FMX - Investor Day 2026 - BGC GROUP INC

Financial Performance:

• FMX revenue grew at a 36% CAGR over the last three years, reaching $122 million in 2026 (up from $48 million).
• Cash U.S. Treasuries platform generated the bulk of revenue, with FX revenue doubling to $12 million (100% growth).
• Market data revenue currently stands at 6% of total revenue, compared to 13% for CME, indicating significant upside potential.
• Operating leverage is high; pre-tax Adjusted EBITDA losses narrowed from $29 million in 2023 to $18 million in 2026, despite significant capital investment in the futures platform.
• Technology costs remained stable at ~$33 million despite new product launches, while front-office compensation ratios decreased from ~60% to ~39%.
• Management projects revenue could exceed $300 million over the next three years with an incremental margin of at least 50%.

Guidance and Future Outlook:

• FMX futures volume grew 49% year-over-year last quarter, reaching 80,000 contracts daily, with a record 162,000 contracts traded on Oct 2.
• Management expects "Year 3" of the futures business to drive exponential growth starting Q4 2025 for SOFR and May 2026 for Treasury futures.
• Cross-margining benefits with LCH (up to 80% margin savings for correlated positions) are expected to go live with FCMs in Q1 2026, serving as a primary catalyst for institutional adoption.
• Pipeline includes 40 active clients, with expectations to onboard 15-20 additional buy-side firms by mid-2026.
• Revenue pricing strategy plans to increase fixed fees and per-million transaction fees in 2027 and beyond; market data revenue share is targeted to rise by 3-4 percentage points.
• Future product roadmap includes basis trading protocols, invoice spreads, and potential expansion into perpetual futures and prediction markets pending regulatory approval.

Business Segments and Product Lines:

• Cash Treasuries: 42% market share of the cloud market, $84 billion daily volume; utilizes counterparty blocking ("P-Club") to reduce toxicity and improve pricing.
• Futures Exchange: Launched SOFR (Sept 2024), 2Y/5Y Treasury (May 2025), and full curve (Aug 2026); 12 FCMs live with nearly 80% of cleared swap balances available.
• FX: Platform volume tripled to $19 billion daily since equity partnership; fastest-growing FX platform globally.
• Repo: Rolling out overnight repo with plans to expand into term repo via BGC's desk infrastructure.
• Inflation: Successfully rolled out inflation bonds and swaps, capturing 35% of the CLOB competitor market.
• Off-the-Run Treasuries: Unique electronic execution for off-the-run bonds, a product previously unavailable electronically.

Market and Competitive Landscape:

• FMX positions itself as the only competitor to CME in U.S. interest rate futures, aiming to break a near-100% monopoly.
• SOFR bid-offer price was equal to or better than CME 82% of the time in Q3 2025; Treasury futures at 68%.
• Tick sizes on FMX are tighter than competitors, forcing market-wide competition on pricing.
• Management views the market as "stale" and driven by a need for competition following the 2019 single-point-of-failure outage; FMX leverages this to gain share one client at a time.
• Regulatory environment is shifting toward pro-competition; CFTC Chairman Selig prioritizes approving new registrants and bringing offshore innovation (e.g., prediction markets, base metals) onshore.

Risks and Challenges:

• Connectivity & Tech: Buy-side adoption (hedge funds) is accelerating, but large asset managers require complex OMS integration (e.g., Aladdin), creating a lag in adoption compared to hedge funds.
• Incentive Alignment: Convincing bank FCMs and traders to shift volume from established CME flows to a challenger requires overcoming inertia and proving liquidity depth.
• Regulatory Uncertainty: Future protocols like counterparty blocking in futures require CFTC approval; new product categories (prediction markets, tokenized treasuries) face evolving regulatory scrutiny.
• Margin Efficiency: The full realization of cross-margining benefits depends on FCMs having the technology to distribute savings to clients, which is still being finalized.

Management Commentary and Tone:

• Tone is highly confident and assertive, framing FMX as a proven disruptor that repeated a successful playbook from cash treasuries to futures.
• CEO Lou Scotto and Chairman John Abulrars emphasize the "built by the market for the market" narrative, highlighting the 10 major bank/liquidity provider partners who own and use the exchange.
• Management expresses strong belief that the "if you build it, they will come" thesis holds true, citing the 42% market share achievement in treasuries as proof.
• Confidence in the LCH partnership is paramount, viewing margin efficiency as the key differentiator that will drive the next phase of institutional volume.

Analyst Questions and Answers:

• Buy-Side Adoption: Confirmed 15-20 new buy-side clients expected by mid-2026; adoption curve is expected to be "slow-slow-slow" then exponential once volume thresholds are met.
• FCM Technology: 70% of FCM partners expected to offer cross-margining in Q1 2026; non-bank FCMs are already processing transactions.
• Pricing Levers: Management intends to raise fixed fees and per-million transaction fees in 2027; market data pricing power is expected to increase with the full suite of products.
• Strategic Investors: No immediate need to raise capital; however, there is significant interest from major buy-side firms (e.g., BlackRock, T. Rowe) for equity stakes, though the current partner set is deemed sufficient for near-term targets.
• Future Products: Panelists expressed strong support for electronic swaps trading, listing swaps, and the potential for prediction markets, noting the LCH partnership solves the margin inefficiency of current OTC structures.

Other Key Points:

• LCH Partnership: Critical for capital efficiency; LCH clears 96% of global USD swap volume, creating a massive pool for cross-margining opportunities (50-80% margin savings potential).
• Technology: FMX utilizes a deterministic, single-connection API with tiered liquidity structures ("P-Club") that allow for customized risk management and reduced toxicity.
• Regulatory Stance: New CFTC leadership (Chairman Selig) is actively pursuing a "pro-competition" agenda, approving new registrants faster than the 180-day mandate and prioritizing bringing offshore innovation onshore.
• AI Keynote: Professor Geoffrey Hinton discussed the risks of AI, the shift from hand-designed features to raw data learning, and the necessity of government regulation for AI safety, drawing parallels to the need for competition and safety in financial markets.
• Tokenization: Panelists acknowledged tokenization's potential for post-trade settlement and collateral mobility, though liquidity is not currently the primary driver.