S&P 500 may face selling pressure as systematic funds reach full exposure
Introduction & Market Context
Flow Traders NV ( AMS (VIE:AMS2):FLOW) shares plunged 17.53% on Thursday after the electronic trading firm released its Q1 2025 trading update showing a significant decline in profitability despite growth in trading volumes. The company’s stock closed at €24.94, down €5.30 from the previous day’s close of €30.24.
The Amsterdam-based liquidity provider reported mixed results for the quarter, with increased trading activity across its platforms but substantially lower bottom-line performance. The results come amid a quarter of increased market volatility, with the VIX index up 35% year-over-year, which typically creates favorable trading conditions for market makers like Flow Traders.
Quarterly Performance Highlights
Flow Traders reported growth in trading volumes and modest revenue increases for Q1 2025, but these improvements failed to translate into higher profits. The company’s ETP (Exchange Traded Products) value traded reached €507 billion, a 24% increase from €409 billion in Q1 2024, while total value traded across all products rose 11% to €1,724 billion.
As shown in the following comprehensive snapshot of the company’s quarterly performance:
Total (EPA:TTEF) income increased by 4% year-over-year to €135.1 million, while EBITDA saw a marginal 1% improvement to €62.3 million. However, net profit declined significantly by 21% to €36.3 million compared to €45.9 million in the same period last year. Earnings per share fell to €0.84 from €1.05 in Q1 2024.
The company’s performance occurred against a backdrop of growing global ETP markets, as illustrated in the following market overview:
The global ETP market showed strong growth during the quarter, with market ETP value traded increasing by 20% year-over-year and ETP assets under management reaching a record €14,321 billion, up 3% from the previous quarter. The average implied volatility (VIX) increased by 35% compared to Q1 2024, which typically creates more trading opportunities for market makers.
Detailed Financial Analysis
The significant drop in net profit despite higher trading volumes and modest revenue growth can be largely attributed to rising costs. Fixed operating expenses increased by 15% year-over-year to €50.8 million, driven by higher employee and technology expenses.
The following chart illustrates the company’s cost structure and operating leverage:
The company’s EBITDA margin contracted to 46% in Q1 2025 from 48% in Q1 2024, reflecting the pressure from rising costs. Flow Traders expects fixed operating expenses for the full year 2025 to remain in the range of €190-210 million.
Despite the profit decline, Flow Traders continued to strengthen its balance sheet. Trading capital increased by 32% since the end of Q1 2024 to €803 million, while shareholders’ equity grew by 25% to a record €787 million.
Regional performance varied across the company’s global operations, as shown in this geographical breakdown:
Europe maintained its leading position in terms of revenue contribution at €69 million, with Flow Traders’ ETP value traded in the region reaching €245 billion. The Americas saw more muted volumes due to market uncertainties, while Asia’s volumes remained elevated, particularly in Hong Kong and China. Digital asset trading volumes in cryptocurrencies remained higher than last year, though net fund flows into crypto ETPs declined significantly.
Strategic Initiatives
Flow Traders continues to focus on four key strategic pillars: optimizing core operations and growing trading capital, diversifying business and exploring adjacent growth opportunities, leveraging proprietary infrastructure, and increasing research capabilities.
The company identified four supportive mega-trends driving its growth strategy:
These trends include the continued growth of ETPs (projected to reach $25 trillion in assets under management by 2030), increased electronification of markets (with approximately 50% of executed volumes in Euro credit now electronic), expansion of digital assets (with tokenized real-world assets projected to reach $30 trillion by 2030), and a conducive regulatory environment.
Forward-Looking Statements
Flow Traders expects fixed income ETF assets under management to triple from $2 trillion in Q1 2025 to $6 trillion by 2030, representing a significant growth opportunity. The company’s long-term performance demonstrates its ability to generate consistent trading income across varying market conditions, as illustrated in this historical performance chart:
Despite the positive long-term outlook, the significant drop in the company’s share price following the Q1 results suggests investors are concerned about the declining profitability and rising cost base. The 21% decrease in net profit despite favorable market conditions with increased volatility raises questions about the company’s ability to maintain its historical profit margins in an increasingly competitive market environment.
As Flow Traders continues to invest in expanding its trading capabilities and diversifying its business, investors will be watching closely to see if these investments translate into improved profitability in the coming quarters or if the higher cost base represents a new normal for the company’s operating model.
Full presentation:
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.