we are an investment company. The cash balances from customers is relatively small compared to, I would say, commercial banks. But the aggregate amount is significant, so I do not see this as a pain point for customers that we need to solve for.
Thank you. We have a question asking, do you have a sense of what was your incremental market share in new broking account openings in the last quarter and last 12 months?
I don't think this is really disclosed anywhere. We don't really have that data available in the market. It's very hard for us to provide an answer to this question.
Right. We try to take as much as we can. Thank you to all the participants. This has been very engaging. A question asking, you indicated $15 million AUM for feeder fund for tech. Are we exploring single country funds? What AUM can we garner through thematic feeder funds of this kind over the next two to three years?
We have a program for venture capital investments. We have a strategy that works closely with handpicked best-in-breed fund managers, mainly in Silicon Valley. These are typically offering exposure to best managers, best growth companies in the valley that we think would be impactful. We are launching this feeder fund of $15 million. We have secured an allocation for that strategy with one of the top funds. We think this is an exciting opportunity for our investors.
Generally, we don't really do sort of general thematic funds that are related, for example, to public markets. We focus on where we can add value by opening doors for hard-to-access managers, getting some interesting opportunities in the venture capital that we think are game changers and redefining certain technologies. This is where we put our efforts and develop products for distribution in the local market.
Question asking, is there any M&A strategy, local, regional or international?
Since we announced our intention to list, we have been receiving a lot of proposals for M&A. The company was not really engaging on this actively. I think some of these might really grab our attention. We are very selective with that. We haven't really raised money for the purpose of M&A during our IPO process. Having said that, we come across a lot of opportunities. We have not really spotted anything that really makes us super excited to move. If any development happens in that direction, we'll keep you updated. I think Fintechs overall look very interesting to us in general, but we haven't really looked at a target opportunity that we would like to share with the rest of the market.
Thank you so much, Abu Abdullah. Thank you so much to Derayah's management team. This has been very engaging, and thank you as well to all of the attendees for all of your questions. It was a pleasure to host this call with you.
Thank you, Waleed for hosting the call. Thank you, ladies and gentlemen, for your participation. This is very informative session. Very smart questions. Looking forward to staying in touch, and hopefully, we have a much better set of results in the Q3. Thank you.
Thank you