FMX - Investor Day 2026 - BGC GROUP INC

Explicit Guidance:

• Revenue: Illustrative projection for FMX revenue to exceed $300 million over the next three years if current 36% CAGR growth continues.
• Margins: Projected incremental operating margin of at least 50% (50 basis points) over the next three years, driven by operating leverage as the futures platform is already funded.
• Technology Costs: Expected to remain stable at current run rates despite new product launches, avoiding linear growth in expense.
• Cash Flow/Loss: Current pre-tax accounting earnings (AE) loss on the futures platform is $18 million; no additional equity capital is required to fund the business.
• Market Data Revenue: Target to grow market data revenue contribution from current 6% of revenue to 9-10% (a 3–4 percentage point increase) within the coming year by offering a full suite of pricing and compliance data.
• Pricing Strategy: Plans to increase fixed fees for "all-you-can-eat" deals starting in 2027; potential to nearly double the fee-per-million-notional trading rate as participation grows.

Business-Segment Outlook:

• Futures (SOFR & Treasury): Expecting exponential growth starting in Year 3 (October 2025 for SOFR, May 2026 for Treasuries) driven by the completion of API connectivity for systematic algorithms and the activation of cross-margining benefits with LCH.
• Buy-Side Adoption: Pipeline includes 15 to 20 new institutional clients (hedge funds, RV shops) expected to onboard by the middle of next year; asset managers are projected to follow later in the year (6–12 month timeline) as OMS integration completes.
• FX Platform: Expected to continue dramatic growth over the next 18 months, leveraging the existing equity partner infrastructure.
• Repo: Focus on expanding from overnight to term repo electronification; leveraging BGC's existing desk infrastructure to compete where rivals cannot.
• Market Data: Anticipated revenue growth from $6M to ~$10M (approx. 60-70% increase) in the coming year as the full product suite (cash, FX, futures) becomes available for subscription.
• Product Pipeline: Plans to introduce basis trading protocols (combining cash and futures in a single order book) in Q1/Q2 next year; exploring invoice spreads and T-spreads as package products; potential future expansion into listed swaps, swaps futures, and credit futures.

Market and Competitive Outlook:

• Competition: FMX aims to become a viable, necessary second venue in interest rate futures, leveraging tighter tick sizes, lower latency, and curated liquidity (P-Club style) to challenge the incumbent (CME).
• Share Shifts: FMX expects to capture significant market share by offering margin efficiency (up to 80% reduction in margin requirements via LCH cross-margining for correlated positions) and basis trading capabilities unavailable elsewhere.
• Protocol Innovation: FMX intends to bring cash market protocols (counterparty blocking, tiered liquidity) to the futures space, pending CFTC approval; currently has a proposal in front of the regulator.
• Volume Growth: Momentum is shifting from manual to systematic algorithmic execution; clients with full API/Smart Order Router integration trade 10x more volume than those with basic connectivity.
• New Venues: Potential for FMX to introduce perpetual futures or other derivative structures if regulatory paths open, targeting the base metals (copper, aluminum) and prediction markets gaps.

Macro / Industry Outlook:

• Regulation & Competition: Management views the CFTC (under new leadership) as highly supportive of competition, innovation, and bringing offshore products (crypto, prediction markets) onshore. SEC-CFTC harmonization is anticipated to improve.
• Market Structure: Anticipates a "renaissance" in interest rate markets driven by mandatory central clearing (SEC rules for cash Treasuries/Repo) forcing clients to optimize margin and collateral, directly benefiting FMX-LCH offerings.
• Volatility: Expect continued political volatility and market volatility in the near term due to government dysfunction, which drives trading volume.
• Base Metals: Strong regulatory push to bring price discovery for copper, aluminum, and critical minerals back to U.S. venues to reduce reliance on the LME.
• Crypto/Tokenization: Tokenization of liquid cash collateral (Treasuries) is viewed as a future efficiency driver for post-trade/settlement, though not an immediate liquidity catalyst.

Strategic Initiatives:

• LCH Partnership: Fully realized clearing partnership; cross-margining benefits expected to be operational for banks/FCMs by Q1 of next year, unlocking significant capital efficiency for clients.
• Technology Upgrades: Completion of API/algorithmic connectivity for systematic traders over the next three months; migration from "connectivity" to "integrated algorithmic execution."
• Equity Partners: Current 10 equity partners (major banks) are sufficient; however, there is high interest from buy-side institutions (e.g., BlackRock, T. Rowe) in acquiring strategic equity stakes to deepen adoption.
• Global Expansion: Building a single "one-stop-shop" platform with seamless API access across cash, futures, FX, and repo.
• Capital Allocation: No need for external equity raises; BGC will fund operations internally, utilizing the existing $33M annual tech run rate efficiently.

Risks and Headwinds to Outlook:

• Regulatory Approval: Uncertainty regarding CFTC acceptance of cash-market style protocols (e.g., counterparty blocking, tiered liquidity) in the futures environment.
• Bank Technology Adoption: The timeline for 12 FCMs and banks to complete the internal technology integration required to offer cross-margining to clients; currently estimated at 70% readiness by Q1 next year.
• Asset Manager Integration: Slower onboarding of large asset managers due to complex OMS integration (e.g., Aladdin) compared to hedge funds.
• Incumbent Retaliation: Potential for CME to tighten spreads or adjust protocols to defend its dominant position.
• Liquidity Thresholds: Success depends on reaching a critical mass of liquidity (Open Interest) to convince asset managers to connect; current volume is growing but still in the "slow-slow-exponential" phase.
• Regulatory Arbitrage: Potential for regulatory friction between SEC and CFTC regarding security-based swaps and prediction markets.

Management Tone on the Future:

• Confidence: High confidence in the "playbook" replicating success from Cash Treasuries (42% market share) to Futures.
• Optimism: Strong belief that the "build it, they will come" dynamic holds true, driven by superior economics (margin, tick size) and technology.
• Patience: Acknowledges the "slow start" in futures adoption is normal, expecting a sharp inflection in Year 3 (starting Oct 2025) once technology and margin benefits align.
• Strategic Focus: Emphasis on listening to clients and iterating protocols rather than launching products without demand.
• Competitive Stance: Confident that FMX is not entering to be #2 but to become the primary competitive alternative, citing the "82% bid-offer better than CME" metric as proof of viability.

Miscellaneous:

• AI & Market Evolution: CEO John Abulrars and FMX leadership referenced the AI keynote (Prof. Geoffrey Hinton) to highlight themes of perseverance, the exponential nature of technological change (fog analogy), and the potential for AI to drive efficiency in trading and risk management.
• Tokenization: Panelists view tokenization of collateral as a medium-term post-trade efficiency opportunity but not a primary near-term liquidity driver for spot trading.
• Surveillance: Management and regulators (CFTC/SEC) are prioritizing market surveillance and enforcement capabilities for emerging markets like prediction markets to prevent manipulation.