I just finished listening to the 2Q earnings conference for BGC. Most of the information from the prepared statements had been already reported. As always, the question and answer session was the best part. A few highlights:
* Re: quarterly dividends. The industry generally declined the second quarter but BGC experienced double-digit growth. The C’s (especially co-CEO Howard Ludnik) credited that to the expansion of electronic trading and fx markets.
* One analyst (I didn’t get his name) wanted to know if the seasonality of August-September was typical. Frankly, I wasn’t really sure where he was going with the question and I doodled on my notepad while Howard answered.
*Daniel Harris of Goldman Sachs asked a question about BGC’s new lower commission structure: “how do you incent brokers with lower commissions?” The answer was simple: volumes. Howard Ludnick said there was a certain “law of friction” and that when one went up, the other went down (volume and commissions). He said that brokers now receive 15% on fx options and credit swaps. Later, another question came up about this issue (“how do you combat commission pressure?”) and Howard Ludnik said you scale across the products.
*Another analyst (name and company missed) asked what products are driving the shift to fully electronic trading. Howard put special emphasis on fx options and credit swaps (again). He pointed out that BGC’s electronic platform was fully electronic – it didn’t just capture the information to complete the trade later. He said “We are excellent at this” and it was one of the two brightest points of the call, I thought. He was very passionate and said it two or three times: we are excellent.
*Howard Lutnik stressed that equities, commodities and energy were three big drivers of growth of growth for the company. BGC doesn’t have a big percentage of their revenues from these operations and they provided big opportunities for the company.
*One analyst asked if Howard could give us an idea of the impact of competitor’s potential mergers and Howard said, “We say acquisitions” and the execs laughed. I thought that was pretty funny.
* Howard Ludnik pointed out that electronic trading was a global initiative and pointed out there was still much growth to be had in Europe, Asia, and US.