Marex Group plc (MRX) Earnings Call Transcript & Summary

Good morning, everyone. I'm Robert Coates, Global Head of Investor Relations for Marex. Thank you all for joining us today for our first half of 2024 results conference call. Speaking today are Ian Lowitt, our CEO; and Rob Irvin, our CFO. After our formal remarks, we will open up the call for questions. Before we begin, I would like to highlight that certain matters discussed in today's conference call are forward-looking statements relating to future events, management plans and objectives for the business and the future financial performance of the group. These are subject to risks and uncertainties. Actual results may differ from those anticipated in the forward-looking statements. The risk factors that may affect these results are referred to in the company's press release issued today and also in our filed prospectus with the SEC back in April. The forward-looking statements made today are as of the date of this call, and the company does not undertake any obligation to update these forward-looking statements. Finally, the speakers may refer to certain adjusted or non-IFRS measures on this call. A reconciliation of the non-IFRS financial measures to the most directly comparable IFRS measures is available in the company's press release issued today. A copy of the press release and the investor presentation can be found on the Investor Relations page of marex.com. With that, I will now hand over to Ian.

Welcome, everyone. Thank you for joining us today. As the CEO of a public company, one is well aware of the desirability of delivering strong results, particularly early on when one is looking to build credibility with the markets. And so it is with a small dose of relief and a much larger dose of pride that Rob and I can share with you our very strong performance in our first quarter as a public company. And what is so pleasing to me beyond the record numbers is what I see driving the performance. You will see evidence that we are gaining share. I hear this anecdotally in the conversations we have with clients, who report on their positive experiences dealing with Marex. I can feel the positivity and enthusiasm of our staff, as they describe the progress they are making, growing their business or function. So we're certainly off to a robust start as a public company, and I'd like to once again thank all of those investors who have put their trust in Marex. Turning to Materials on Slide 3. I want to start out with a reminder of how and where we participate in the financial market ecosystem. Slide 3 illustrates how we play a critical role in connecting clients to markets and how our 4 services of Clearing, Agency and Execution, Market Making and Hedging and Investment Solutions fit together. We provide connectivity to producers and consumers of commodities as well as asset managers and hedge funds, and act as an essential layer between our clients and the markets they need to access. At the heart of the firm is Clearing, which provides the essential infrastructure to connect clients to exchanges and clearing houses. We also provide clients with access to market liquidity, either through Agency and Execution or Market Making. And if there is no on-exchange instrument that meets their needs, we provide bespoke hedging services through our Hedging and Investment Solutions business. In combination, these 4 services reinforce one another, produce multiple entry points into the firm for our clients and increase cross-selling opportunities for Marex. We are increasingly relevant in this connective layer by adding clients and growing the amount of business we do with them in the provision of these interconnected services. Turning to Slide 4. You can see our strong track record of double-digit growth and our continued momentum. We believe we are on track for a tenth year of sequential growth, having delivered a 34% CAGR in adjusted operating profit over the last 9 years. We are delivering on our strategy, which is to ensure we have sufficient structural growth to offset cyclical headwinds. By executing on the strategy, we've been able to grow through a variety of different market conditions through a combination of organic and inorganic growth. We continue to add clients and do more business with them, with around 5,000 active clients at the end of the first half, up from around 4,100 at the end of 2023. Moving now to Slide 6. We have delivered extremely strong performance in H1, having grown our earnings and also grown our market share. We have seen growth in all our business segments. As you can see in our earnings release, the second quarter saw an exceptionally strong performance, with record revenue of $422 million and operating PBT of $92 million. Our second quarter profitability is over 50% higher than the average quarter in 2023 and 35% higher than the first quarter in 2024. Reported ROE for the second quarter was 29%, and excluding onetime items related to the IPO, ROE was 37%. During the second quarter, we were able to take advantage of the opportunities presented in the unusual conditions in the metals market. In this period of heightened market activity, we were able to provide consistent service to our clients as we continue to make markets and to provide ongoing access to liquidity, while keeping well within our risk parameters. Considering now our first half, we delivered strong growth, with revenue up 27% year-on-year to $788 million and adjusted operating profit also up 28% to $159 million, with reported ROE of 25%. Thanks to our strong performance in the first half, positive momentum in all our businesses and the continued execution of our growth initiatives, we have a positive outlook as we anticipate full year adjusted operating PBT of between around $280 million and $290 million, assuming more normalized market conditions and the likely impact of lower interest rates in the fourth quarter. Lastly, consistent with the capital allocation policy set out at IPO, we have announced a progressive dividend policy with a quarterly dividend of $0.14 per share, demonstrating our confidence in the outlook for the group and commitment to shareholder returns. As referenced in our previous earnings call, Slide 7 shows the key metrics that we, as a management team, are focused on: growth, margins and ROE, productivity and quality of earnings. In terms of growth, what we are most focused on is increasing adjusted operating profit after tax to our common shareholders. In the first half, we delivered strong double-digit growth in all these metrics, with revenue up 27%, adjusted operating PBT up 28% and a 28% increase in operating PAT up to $116 million. In terms of margins and ROE, our operating PBT margin remained at 20% and our reported ROE was 25%, up 2 percentage points year-on-year. And the increase in return on adjusted operating PAT attributable to common equity was even stronger, up to 32% from 30%. In terms of productivity in our business, operating PAT attributable to common equity holders per FTE was up to $101,000 on an annualized basis, up 3% year-on-year. With regard to quality of earnings, our Sharpe ratio is healthy 3.3. You may be aware that there are limitations in the Sharpe ratio metric, as growth as well as unusually profitable months as we had in the second quarter, have the counterintuitive impact of reducing the Sharpe ratio, although investors would not see this as a negative in terms of quality of earnings. On Slide 8, you can see that overall, the market in which we operate continues to grow at around 8% to 9%, which is consistent with historic averages. Within that, though, you can see that there's been a positive skew to commodity markets, which have grown at 22% year-on-year, a much faster rate than financial securities markets. Turning to Slide 9. 2022 was characterized by elevated volatility and higher commodity prices following the Ukraine invasion. In 2023 and so far this year, volatility in commodity prices have returned to more normalized levels. The Fed funds rate increased dramatically in 2022, and the forward curve now reflects rate cuts through 2025. Whilst in June, the forward curve was reflecting a higher for longer outlook as at the end of July, market expectations have returned to a similar level as at the start of the year. On Slide 10, we show the positive market dynamics in metals during the second quarter. The quarter presented opportunities due to updated guidance on restrictions placed on the trading of Russian metal on the London Metal Exchange. We saw an increase in prices and increase in market volume and an increase in client activity, which was beneficial to our Metals franchise. We were able to support increased activity, while staying within our strict risk parameters without increasing VAR and maintaining our historic positive profitability distribution. These market dislocations are important, not just because of the opportunity they present to increase profitability, but critically, by supporting our clients through such events. We cement our reputation as a reliable partner, which enables us to gain share over time. Moving on to Slide 11. We are committed to find ways to describe our results to investors, in ways which make our progress transparent and links to metrics that are intuitive and can be tracked against publicly available information, which, for our business, is exchange volumes. When you look at our various businesses on this basis, it's apparent that we are gaining share. We see increased market volumes across each service segment, while Marex's own volumes and importantly, revenues, are growing at a faster rate. Market volumes in Clearing, for example, are up 9% in the first half of 2024 versus the same period last year. While at Marex, we saw our volumes up 28% and revenues up 16%. Within Agency and Execution, in the energy markets, volumes rose 25%, while our revenue was up 42% on volumes that were up 66%. In the securities markets, volumes rose 6% in the market, while our volumes rose 16% and our revenues were up 25%. Market Making saw volumes up 22% in the market, while Marex saw revenues up 32% on volumes up 27%. This is a consistent picture of Marex growing faster than the market, which itself is growing at a healthy clip. Turning now to Slide 12. Our growth is powered by the addition of new clients and the increase in the business we do with our existing clients. In 2024, we have added 900 or so new clients, both through the Cowen acquisition and our ongoing onboarding efforts. The number of clients paying us more than $1 million on an annualized basis has also increased to 259. Now I'll pass on to Rob to talk you through the financials.

Thanks, Ian, and good morning, everyone. I'm really pleased to be with you today, presenting for the first time our half year update. Picking up on Slide 14, you can see that we've had a strong start to 2024. We have grown our revenues by 27% to $788 million, in part reflecting the impact of the Cowen acquisition, but notably due to strong organic growth, which contributed over 2/3 of the increase in revenues. This enabled us to grow operating profit to $159 million for the first half, up 28%. The second quarter was particularly strong, and our adjusted operating profit increased by 35% compared to the first quarter, to $92 million. We saw strong contributions from all our business segments as well as exceptional activity in the metals market, which benefited our Market Making business. Our adjusted operating margin reached 22% compared with 19% in the first quarter, demonstrating our platform's ability to deliver scale benefits. Historically, we've had minimal adjustments between our adjusted operating profit and our reported profit before tax. For the first half of 2024, these nonoperating items were just over $20 million, and there were four main components of this. Firstly, we incurred $8.3 million of costs associated with the IPO, predominantly legal and accounting costs to support our U.S. listing. Secondly, we incurred $2.2 million of tax expense relating to the vesting of our gross shares, which were connected with the IPO. Thirdly, we incurred $2.3 million on the fair value of the cash settlement option on the gross shares. This is a technical accounting booking, and as the gross shares were all settled in equity, there was an offset in retained earnings. Fourthly, we incurred $2.4 million of owner fees that we used to pay to our private equity shareholders, which was a function of profitability. These fees ceased at the point of the IPO and will not resume. Going forward, now we have completed the IPO, we would expect minimal adjustments between our adjusted operating profit and our reported profit before tax. Given this, a measure that we focus on as a management team is our return on adjusted operating profit after tax attributable to common equity holders. As a reminder, this return is calculated as follows: we tax effect our adjusted operating profit and then deduct the post-tax cost of our AT1 dividend, once the equity is the firm's total equity, excluding our AT1 capital. For the first half of 2024, our return on operating profit after tax attributable to common equity holders was 32%, up from 30% in the first half of 2023. The tax rate for the first half of 2024 was 26%, reflecting the number of adjusting items, which were not tax deductible. Over the medium term, we would expect our effective tax rate to be 25%. As part of the IPO, we also reorganized our share capital. This included doing a share consolidation. As a result, at the end of June, we had 70.3 million ordinary shares. This excludes 1.9 million treasury shares. Our adjusted basic earnings per share was $0.96 for the second quarter and $1.70 for the first half of 2024. On Slide 15, you can see that we have achieved double-digit revenue and operating growth across all of our business segments. In Clearing, revenues grew by 16% during the first half of 2024, reflecting growth in both commissions and net interest income. This was due in part to heightened market activity in the metals market, which increased margin requirements at exchanges and transaction volumes, but also due to the benefit of our growth initiatives in Australia, Singapore and in our prime services offerings. In Agency and execution, revenues grew by 32%, reflecting market share gains, positive market sentiment in the energy market and the benefit of recent acquisitions, primarily Cowen, which increased our capabilities in financial securities. In Market Making, revenue was up 23%, driven by market sentiment and metals trading, which benefited from heightened market activity across copper, aluminum, nickel, following revised guidance related to Russian materials on the LME. And in Hedging and Investment Solutions, revenue growth occurred across all regions, and was driven by favorable market conditions stemming from volatility in cocoa and coffee, while financial products benefited from positive investor sentiment and equity market performance as well as the benefits of our growth initiatives, which resulted in strong client trade flows in the first half of 2024. So in summary, a strong performance across all 4 of our business segments during the first half of 2024. Moving to Slide 16. As you can see, average client balances in the second quarter were $13.6 billion, up from $13.2 billion for the first quarter of 2024. Please be aware that the average balances for the quarter are based upon the month end. If we're to use daily average balances, our balances would have been up around 10% versus the first quarter, which was a key driver of the increase in net interest income during the quarter. As a result, net interest income rose to $101 million for the first half of 2024. The growth in net interest income primarily reflected three factors: higher average Fed fund rates, the impact of the Cowen Prime Services transaction, which we completed in December 2023 and reinvestment of maturing assets at higher yields. These factors were partially offset by higher interest payments to clients. It's important to remember that net interest income does not just impact our Clearing segment. For example, the interest earned by the Cowen Prime Services business is included within the Agency and Execution segment, and our Market Making and Hedging and Investment Solutions incur interest expense, as they use funding to support their activities. Clearly, the fact that rates have remained elevated in the first half of 2024 is beneficial to the business. As Ian mentioned, we do expect rate cuts late this year and into next year. We estimate that a 100 basis point decrease in rates will reduce operating profit by around $20 million. This is based upon the current book and does not take into account any future growth, which would partially mitigate the impact. On Slide 17, our capital allocation framework looks to balance a strong capital position, supporting both organic and inorganic growth opportunities with disciplined returns. We can build this out into four key areas. Firstly, we will maintain a strong capital position to support our investment-grade credit rating. Secondly, on organic growth, our investment will focus on targeted areas of our underlying business where we can earn an attractive return. Thirdly, on dividend, we have announced today an initial dividend of $10 million or $0.14 per share. This will be paid to shareholders of record on the 30th of August and is expected to be paid on the 16th of September 2024. And fourthly, with surplus capital, we will continue to make an active approach to selected M&A, focus on complementary businesses that support our current businesses while delivering attractive returns. As you can see on Slide 18, we continue to maintain prudent levels of surface capital and liquidity, which underpins our investment-grade credit ratings from both S&P and Fitch. These levels of surplus capital and liquidity also ensure that we are well positioned in periods of market turmoil. At the end of the first half of 2024, our total capital ratio was 276%, and we had liquidity headroom of $1.2 billion. Turning to Slide 19. I will conclude with a view on risk. We have a proactive and involved risk management approach at Marex. In Market Making, we are client flow-driven business, and do not take a directional view on prices. However, as the business is a market maker, we do carry some inventory. The VAR, value at risk, has remained at around $2.5 million. As Ian said, we were able to support our clients during this period, providing ongoing access to liquidity, while keeping well within our risk parameters without increasing VAR and without increasing trading losses. Although we did have one week where we made a small loss, the number of positive trading days has remained consistent to 87%. During the first half of 2024, we wrote off 5 specific historical provisions, which have been fully provided for in 2020 and 2022. Within our P&L for the first half of 2024, we had a release of around $2 million, reflecting our proactive credit risk management approach, which has resulted in partial recoveries of provisions we've previously taken. We maintain a very prudent approach to monitoring credit risk. Now I'll hand you back to Ian for an operational update and some concluding remarks.

Thanks, Rob. In the last few slides, we thought it would be helpful to give you another lens to understand how we're growing. Most information we provided at a segment level, and we thought it would be helpful to show you the geographic element of our growth and diversification. Turning now to Slide 21. The commodity markets, in particular, are well served out of the European time zone. In many of our franchises across this region, we've built market-leading positions in the core commodity markets. We continue to expand our offering in Clearing. We became the first non-bank FCM to become an LCH swap clearing member in June 2024, going live at the end of July and clearing our first trade earlier this month, and we're seeing interest from a large number of potential clients for this service. The acquisition of ED&F Man Capital Markets and OTCex gave us a footprint in the Middle East where we currently have over 60 people, and we're seeing a lot of interest from people moving to Dubai and client interest in the region. We continue to be able to attract successful teams to our platform, and are looking to build our teams in the Middle East. For example, in FX, where we are making investments to expand our capabilities in the second half of the year. On Slide 22, acquisitions have been an important part of our growth in the Americas, with both RCG and ED&F Man, providing scale in a very large and growing market. We now have over 700 people across 19 offices in the Americas, providing all of our services on a cross-asset class basis. The business is performing well, with growth in all the core commodity businesses, Metals, Energy and Agriculture, so far in 2024. The recently acquired Prime Services business is contributing to growth, with around 70% of the revenue in the U.S. market. Integration of that acquisition is progressing well, and we have important system integration milestones over the next few months. We're also making a series of team hires to fill product coverage gaps. We continue to monitor opportunities for further consolidation within our core services. This is in line with the capital allocation priorities discussed by Rob, which include an active approach to selective M&A. On Slide 23, we see significant opportunities in Asia Pacific. We've had a presence in Asia for over a decade now, initially focused on the energy markets of Singapore, which is our regional head office. The carrying memberships we obtained at the end of 2023, with ASX and SGX, support the growth and scalability of our platform, and mean we can offer more services to more clients. We have made good progress on boarding new clearing clients with strong uptake in energy clearing on ASX, given this is a concentrated market with good opportunities in other asset classes in future. We have also been growing our footprint in the broader APAC region. The ED&F acquisition gave us capabilities on Australia, and the recent addition of clearing capabilities in the country is supporting growth, providing margin expansion opportunity as our investments bring increased scale benefits in the country. A great example of scalability of our platform is with our recently announced new office in New Zealand. We opened this office earlier this year, which brings new clients in carbon, energy and dairy. Our clearing memberships with ASX and SGX mean that these new clients can also clear directly with us, something they couldn't do previously, enhancing our relevance to them from day 1 and demonstrating the value of our platform. Our Hedging and Investment Solutions business in APAC is also performing well, with additional hires expanding our distribution capabilities and supporting growth. Moving to Slide 25. I hope that we have provided you with a good sense of the strong performance in the first half, including a very strong second quarter and the good progress we are making with our growth initiatives. Thanks to the combination of these things. We have a positive outlook for the full year. We anticipate full year adjusted operating PBT to be between $280 million and $290 million. We continue to be very proud of the scalable platform we have built at Marex and of the consecutive growth that we have delivered year after year and our ability to deliver a strong performance across a variety of market conditions. We have a client-driven business model with prudent approach to risk and maintain surplus capital and liquidity, which positions us well to take advantage of market opportunities, as you can see from our performance in the second quarter. Against that backdrop, we are pleased to announce the dividend from the third quarter. Our progressive dividend policy signals the Board's commitment to balance a healthy financial position, growth and returns to our shareholders. And with that, I'd now like to open for questions.

[Operator Instructions] We will now take the first question from the line of Patrick Moley from Piper Sandler.

Yes. I just had one on the adjusted pretax income guidance. Ian, could you maybe just elaborate on some of the assumptions you're baking in there around maybe margins, where you expect interest rates to go for the rest of the year and M&A contribution that you're baking in from some of these growth initiatives?

Sure. Thanks, Patrick. So a few things. I mean, obviously, in terms of sort of interest rates, we're using sort of the forward curve as the basis for sort of the forecast. And I think as we sort of showed in the materials, the forward curve is now sort of anticipating something very similar to what I think existed sort of at the beginning of the year. But that's sort of the basis that we would have with regard to interest rates. So some series of sort of cuts in the latter part of the year. I think that as we think about sort of the second half, we want to ensure that we're not making sort of heroic assumptions about the kind of environment that we're going to be operating in. So we broadly have in mind a much more normalized environment. We're also aware that there is some limited seasonality in our sort of earnings, if you looked at last year, I think it was 54% of our earnings were in the first half and 46% in the second. And so in the second half, you just typically have 2 slower summer months in December, and so you just want to reflect that seasonality. But I think that broadly what animates -- this is a view that we're obviously very pleased with how we did in the second quarter and how strong our first half was. We feel very positive about the franchise and the business we've built. And we are also sort of cognizant that we're still building credibility with the market, and so we want to ensure that what we're sort of indicating on numbers that we have, sort of very high confidence that we can deliver again. Did I address all your points, Patrick? I want to make sure I did.

Sorry. One moment, please. We will now take the next question. Patrick, if you need a follow-up [Operator Instructions]. The next question comes from the line of Dan Fannon from Jefferies.

I wanted to follow up just on the second quarter environment, and you talked about what happened with the LME in Russia. So curious if we could size, maybe the contribution of that and/or maybe how the market is operating today and or the period of time for which we may be earned outsized revenues?

Yes. So I think that -- I mean you have a sense of that Market Making was sort of strong in the first half of '24 versus the first half of '23. And I think Metals is a component of that. But I think it's also important to recognize that Market Making is a quite diversified activity for us. And while it's true that the Metals was very strong in the first half of this year, actually, some of the Energy Market Making was lower. So all of that sort of is reflected in the fact that on a go-forward basis, one would sort of expect Market Making to continue to be quite strong. Notwithstanding that, as I'm sure you're aware, there was levels of open interest price movement, interest from clients that was sort of unusual in the sort of second quarter, and that clearly created opportunities for us. It created opportunities in a couple of centers. One is obviously just sort of the profit opportunity of servicing the flow of clients. But also really importantly, it gives us opportunity to just show how Marex can be a reliable partner for clients. And so just by way of example, there was one sort of large clients that was looking to adjust their position, went to their normal provider and was on -- because of the volatility in the marketplace, was only quoted on 20% of their position. And then they came to Marex and we knew where all the sort of pool of liquidity were, and we were able to close them on the full position that they had. And as a consequence, I think we've been able to reinforce our position with a big client in the marketplace. And on a go-forward basis, that's going to help. So when we think about these sort of more difficult markets where there's a lot of volatility, there are opportunities not just for profit, but actually to establish your credibility in the marketplace, and I think we did that. Now in terms of the metal markets going forward, I mean, I think that it will certainly come off, sort of very positive circumstances that we saw in the second quarter. But I think our sense at the moment is sort of settling at a higher level than it had been at sort of previously, although obviously, there's no sort of certainty that, that persists. But it does feel as though there's sort of more interest in metals. We certainly saw many clients who have not traded metals, expressed any sort of genuine interest in the metals product, and we're able to sort of cross-sell those clients very successfully. So I think this is a general matter, it's more positive for us than it was, but not as positive as it was in the second quarter.

Great. That's helpful. And I guess just as a follow-up separately just around inorganic and M&A., you guys obviously have been acquisitive in the past. You talked about being acquisitive going forward. Can you talk about the current dialogue, the backdrop and ultimately, the scope of that, meaning small versus large and where your focus really is today?

Yes. I think that -- I mean we have a very active pipeline. I think that -- there's a couple of dimensions to that. I mean, partly, we were very engaged, obviously, with the IPO in the sort of first part of this year. So to some extent, we've been able to sort of shift a lot of resources that we're focused on that, to M&A. And as a result, there's a lot of activity with regard to the pipeline in that regard. We're certainly finding as a public company, we have more inbound, and I think that our credibility with clients or potential acquisitions is actually higher as a sort of public company. So those are sort of positive. It's really important for us to maintain discipline in pricing and our returns. And that obviously, we are sort of applying and we sort of recognize how critically important that is as a public company, to show that the discipline that we exhibited previously continues to be exhibited. In terms of what are we seeing, we're certainly seeing opportunities to expand regionally. And our focus is, as I think we've shared with on these calls is the Middle East, APAC and particularly Australia and then also the United States. And so we're seeing opportunities there. We're always looking to increase diversification and resilience of our business by adding either products or into geographies that we're not sort of currently involved with or adding clients and capabilities that we don't currently have. And we certainly are seeing opportunities of those kinds. And then in terms of scale, it really does range, so there are sort of some small bolt-on type acquisitions that sort of feel sort of some very niche product holes, which we're looking at. We're looking at some things that would generate $10 million to $20 million of sort of additional earnings, and then we're thinking of some things potentially in between those things. So a wide range of things, and hopefully, we'll be able to close on something in the second half of the year. But most important for us is not to do anything that breaks with the historical financial discipline.

We will now take the next question from the line of Ben Budish from Barclays.

I wanted to just ask a few more details on Q1 -- or Q2, the quarter-over-quarter performance, both in net interest income and Metals. So on the interest income side, you indicated that the average client balances were up, I think, on a daily basis around 10%, but your net interest income was up quite a bit more than that quarter-over-quarter. So just wondering what else was the driver there? And then similarly, on the Metal side, your revenues outpaced the volumes, and it looks like the average revenue per trade picked up. Ian, in your comments, you indicated an opportunity to take advantage of basically more opportunities to serve your clients given the liquidity constraints in the market. How should we think about what normal looks like? You indicated the back half of the year based on a more kind of normalized outlook. So how should that trend? And how should we maybe be thinking about future upside in times of market volatility?

Well, why don't you take the NII question, Rob, and then I'll talk to the Metals question.

Okay. Perfect. Ben, obviously, there are many factors that drive our net interest income, but there were 2 key drivers of the increase in the second quarter. Firstly, just to be clear, within the materials that we released today, average balances for the quarter are calculated off of 4-point average by using month end. What actually drives our net interest income is the average daily balance, which can fluctuate significantly for various factors, including current flow and margin requirements of exchanges. This is particularly the case in the second quarter as we supported our metal clients. So if I look at the average daily balances for the quarter, these were approximately 10% higher than the first quarter. And this just -- this added just under $20 million of additional income in the quarter. As we build out our reporting capability over the coming months, we will look over time to disclose our average daily balances rather than the 4-point average. Secondly, we have reinvested a number of maturing assets into higher-yielding investment. And I think the other point that I would make is that although the average proportion of clients where we pay interest out is consistent at 60% quarter-on-quarter. We do get some fluctuations on a daily basis, which does give some rise to sort of gains in the quarter, particularly on Metal with clients where we tend to pay out slightly less.

Thanks, Rob. And then just with regard to your sort of question about Metals and the increase in -- or Market Making and increase in revenues versus increases in volumes. I mean, I think that as I think about what we're sort of sharing with regard to volumes and pricing. And I think those relationships are quite robust. For Clearing. They're quite robust for sort of the Agency and Execution businesses, and I think they're broadly indicative within the market-making world. So I think that what we saw in the quarter, and it's reflected in those numbers, is that at times of higher volatility and at times where there's sort of fewer people willing to be a market maker in sight for clients, those are opportunities where you would expect your revenue per transaction to be larger. And that's what's borne out. I don't think, to the point of your question, that that's a level that would maintain. But I do think that there will be ongoing opportunities in Market Making when there are dislocations or changes or just movements that require people to adjust hedges. And hopefully, what everybody will recognize here is when those opportunities arise, Marex, through a combination of its sort of capabilities and client relationships, is in a position to take advantage of those opportunities. So in a period where there aren't those kind of dislocations or opportunities, we wouldn't expect to see the same kind of revenues per transaction, but we do believe that there will be other periods where we can replicate this kind of performance. You obviously just can't know when those are going to be.

Got it. Very helpful. Maybe just one follow-up, a separate question on the structured notes offering. You talked about equity markets and other factors sort of being positive drivers in the quarter. Just how are you thinking about the next, say, 12 to 18 months? What are the key drivers, to the extent that they're in your control, geographic expansion, new distribution partnerships and things like that? How should we think about the trajectory there?

So Ben, just for clarity, you're asking for just for structured notes, what sort of our view is?

Yes. Yes.

Yes. Look, I mean, I think that we continue to see a lot of demand for sort of Marex and structured notes. I do think that we are keen to diversify our funding sources away from just structured notes. And I think that's something that in the fullness of time, we will realize. But we're certainly seeing sort of genuine interest, and so I would anticipate that we will be able to continue to grow broadly speaking, at the rates that we've grown historically for that particular product.

We will now take the next question from the line of Carlos Gomez-Lopez from HSBC.

Congratulations on the current results. Two questions. The first one about M&A, I should say, you are receiving more inbound, I guess, offers as a public company. Have you also felt that perhaps the market has become more pricey because now it is possible to -- you have listed, you have proven that, that is possible to be a listed company and therefore, people can be perhaps a bit more really when it comes to selling the business to you. And second, in terms of your capitalization, which is as you said, getting stronger, have you revisited with the recognition is what you would need to achieve a higher investment grade? I would imagine that being a public company, having more financial flexibility, also put you in a better stance in front of the rating agencies.

Yes. So I think that, that -- sort of to your question of -- are we sort of under sort of more pressure to pay, more for acquisitions because we're a public company. I mean I think that there's sort of a general sense that many of the companies that we're talking to have had successful sort of first half of the year. And so I think that the sort of generally -- and I don't think it's because we're a public company, but generally, there's sort of a sense that, that sort of impacts pricing. And I think that, that's really the reason that I've been at such pains to emphasize that we have very strict sort of financial hurdles. We recognize how important M&A is to grow, but we also recognize how important -- our credibility as sort of say the acquirer of properties and being able to sort of attract, sort of good businesses and then be able to grow them as part of our platform is sort of to ongoing valuation. And so what is important for us is to show that whatever it is that we're going to acquire fits well within sort of our financial targets, which are quite sort of demanding. So I think there's something to your point that we're public. There's something to your point that businesses that are selling sort of come off a fairly robust sort of performance. But on the other hand, we recognize how important it is for us to continue to be very disciplined, and I think we are... What was the second?

What do you think about ratings?

I mean, as a general matter, I think that we're not actively looking to get upgraded. I mean, only because I think that that's a real challenge and sort of being solidly investment grade is sort of sufficient. If are the result of all the things that we're doing to strengthen the firm in terms of earnings, in terms of reliability of earnings, in terms of our liquidity and our capital actually leads to the rating agencies upgrading us, I think we'd obviously be very pleased and grateful. But I don't think we're actively looking to change that. What would you say [ Paolo ]?

Yes, we have an active dialogue, as you'd expect with S&P and Fitch both to rate us. We think that we are performing in line with their expectations, but they've got a very high bar for upgrades. And so I think we will have to have a longer periods of demonstrating the type of performance that you'll see in this half.

In the past, you have said you would need perhaps as much as 40% more capital. Have you revisited that calculation?

No, I think the sort of guideline that we've been given for capital as a component of the upgrade, which I think is -- it's only one element of the rate in calculation, is that the ratio would need to be about, for us about 25%, maybe a little bit less than that 20% higher. And that hasn't changed. We haven't had any sort of discussion with them that suggests that it could be narrower than that. But it is only one component, and there are other factors, which I think play positively to sort of a ratings improvement.

There are no further questions at this time. I would now like to turn the conference back to Ian Lowitt for closing remarks.

Good. Well, thank you all for joining us. It's obviously an exciting sort of moment for us to have sort of first earnings call as a sort of public company, and it's great to be able to share the very sort of strong results with all of you and also our sort of sense of enthusiasm and optimism for the future. We really are building an extremely competitive and effective firm here, and all of the sort of long-term drivers of success that we have talked about seems to be playing out in exactly the way that we had anticipated and hoped. So it's obviously been a good quarter, and we recognize that it's just one, and we have to sort of keep doing this. And we're obviously moving forward with the third quarter and thinking about all the things we need to do for 2025 and beyond. So thanks for joining us and look forward to having follow-up conversations with some of you sort of post this meeting and you having an opportunity to sort of reflect on the earnings.