Marex Group plc (MRX) Q4 FY2025 Earnings Call Transcript & Summary

Hello, everyone. Thank you for joining us, and welcome to the Marex' Q4 2025 Earnings Call. [Operator Instructions] I will now hand the call over to Adam Strachan, Head of Investor Relations. Please go ahead.

Good morning, everyone, and thanks for joining us today for Marex' Fourth Quarter 2025 Earnings Conference Call. Speaking today are Ian Lowitt, Group CEO; and Rob Irvin, Group CFO. After Ian and Rob have made their formal remarks, we will open the call to questions; and Paolo Tonucci, our Chief Strategist and CEO of Capital Markets, will join for Q&A as usual. Before we begin, I would like to remind everyone that certain matters discussed in today's conference call are forward-looking statements relating to future events, management's plans and objectives for the business, and the future financial performance of the company that are subject to risks and uncertainties. Actual results could differ materially from those anticipated in these forward-looking statements. The risk factors that may affect results are referred to in Marex' press release issued today. The forward-looking statements made today are as of the date of this call, and Marex does not undertake any obligation to update their forward-looking statements. Finally, the speakers may refer to certain adjusted or non-IFRS financial measures on this call. A reconciliation schedule of the non-IFRS financial measures to the most directly comparable IFRS measures is also available in the earnings release issued today. A copy of today's release and investor presentation may be obtained by visiting the Investor Relations page of the website at marex.com. I will now turn the call over to Ian.

Good morning, and welcome to our fourth quarter and full year 2025 earnings call. 2025 was a year of continued growth for Marex. We delivered another year of record financial performance with revenue of over $2 billion. Over the past 5 years, we have increased profitability sevenfold from $61 million in 2020 to $418 million in 2025. We have done this by broadening our product offering across our 4 interconnected services, expanding geographically and combining organic growth with targeted M&A. Acquiring, integrating and scaling businesses is embedded in the DNA of Marex, enabling us to add clients and deepen relationships across products, asset classes and geographies. Our platform and organization are difficult to replicate, increasing further the high barriers to entry that we benefit from in our industry. The results we are reporting today demonstrate that our strategy is effective and continues to deliver value for our shareholders. On Slide 4, you see that we closed the year with record profitability in the fourth quarter. Revenues grew 38% from $416 million to $572 million, and adjusted profit before tax increased 41% to $115 million. We grew EPS by 50% to $1.14 per share. Pleasingly, this performance was not driven by an idiosyncratic market event, but by broad-based strength across the firm. Full year revenue grew 27% from $1.6 billion to just over $2 billion, and adjusted PBT increased 30% to $418 million. Profit after tax increased at a faster rate, benefiting from an improved effective tax rate, which declined from 26% to 25%, reflecting our evolving geographic mix. Full year EPS grew 39% to $4.12. We experienced growth across all our segments, with continued strength and client balance growth in Clearing, strong performance in Agency and Execution, driven in particular by Prime, which I'll come back to, as well as good momentum in Market Making and Hedging and Investment Solutions. In Clearing, average customer balances increased over the year by 18% to $14 billion in the fourth quarter with balances growing steadily quarter-by-quarter. We continue to execute our M&A strategy, strengthening earnings through disciplined integration and development of recent acquisitions. We have developed a repeatable model for identifying complementary assets, acquiring them at attractive prices, integrating them efficiently and enhancing their earnings power as part of the Marex platform. That capability continues to be a sustainable competitive advantage for the firm. We are very selective in the opportunities we pursue and maintain high conviction in our ability to meet our return objectives and grow acquisitions once integrated. This is evidenced by the acquisitions we completed during the year, which are delivering in line with or ahead of expectations. Aarna provided an opportunity to establish a clearing presence in the Middle East. The day 1 synergies we identified, which increased profitability by around 50% were realized as expected. Hamilton Court provides us with access to a number of U.K. and EU corporates that we did not serve previously. It expands our client base and creates meaningful cross-sell opportunities. Winterflood, which we completed in December has started strongly and enhances our U.K. equity market-making franchise while creating cross-sell opportunities with leading U.K. participants. Following the subsequent sale of Winterflood's custody business, which we expect to complete in Q2, we will have acquired Winterflood at a meaningful discount to tangible book value, a transaction that we believe will generate substantial long-term value for our shareholders. Alongside M&A, we continue to execute a number of organic growth initiatives, including digital assets within Clearing, expanding our footprint in Asia, the Middle East and Brazil and growing our Prime brokerage and FX capabilities. A meaningful contributor to the diversification of the firm and an example of how we scale businesses once integrated into our platform is Prime Services. We acquired Prime in December 2023 for approximately $25 million of premium. In 2025, it generated over $250 million of revenue and now accounts for around 1/4 of the group's profitability. Prime also adds diversification to our earnings profile broadening our revenue drivers beyond traditional exchange volume-linked activity. Finally, as the breadth of our platform expands, we're increasingly scaling relationships with larger, more sophisticated clients. Something I'll touch on in more detail shortly. On Slide 5, you can see the consistent improvement in our key financial metrics, revenue, profitability, earnings per share and return on equity. Beyond the headline growth, what is particularly encouraging is the quality of that growth. Full year revenues increased 27% to over $2 billion. Adjusted profit before tax grew faster than revenues, up 30% for the year, and EPS increased 39%, reflecting the improved tax rate. Reported return on equity improved to 27.6% and underscoring the capital efficiency of the model and pretax margins were 21%. Looking now at the operating environment in more detail on Slide 6. As we step back and look at the operating environment during the year, it is clear that on the whole, we have enjoyed a supportive backdrop for our services. The spike in volatility in April was notable at the start of the second quarter. While April was a strong month, it was not outsized in the context of the full year. We continue to deliver strong growth even as volumes and volatility reduced from April's peak, including through the seasonally quiet third quarter and amid the impact of the short report. We also absorbed the impact of lower interest rates in Clearing as we grew our client balances, which Rob will cover in more detail. In Q4, exchange volumes increased, up 5% year-on-year and 8% higher than the third quarter, while volatility also picked up modestly. Equity markets being at or around all-time highs in Q4 helped our Prime business, which is a function of customer balances and spreads. It also, to some extent, support solutions, where we tend to see higher client activity in structured products when markets are rising. In this context, our fourth quarter profits were up 41% year-on-year and up 14% compared to the third quarter, and also above our prior record in Q2. This demonstrates that we are growing faster than underlying market volumes and that we have set up the firm to deliver growth through a variety of environments. I'll now hand over to Rob, who will take you through the financials in more detail.

Thanks, Ian, and good morning, everyone. I'll take you through our financial performance for the full year and the fourth quarter following the same structure as usual. For the full year, we grew revenue by 27% to $2.02 billion with growth across all our business segments. Total expenses increased by 24%, reflecting the higher revenues as well as ongoing investment to support growth and acquisitions during the year. Adjusted PBT margin expanded by 60 basis points to 20.7%, delivering a 30% growth in adjusted PBT to $418 million. The effective tax rate for the full year decreased from 26% to 25%, reflecting mainly the geographical mix of our earnings. This is an excellent result for the year, capped off by the fourth quarter, which was the strongest quarter in our history. Q4 revenue of $572 million was up 38% versus last year, while total expenses grew 36%, broadly in line with revenues driven by higher compensation costs and ongoing investments to support growth. Adjusted profit before tax increased 41% to $115 million as margins increased 50 basis points to 20.1%. Our adjusted return on equity remained very strong at 30.8%, and we grew basic EPS to $1.14 per share, up 50% year-on-year. Focusing now on our segmental performance, starting with Clearing. In the fourth quarter, Clearing revenue increased 10% to $137 million. This was driven by growth across all revenue lines, higher volumes and continued momentum in client onboarding, particularly large institutional client wins during 2025. Average Clearing balances increased to $14 billion from $11.9 billion in the fourth quarter of last year, reflecting the contribution from Aarna and new client wins. Net commission income increased 6%, reflecting higher client activity as well as our broadened product offerings across regions. Net interest income was stable at $59 million, the durability of Clearing NII, even as rates have declined, shows how well this business is positioned as growth in client balances offset these rate pressures. Adjusted profit before tax for the quarter increased to $67 million with margins at 49%. For the full year, Clearing revenue increased 13% to $528 million with sustained growth in client balances, new client wins and an expanded product offering. Adjusted profit before tax increased to $262 million, with margins at 50%, reflecting disciplined investments to support growth. Overall, the fourth quarter capped a year of sustained momentum in Clearing with strong client acquisition, higher balances and disciplined investment, positioning us well going into 2026. Turning now to Agency and Execution. This quarter, we're providing a more granular breakdown of performance across the asset classes to reflect the continued expansion and diversification of the platform. The fourth quarter was another strong period with revenue increasing 51% to $290 million. This is driven primarily by strong growth in securities, reflecting the continued strategic expansion of Prime alongside more modest growth in energy. Securities revenues increased to $209 million, reflecting broad-based growth across the platform, with all major asset classes contributing. Prime was again a standout performer, with revenue increasing to $87 million, supported by a significant increase in clients on our platform and continued expansion of our securities-based swaps offering. FX also performed strongly, benefiting from the integration of Hamilton Court, which completed in July and growth across the broader FX platform. In energy, revenue increased to $76 million, driven by higher activity in U.K. and European gas and power markets and continued capability expansion. Adjusted profit before tax increased to $89 million in the quarter with margins expanding to 31%, reflecting growth in higher-margin activities, particularly Prime. For the full year, Agency and Execution revenue increased to $1.05 billion, with strong contributions from both securities and energy. Adjusted profit before tax increased to $281 million reflecting the continued build-out of a more diversified, high-quality platform with Prime central to that transformation. The structural improvements we made are now clearly visible in the margin profile of the business, which expanded to 27%. Turning now to Market Making. Fourth quarter revenue grew 83% to $81 million, driven by a particularly strong performance in Metals and Securities, partly offset by softer conditions in agriculture and energy. Metals delivered the second-best quarter on record with revenue increasing to $50 million. While supportive market conditions and high volatility provided a favorable backdrop, performance was driven by increased client activity across both precious and base metals. Securities revenue increased to $20 million, reflecting the inclusion of Winterflood following the completion in December, alongside improved performance from our FX and credit desks. In energy, revenue was lower year-on-year as the prior period benefited from elevated volatility and large client flows, whereas the fourth quarter in 2025 saw more muted Hedging activity. Agriculture also moderated year-on-year, reflecting a more challenging macro backdrop and elevated commodity prices although performance improved sequentially from the third quarter as conditions stabilized. Adjusted profit before tax increased to $27 million, with margins expanding to 33%, a strong revenue growth, more than offset higher front office compensation and the additional headcount following the Winterflood acquisition. For the full year, revenue increased to $236 million driven primarily by strong performance in both Metals and Securities, which, more than offset softer conditions in agriculture. Adjusted profit before tax increased to $69 million with margins at 29%, reflecting investment through the year and the mix of revenues across the platform. Finally, solutions, which had its strongest quarter on record in Q4. Revenue increased by 57% to $63 million reflecting growth across both Financial Products and Hedging Solutions. Hedging Solutions revenue increased to $23 million, supported by institutional client wins and higher activity in energy and FX, more than offsetting softer agricultural markets. Financial Products revenue increased to $40 million, reflecting continued strength in structured products. Performance was supported by improved market conditions, expanded exchange access and regional expansion, particularly in Asia. The rollout of our new technology platform also supported higher issuance volumes and broader product accessibility. Adjusted profit before tax increased to $14 million, with margins improving to 23% despite continued investment in technology and headcount. For the full year, revenue increased to $197 million reflecting sustained growth across both businesses. Adjusted profit before tax increased to $44 million, with margins at 22%, reflecting our investment to support long-term scalability. Turning now to net interest income at the group level. For the full year, NII was $153 million compared to $227 million in the prior year. Interest income increased 4% year-on-year as $4.8 billion increase in average balances, more than offset 100 basis points decline in rates. However, interest expense increased 21%, reflecting $1.5 billion of additional average structured note balance and senior debt issuance, which, more than offset the increase in interest income. NII for Q4 was $26 million, down $13 million compared to Q3 2025, primarily reflecting the further 40 basis point decline in the average Fed funds rate during the quarter. Interest income was $181 million as lower rates offset growth in average balances. Interest expense was broadly flat, with a decrease in rates being broadly offset by higher structured note balance. Throughout the quarter, we continue to hold significant liquidity headroom, while this creates a modest near-term headroom to group NII, it is a deliberate choice that strengthens the balance sheet and positions us to support clients and pursue future growth opportunities. Importantly, as we highlighted in the Clearing segment, Clearing NII remains resilient. Average Clearing balances increased to $14 billion in the fourth quarter, and that growth has continued to broadly offset the impact of lower rates. I'll briefly touch on expenses as it's important to understand how our cost base evolves as we grow. As I've said before, our cost base is highly flexible, with around 55% of total expenses in Q4 variable in nature, which are linked to the performance of the group. In the front office, variable expenses primarily flex with revenues, while back office variable expenses flex with the overall profitability of the group. Given the strong revenue performance year-over-year, $54 million of the increase in total expenses was driven by higher variable compensation, which included variable compensation for recently completed acquisitions, a further $18 million related to the fixed costs associated with the recently completed acquisitions. These acquisition-related costs are not the one-off transaction expenses, but the continuing operating costs of growing these businesses, which generate revenue and drive overall profitability, and an additional $50 million to support the future organic growth of the organization and investment in control and support, notably technology. These investment decisions are deliberate choices we have made to support the future growth of the organization. Looking now at our balance sheet. As a reminder, approximately 80% of our balance sheet supports client activity and consists of high-quality liquid assets. Total assets increased to $35 million (sic) [ $35 billion ] at the end of December, driven by growth in Clearing client balances and securities activity, including Prime. After netting client assets and liabilities of the remaining residual balance sheet, primarily comprises of corporate cash and other assets against group liabilities, including our structured notes portfolio and senior note issuance. Turning now to capital and liquidity. We continue to manage capital and liquidity prudently, maintaining substantial headroom above regulatory requirements to ensure resilience across market environments. At year-end 2025, regulatory capital was $927 million against the requirement of $403 million, representing a capital ratio of 230%. This provides a substantial buffer and supports our investment-grade credit ratings. Total corporate funding increased to $6.2 billion, up from $3.8 billion at year-end 2024, primarily reflecting structured notes issuance and a senior debt issuance of $500 million during the year. We maintained approximately $1 billion of liquidity headroom at year-end. In line with the growth of the business, we have increased our liquidity stress testing limits and associated buffers to ensure we remain well positioned to support higher client volumes while maintaining a conservative risk profile. While carrying excess liquidity creates a modest drag on net interest income, maintaining substantial headroom remains a deliberate and conservative choice that strengthens the balance sheet and ensures we're well positioned to support clients and navigate periods of market volatility. Overall, our capital and liquidity framework remains robust, scalable and aligned with our growth ambitions. Finally, we announced again a quarterly dividend of $0.15 per share for the fourth quarter of 2025 to be paid to shareholders on the 31st of March this year. Finally, we have a proactive and involved risk management approach at Marex. In Market Making, we're a client flow-driven business and do not take a directional view on prices. However, we do carry a small level of inventory to source client demand and capture the trading spreads. Average daily VAR was $3.8 million for the full year and remains at a very low level relative to the growth in the overall business. In terms of credit risk, we had a realized credit loss of $800,000, representing less than 0.1% of revenues. Now I'll hand you back to Ian.

Thanks, Rob. Let me spend a moment on clients because this is the critical component of the Marex growth story. As our platform has expanded, particularly since we went public, we are increasingly having success with larger and more sophisticated clients. You can see on Slide 19 that while active clients, which we now define as those generating over $25,000 in annual revenue, grew 19% year-on-year, revenues grew 32%, and average revenue per client increased 11%. Consistent with my commentary throughout the year, that growth is particularly evident amongst our largest clients. Our $5 million-plus client cohort increased by 36% and revenue from that segment grew by over 80%, with average revenue per client up 35%. Today, those top circa 50 clients generate on average $14 million annually versus $10 million last year and drove over $300 million of our revenue growth in 2025. Importantly, this does not mean we are becoming overly concentrated. The top cohort represents around 1/3 of firm revenue, but we remain diversified across, more than 3,400 active clients and no single counterparty represents undue exposure. We included Slide 20 at last year's Investor Day and again at the half year results. We think it is a helpful way to demonstrate the quality and reliability of our earnings. On the left-hand side of the chart, we show the consistent year-on-year growth in our average monthly PBT, and the relatively low variability in distribution, driving an extremely high Sharpe ratio of 6.2% for the full year 2025. This shows that our profitability is not driven by a few exceptional months. It is stable and in a narrow band, demonstrating high-quality earnings. On the right of the chart, we show the distribution of our daily profitability for the full year versus last year. You can see the distribution has shifted to the right by around $400,000 year-over-year from around $1.3 million to $1.7 million. The left tail remains very small, with only 6 negative days during the year. In the right tail, you can also see how we have successfully captured market opportunities with more above-average profitability days. This is not just successful Market Making. We are doing more larger transactions with clients as we become more relevant to sophisticated market participants. So in conclusion, at our Investor Day last April, we described our goal of delivering sustainable profit growth with roughly 10% organic and 5% to 10% from selective inorganic opportunities. 2025 performance reinforces our belief in our competitive position and ability to continue to deliver growth. Structural shifts in bank focus, high barriers to entry, the breadth of our capabilities and the quality of our service creates opportunities for Marex. Our M&A pipeline remains attractive. The opportunity set continues to expand as our scale and reputation improve, and we are increasingly seeing inbound opportunities. As a result, we are able to be more selective, executing only those transactions where we have high conviction in our ability to enhance returns through integration and scale. Our digital assets initiatives continue to progress well, as we are seeing growing engagement from clients coming to us to solve real-world use cases for them. We already have 24/7 trading capability in place for our digital assets offering and solutions and plan to extend this imminently to Clearing, where we clear crypto futures for clients primarily on CME. This will also give us the ability to support prediction markets at limited additional cost. Towards the end of 2025, we went live as a day 1 clearer for SGX derivatives launch of digital asset perpetual futures, meeting institutional demand for transparent access to regulated crypto derivatives, and we are actively involved in the CFTC's pilot program for the acceptance of stablecoin and crypto as collateral for futures, and we expect to go live with this at the end of March. While still early days, we believe these initiatives position us strongly as market structure continues to evolve, and they represent a meaningful long-term opportunity for the firm. Artificial intelligence is clearly a major theme in the markets today, and given how topical it is, I would like to address it. We see AI as an accelerant to our competitive advantages and are already deploying it internally to enhance productivity, improve risk management and deepen client engagement. As a vertically integrated firm with deep expertise and institutional knowledge of market infrastructure, and strong client relationships, we believe our competitive moats are reinforced, not threatened by the technological advancement. Looking ahead, we remain confident in our ability to continue to deliver sustainable growth across a range of market environments. For 11 straight years, we have reported to our Board and shareholders that Marex has delivered record profitability. We are extremely proud of that track record, and we feel confident in our ability to continue that trajectory in 2026 and beyond. We remain committed to disciplined capital allocation, excellent client service and long-term value creation for shareholders. Finally, you may have seen, we announced a second Investor Day on March 26 in New York. We look forward to seeing as many of you as possible there later this month. With that, I'll hand it back to the operator to open the line for questions.

[Operator Instructions] Your first question comes from the line of Dan Fannon with Jefferies.

Ian, I was hoping you could just talk a little bit more about the current environment given we're in early March and a lot has changed, not only recently here in the last week or so, but just even year-to-date, given volatility. So I was hoping to get an update just in terms of how clients are behaving, maybe balances or any real changes in the environment that you've seen so far?

Dan, yes, look, as you say in your question, it's been a very interesting couple of months. And certainly, it feels like there's a great deal going on at the moment. I mean, I think, that there are a series of things that I would regard as sort of tailwinds for our business, and then a series of things that probably sort of feel more like headwinds. The tailwinds obviously increased exchange volumes, which are actually quite a bit higher this year than they were last year. Volatility has been a lot higher, particularly around commodities. I mean, I think, as we've spoken on this call a few times, when we think about volatility, there's sort of a Goldilocks level of volatility, which is sort of active volatility, but it's not sort of excessive or too high. I think the volatility that we've seen in January, and we're seeing, again, in March, it doesn't fall into sort of the Goldilocks category. It's pretty high, and it makes a big difference and puts a lot of pressure on clients. So I think that it's very active. I think there's a lot of uncertainty in the marketplace. I think that the demand for our services is high. And I think that consistent with the message that we had in the prepared remarks, we're very confident with regard to our ability over the course of the full year to deliver growth in the sort of corridor that we previously indicated to the market. Exactly how that sort of plays out through the course of the year is obviously sort of possible to tell, but we feel very good about our business, our business model, our competitive position and the opportunities ahead of us, given how diversified our business is.

Understood. And then just as a follow-up, I was hoping you could expand on the growth and outlook for the Hedging and Investment Solutions business. Obviously, I think you said a record quarter, really strong 4Q results. Just to get a little bit more underneath that in terms of what's driving that and the sustainability of that as we think about 2026.

Yes. I mean, I think that as I think about all of our businesses in 2026, I have sort of quite a lot of confidence that all can continue to grow. I mean the management team in each of those businesses is sort of ambitious. They all sort of see opportunity, and we see ourselves as sort of broad-based and looking to ensure that all the elements of the firm are growing. Your question is about solutions specifically, and I think that what we're seeing there is the impact of sort of global expansion as well as sort of the addition of additional products, and then additional penetration of clients. And I don't see anything that will undermine that over the long term. And I think that we should and expect to see sort of solutions continuing to grow, consistent with broadly how the overall firm is expecting to grow.

Your next question comes from the line of Bill Katz with TD Cowen.

I apologize for any background in transit this afternoon. I was really keyed in on your commentary around just sort of the growth in some of the larger accounts and not a lot of concentration in that. Could you unpack that a little bit, maybe where you're seeing the greatest rates of growth, either by the distribution channel, geography, the segment of the business? I'm sort of curious what some of the underlying drivers are in the process there?

Sure. Well, I think that, anecdotally, what I've been sharing with people is sort of client wins that we've been enjoying with prominent hedge funds and with some of the largest and most sophisticated players in our space. And we've had traditional strengths with commodity producers and consumers. And as you're aware, as part of our efforts to diversify the firm, we were looking to expand out the products that we could offer sort of leading financial players. And I think that what we're seeing now is the sort of fruit of that, and it doesn't feel like it's sort of the end. It feels like it's sort of building momentum. So who are the people in that $5 million-plus sort of category. It's the largest financial players in the world. It's the largest commodity producers and consumers. I think if there was a geographic focus, it's probably in North America, which, again, I think is not surprising just given the preponderance of large players in the U.S., and I think the success we've had sort of growing our U.S. franchise. But it's -- the growth has been with financial players sort of banks, hedge funds, large asset managers, more than in any other sort of product type or -- sorry, client type. And those are all clients who are engaging with us across a number of different segments and a number of different desks. So part of what's sort of driving that growth is just sort of the cross-sell so that those players who are able to engage with us across a lot of products and do so in size are increasingly doing that.

Great. Just as a follow-up, I'm very intrigued by the digital opportunity, the stablecoin crypto, what have you. A lot of debate, just in terms of the impact of tokenization, just on the ecosystem at large. I was wondering if you could maybe break down where you sort of see the opportunities for tokenization at the front, maybe that's already on sort of expanded trading activity, but maybe post trade, how we should think about the durability of the business to the extent that tokenization continues to sort of mature and season into the market structure system.

Sure. I mean, look, I think that -- I mean, what we're focused on is what I think we described last quarter as our digital Prime brokerage offering. What we're very keen to be able to support for clients is our ability to take sort of digital assets as collateral with all the things that sort of go with that to ensure that, that's sort of viable and supported. And there's a lot of work that sort of goes into that, and we've -- that's really been our focus, more than around what our view is with regard to the long-term sort of prospects of tokenization. I think my expectation of this is that there will be sort of weekend trading, I think it will be done in sort of tokenized form, I think it will just live alongside the exchanges for some period of time, maybe forever. And it won't sort of replace it, it will just sort of exist as a separate world, meeting very specific requirements of a specific set of investors. How tokenization moves into post-trade, I don't really have a specific perspective, and we're not sort of currently investing in that. But I think that, if that does turn out to be more relevant, I think we'll be in a position to take advantage of it. But really, the emphasis at the moment is being able to create some products for clients, which are more around being able to take digital assets as collateral. What I would add to the answer, though, is we've certainly seen with some of the sort of the digital asset products that we've been involved with, the ability to collect margin real time, and in particular, over the weekends, is really a very attractive feature in terms of risk mitigation. And so as I sort of think about the impact on Clearing as a sort of general matter, the ability to get collateral or sort of get payment 24/7, I think, is actually a really attractive risk mitigant. I don't know if you have anything to add to the color.

Yes. I mean, just a couple of points. But it's a good question, Bill. I think just to extend Ian's point on where we're focusing. The key components of both the Clearing and the Prime offering. One is more futures oriented and the other is more securities oriented is that we can receive the collateral and recognize the collateral, which I think there's been significant progress both with the exchanges and on the regulatory side, that we can provide a combined sort of margining on a risk basis, which includes the sort of activities, the risks and the collateral that we can provide all of the reporting and the reconciliations. And I think that in each of those dimensions, we've made significant progress. We have applied for a license, which will allow for the conversion of -- for us to provide the conversion between crypto and fiat currencies. And we hope that, that will come through in the next few weeks. We have got the infrastructure in place, and we've partnered with very established players to establish the infrastructure both for Execution as well as for Clearing. And that sort of extends to tokenization where we're working with some of our most sort of progressive clients to ensure that sort of all of the rails for tokenization, whether that's for sort of post-trade or whether that's for the sort of 24/7 activities supporting 24/7 activities. So I think we've moved a long way. And I think -- now my sense is relative to where the rest of our competitor group are, we're probably towards the front, if not at the very sort of front of that queue.

Your next question comes from the line of Benjamin Budish with Barclays.

Maybe first, Ian, I was wondering if you could unpack a little bit more the comment you made earlier in the Q&A around this sort of not being a Goldilocks volatility kind of environment. Maybe talk about like what do you typically see when there are volatility spikes in terms of either exchanges, collateral requirements or how customers respond. And I gather, or I think your comments, maybe you were referring to mid-February, but obviously, things have changed a little bit more in the last couple of days. So just curious how to think about. We can see your collateral balances daily through your website, but things have changed more in the last couple of days. So if you could unpack that a little bit, that would be helpful.

Sure, Ben. Look, I think it's a really good question. So look, at times of very high sort of volatility, a couple of things are sort of happening. So one is either we're increasing margin multipliers or the exchanges are often increasing their margins. And you certainly saw that in January. So people are having to put sort of more margin up against sort of the existing positions. The other thing that sort of plays out is in terms of their own existing risk models, they have limits and what kind of positions they can maintain relative to the risk that they've been authorized to hold, they tend to reduce the positions in order to remain within sort of their risk limits. I mean the other thing that is just sort of an obvious consequence of extremely high levels of volatility is it impacts how people choose to hedge and how they think about Hedging in the sense that they have to decide what their entry points are, they have to decide how long they're willing to hedge for. And just as we saw in April of last year with a Liberation Day when people are sort of unsure where -- what's driving pricing and where it's going to settle, their reaction is often to shorten the duration of the hedges or actually just be unsure about when to begin to hedge. So they're also sort of -- they got to manage their liquidity carefully in addition to managing their risk carefully. So all of those things play through where you have those volatility spikes. And just to put that in perspective, I'm sure you sort of appreciate that. But some of the moves in some of these commodity contracts were 1-in-35-year events that were sort of playing through at the end of January. I don't know in terms of over the last few days, and where this thing is going to go whether we're going to see volatility of that magnitude. But certainly, in the natural gas prices, we're seeing price moves that are not dissimilar to what we saw with the Ukraine invasion. So that's really a bit more color on what's actually involved when you're operating in a world of extremely high volatility.

All right. Understood. That's very helpful. Maybe just a follow-up, a separate topic. You mentioned briefly prediction markets in your opening remarks. And just curious, from your seat, how do you see this evolving from an institutional perspective? It seems like from all the data that's trackable, most of this is happening in sports and in the retail channel, but there's a big question mark around how and when this might evolve into something broader. So just curious, what does institutional interest look like? Where in prediction markets are you guys looking to participate? How do you think this plays out over the next year?

Yes. I mean that's sort of interesting to us is if this results in contracts that are really listed on the sort of principal exchanges. So whether CME or ICE or CBOE, end up listing a series of contracts, which aren't sort of sports-related specifically, but our sort of financial instrument related, which I think is certainly a direction that people are looking at. And we also believe that there's interest from retail aggregators for this particular product. So I do believe that we will see these products listed on exchanges so that you deal with sort of the credit risk associated with some of these other venues. And you will, I think, see experimentation with financial instruments and sort of strategies expressed as event contracts in the sort of coming quarters, maybe it will take a little longer than that, but I think that's my expectation. And I think there's a variety of people who are interested in experimenting with it. And at some level, you could imagine these contracts actually being quite intuitive ways for retail investors to express certain investment thesis they have. And so I can see that actually taking off. But you don't want to deal with the sort of credit risk associated with some of these sort of venues. And I think that the exchanges will naturally evolve into that space.

Your next question comes from the line of Patrick Moley with Piper Sandler.

Yes. So I know the Middle East has been an area of focus for you, and it's a place where you found success, especially with the Aarna acquisition. So just curious, with all the geopolitical turmoil going on, if we do see an extended conflict in the Middle East, how that impacts Marex' business and just the overall strategy there?

Look, I think that we -- the answer clearly depends on what actually happens with regard to this conflict, whether it sort of resolves relatively quickly or not. I mean, certainly, we see that opportunity as attractive, sustained and certainly, we're hopeful that there's nothing that sort of undermines it, and there's not knowledge at the moment that it might undermine it. But there's obviously a lot that we don't know. I don't know what you'd add, Paolo.

Yes. I mean, it's difficult to have certainty about the sort of longer-term impacts. But so far, I mean, we've got a very broad-based business in both Dubai and Abu Dhabi. Volumes have been sort of consistently increasing the sort of breadth of product offering has been consistently increasing. It doesn't feel as though that trend is going to change, but we may have obviously some disruption in the short term just as we all watch what's transpiring.

Okay. And then you mentioned in your prepared remarks, the pipeline of opportunities that you're looking at from an M&A perspective. Can you just update us on, maybe what's in focus right now in terms of both asset classes and geographies? Any color there would be great.

Yes. Yes, absolutely, Patrick. We have continued, I think, the sort of pace of acquisitions that we've seen for the last couple of years. And we've had a couple of announced transactions this year. So we most recently announced that we will be purchasing Web Traders, which is an option market-making group. So somewhat sort of away from the Clearing and Execution or Agency and Execution areas where we've had sort of traditionally more focused on acquisitions. Winterfloods also is a market-making business. So it sort of shows that there are opportunities across all of the different sort of service lines. I think we remain of a view that we were buying the capabilities and not just the revenues and the capabilities and include both the sort of geographic coverage as well as sort of product capabilities. And I think that there are opportunities across each of the service lines. But I think that you will see both Clearing and Agency and Execution businesses being added in the next couple of quarters. And from a geographic perspective, I think whilst it's really hard to know -- to predict exactly when these opportunities will arise, we are still focused on both extension in Asia where we have probably a slightly subscale -- slightly subscale business, certainly on the sort of capital market side and in Latin America, where we bought Agriinvest last year. We're really pleased with how that's going. That's obviously an agricultural-focused business, but we're seeing opportunities on the sort of financial side as well. So the geographic focus remains the same. It's just sort of -- it's hard to say exactly when those will sort of come to fruition, but we're seeing good opportunities here.

And I think the thing I'd just sort of add to that is we're always just looking to sort of fill in holes where within a geography, we don't sort of have the product. And if we think we could build that organically, then that's typically what we would choose to do. But in many cases, and particularly, as you try to expand geographically, that's just very hard to do organically. And those are the places where we would typically focus around acquisitions.

Your next question comes from the line of Alexander Blostein with Goldman Sachs.

This is Anthony on for Alex. I wanted to hit on Prime Services, which continues to see solid growth. How much of this growth has been a function of maybe existing clients doing more with you versus kind of onboarding new accounts? And what does the pipeline of new clients look like today?

Anthony, thank you for the question. The -- I'm going to sort of split the answer into the sort of longer-term trend and into what we saw in the fourth quarter. So in terms of our annual accumulation of new clients, we are adding about 30%. We have a growth rate of about 30% a year on a gross basis. And then we lose about 5% of our sort of clients because they sort of cease to be active or they move into sort of different structures. So the long-term trend is around that type of growth rate. In the short term, where you see a bit more volatility is with existing clients, which have relationships and are unable to sort of to ramp up. And so I would say in the sort of in the fourth quarter, there was more increase in activity from existing clients or more impact from existing clients increasing activity than there was from new clients. But the trend over the longer term, and I think you'll see this over the course of both '25 and '26 is that we're adding clients, and we're adding them at about a 30% annualized growth rate.

That's helpful. And maybe just a follow-up on the kind of the M&A you either completed or announced in 2025. Could you talk about the aggregate kind of annual impact on run rate earnings from these transactions and where you think they might scale to over the next few years as you realize revenue and expense synergies?

Yes. I mean, I think the majority of the earnings increase in this year was actually organic, but that did include the impact, as we've talked about very extensively of the prime business. And that comes through on the organic side because we've owned that for some time, and it's really been about our investment in the sort of products and capabilities. But the platform, it's obviously very important. It's the sort of basis upon which we have been able to develop that business. I expect the split between organic and inorganic will be sort of somewhere in the range that we've had before.

Yes. So this year, Paolo, the growth was sort of like 75% organic and 25% inorganic.

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

Thanks, everybody, for joining us. I mean, obviously, very pleased with sort of the full year numbers that we're able to deliver. Really pleased that it was another record, really pleased that we had a record quarter in the fourth quarter. And as I've indicated, we really are quite excited about our sort of prospects over the course of the year and our ability to continue to grow in 2026 and beyond. So thank you for joining us. And hopefully, we'll see as many of you as possible at our Investor Day.

This concludes today's call. Thank you for attending. You may now disconnect.