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The total volume on MTS markets experienced significant growth of 13.5% and numerous records were established in 2006 due to MTS’s very transparent pricing structure, in which trading fees fell as volumes rose to result in the lowest fees of any European fixed-income market. Customers paid an average of 11% less in 2006 than in 2005 for every million euros traded while total fee revenues for 2006 remained comparable to those of 2005. MTS was able to provide these savings for clients due to significant cost reductions, which also enabled MTS to reach an EBIT of €16.7 million in 2006.
BondVision, MTS’s multi-dealer-to-client platform, achieved another record year in 2006 with total volume rising 24% year-over-year to €571 billion. Covered bonds and agencies experienced the greatest growth in volume, 30% and 60% respectively, compared to 2005. The addition of more central banks and global asset managers in 2006 brought the number of participating clients to over 300 while the dealer pool remained the largest in Europe. Following the implementation of FIX connectivity and an exclusive API solution in 2006, BondVision launched new partnerships to increase efficiency and reduce costs in the execution management process. BondVision has targeted similar partnerships with global providers of multi-asset class, e-trading solutions as well as with Portfolio and Order Management System providers in 2007 for the benefit of all participants.
In addition, MTS set new records in every standard measure of its repo activity in 2006. Use of the Central Counterparty rose and nominal volume increased by 19% in 2006 versus 2005 to almost €16 trillion. The number of tickets grew year-over-year by more than 17% and MTS handled a record of more than 54,000 repo transactions in October. Term-adjusted volume reached a new daily record of over €285 billion, significantly surpassing the previous record of €175 billion, while the daily outstanding balance averaged over €150 billion in Q4 and the December average was up 80% year-over-year. In 2007, MTS will introduce initiatives to extend its momentum in the repo market to other segments of the money market business.
MTS maintained its position in 2006 as the leading inter-dealer market for fixed-income in Europe and continued to expand globally. MTS signed a letter of intent in February with the China Foreign Exchange Trade System (“CFETS”), which operates China’s official inter-bank fixed-income market, to cooperate in developing a transparent and liquid fixed-income market in the People’s Republic of China. In addition, the launch of MTS Israel in September has been a major success with total volume exceeding the equivalent of €1 billion within weeks. MTS will continue expanding in 2007 and has already signed an agreement this year with the government of Slovenia to establish MTS’s 12th local market. The launch of the Slovenian market is planned to coincide with Slovenia’s forthcoming, debut domestic-currency issue in euro.
The success of MTS in 2006 extended to its index and data businesses, MTSNext and MTS Data respectively, which leverage MTS’s position as the reference market for government bonds in Europe. The assets under management for ETF’s based on MTS indices in 2006 grew by 72%, trading volumes grew by 76% and new maturity bands are planned for launch in January 2007 to complete coverage of the yield curve for 1-15 year maturities. Moreover, the planned launch on January 24, 2007 of futures for the Italian, French, German and euro area government bond indices by Euronext.Liffe will represent a new landmark for the MTS bond indices. MTS Data, the standard source for government-bond reference price data in both the real-time and non real-time arena, also continued to grow its revenues in 2006 among, for example, its client base of leading dealers and brokers. In 2007, the introduction of MiFID will provide new opportunities in the business of data distribution.
MTS also continued introducing significant upgrades to its IT infrastructure. In Q4, the MTS inter-dealer cash markets migrated to the new Cash Market Facility (CMF) running on the next-generation TradeImpact architecture. The new CMF is already handling a three-fold increase in the rate of transaction updates compared to its predecessor while its modular and scalable design will allow further performance improvements as well as the introduction of new products and trading functionalities. The migration to the CMF follows the 2005 launches of the MTS Money Market Facility (MMF) and Primary Auction System (PAF) to provide the most advanced, integrated platform in the fixed-income market. Going forward, MTS plans to continue adapting its platform to the challenges of constantly evolving financial markets.
“MTS reached many important milestones in 2006,” said Gianluca Garbi, Chairman of the Management Board of MTS S.p.A.. “Not only did we continue to build on our strengths and grow our business, we positioned ourselves to achieve even greater growth in 2007.”
