Highlights
Turnover up 119% on the previous year to £1,477,160 (1999: £675,235); Operating costs of £10,397,987 (1999: £8,240,856), including £1,150,566 of external costs relating to the launch of the European Equity service; Loss for the year of £8,544,676 (1999: £7,295,667); Refinanced by the Tradepoint Consortium of leading international brokerage and financial services firms led by Instinet in May 1999; a further six international brokerage firms joined the Consortium during the year, bringing the number of Consortium firms to eleven.
Current year to date
Launch of the first pan-European blue-chip exchange, offering trading in the constituents of all the major pan-European indices on July 10 this year; Collaboration with SWX Swiss Exchange, to take the pan-European equity service to the next stage by creating the virt-x pan-European market for trading blue chip stocks. Operating under a single regulatory environment and supported by an integrated trading, clearing and settlement infrastructure, virt-x will utilise SWX's EBS trading platform. SWX will contribute all of its trading flow in blue chip stocks to virt-x.
Richard Kilsby, Chief Executive of Tradepoint Financial Networks plc, commented: "We have been working very hard during the last year to establish Tradepoint as the first pan-European equity market. The launch of Tradepoint's pan-European equity service on July 10 this year is therefore a significant milestone. Looking forward, virt-x gives us the opportunity to take our European platform to the next stage by creating a market with a state of the art trading system and significant existing liquidity."
Duncan Paterson, Chief Operating Officer of the Tradepoint Consortium, said: "When virt-x is launched early next year it will be based on a very high volume pan-European platform that is already up and running and it will have immediate critical mass in European blue chips. This latest development is another step towards achieving the Consortium's stated objective of developing Tradepoint, now virt-x, as the principal marketplace for trading the Eurotop 300 by the end of 2001.
Doug Atkin, Chairman of the Tradepoint Consortium, added: "The fact that Tradepoint is in a position to participate in such a ground breaking venture as virt-x is testimony to the many achievements that it has made since the Consortium acquired its 54% stake in the Company a year ago."
Chairman's Statement
The first pan-European equity market
Since the Consortium's investment in the Company, our main focus has been to prepare for the launch of the pan-European market. The need for streamlined and Europe-wide trading, clearing and settlement has become increasingly apparent. Demand was fuelled by the advent of the Euro and the investment community's growing desire to treat Europe as a single geographic entity. A pan-European trading platform is particularly important for cross-border trading and for trading in the constituents of the major European indices.
Several stock exchanges and combinations of exchanges are working towards the introduction of pan-European trading to facilitate international trading and reduce costs for members and investors. We were therefore pleased to launch on 10 July this year the first pan-European equity service. We are now the only market trading the constituents of all the major pan-European indices. In addition, we offer a central limit order book with both pre and post trade anonymity, a single set of market rules and a single integrated clearing and settlement platform for all UK and continental European blue chip securities.
virt-x
At the same time as the launch of our pan-European equity service, we were delighted to announce that Tradepoint and the SWX Swiss Exchange ("SWX") have agreed to create a new pan-European blue chip market. Under these arrangements: Tradepoint will be renamed virt-x; SWX will transfer all the trading of its blue chip shares to the market for pan-European blue chips operated by virt-x; SWX's EBS trading platform will be made exclusively available to virt-x for the trading of European blue chips under a facilities management agreement; SWX members will become members of virt-x; SWX will become a shareholder in virt-x; Trading will be conducted within a single regulatory environment; virt-x will be an RIE supervised by the Financial Services Authority; The London Clearing House (LCH), Euroclear, SegaInterSettle (SIS) and CREST will provide a full central counterparty and clearing and settlement infrastructure on an integrated basis.
We expect the transaction to be completed, subject to detailed negotiations and shareholder and regulatory approvals, in the third quarter of this year. Following completion, we anticipate that SWX will hold, directly or indirectly, some 38% of Tradepoint renamed as virt-x and the Consortium will hold the same percentage. virt-x will be based in London, and have a Board of Directors consisting of representatives of SWX, the Consortium and executive management, together with a number of independent directors. I will continue as Chairman. Richard Kilsby will be Vice Chairman. Antoinette Hunziker-Ebneter, the current CEO of SWX, will head the management team as CEO.
virt-x will combine Tradepoint's pan-European blue chip market with SWX's highly functional EBS trading system to create a fully integrated pan-European market. This will support trading of the constituents of all the major European indices by the end of the first quarter of 2001. As part of the arrangement, SWX will transfer trading in all of the SMI index stocks - which have an average daily turnover value of approximately £1.4 billion - onto virt-x, giving the new market immediate critical mass in the European blue chip equity market. Swiss and UK stocks that are not constituents of the blue chip European indices will continue to be traded on the existing SWX and Tradepoint platforms.
virt-x will offer its members the following advantages: direct trading in the constituents of all major European indices on one market with one rule book; an electronic order book with full pre and post trade anonymity; a fully integrated trading, clearing and settlement model with a central counterparty provided by LCH. SIS will offer clearing services to virt-x members which are also members of SIS and act as a general clearing member of LCH; significant scope for cost savings; multi-currency capability.
The Consortium has committed to exercise the balance of its warrants to provide initial funding to virt-x of some £18m, including the £4m commitment referred to in the Directors' Report.
Trading volumes
Our trading volumes in UK securities have increased significantly in the past 12 months. The lack of member connectivity to Tradepoint has, however, remained a barrier to higher trading volumes. Members have put considerable effort into integrating Tradepoint within their internal order management systems and we hope to see the benefits over the next few months.
Other developments should also significantly improve the ease of trading equities via Tradepoint, and therefore increase our trading volumes. We have established links with royalblue's fidessa trading platform and with GL Trade. This increased connectivity will result in price competition between Tradepoint and the European domestic exchanges for the stocks traded on Tradepoint as the fidessa and GL Trade platforms create virtual order books that allow traders to trade at the best price available across exchanges.
We also established a trading link with Primark Corporation. Tradepoint's UK equity pricing and trading facilities are now available to all of Primark's GlobalTOPIC customers.
We have developed a scheme to incentivise the providers of liquidity to our markets. Under this scheme, members which provide certain levels of liquidity (in UK and pan-European securities) will be rewarded by an entitlement to participate in the equity of the Company.
Delisting from the Vancouver Stock Exchange
The Company delisted from the Vancouver Stock Exchange as virtually all trading in the shares was taking place through the Alternative Investment Market (AIM) in London. The Company had no business activities in Canada, nor directors or officers, and fewer that 10 shareholders on the Canadian register.
Results
Income from operations was £1,477,160, an increase of 119% on the previous year. Operating costs, including depreciation of £801,114 (1999: £804,962), amounted to £10,397,987 (1999: £8,240,856). Operating costs also included £1,150,566 of external costs related to launching the European equity service.
In the operation and continuing development of the Tradepoint Stock Exchange, the Company incurred a loss on ordinary activities before taxation for the year to 31 March 2000 of £8,544,676 (1999: £7,295,667).
The Company's increased level of cash balances as a result of the refinancing led to an increase in interest receivable to £376,151 (1999: £269,954). At the year end, the Company had £7,244,099 in cash balances (1999: £1,011,238).
Outlook
We expect a number of factors to assist in the development of the business of the Company: the launch of the pan-European equity service on 10 July; the proposed creation of virt-x in collaboration with SWX; the continued support of the Consortium; the achievement of increased connectivity of members, and the integration of Tradepoint into members' order management systems, which will continue over the coming months.
All of these give us cause to look forward to the coming year with confidence.
