Title of our Annual 2015
STATUS – STRATEGIC PERSPECTIVES
One year of Accelerate
In 2016, Deutsche Börse’s Group-wide growth strategy was the crucial milestone for the company’s further development. The strategy’s motto “Accelerate” has defined the relationship between us and our stakeholders: our clients, employees, shareholders, other companies and (potential) partners.
Five-element growth strategy
Our long-term objective with “Accelerate” is to become the global market infrastructure provider of choice – being top-ranked in all our activities along the entire value chain. Our focus is on our clients; they are the ones who benefit from more efficient workflows.
Chief Executive Officer
“At Deutsche Börse, we are committed to supporting the real economy throughout Europe – directly and indirectly. With a broad set of pre-IPO services and an extensive overall product portfolio, we aim to assist European companies to be able to get ready to deal with the challenges of the future. It is our chief objective to further increase the customer focus in our work.”
These are the five elements “Accelerate” is comprised of:
1. to better fulfil client needs, through a more rigorous organisation
2. to improve performance measurement and performance-oriented remuneration
3. to review the medium-term financial planning
4. to exploit opportunities for external growth
5. to review and examine the portfolio of businesses and investments
What have we done in the past year in order to implement these elements into our corporate practice?
Better fulfilment of client needs
Since the beginning of 2016, the core business segments of Deutsche Börse Group have been bundled in the Executive Board portfolio of Jeffrey Tessler. Deputy CEO Andreas Preuss, also responsible for market data and IT, is head of the growth areas commodities and foreign exchange (European Energy Exchange and 360T). And the cash market business, headed by Hauke Stars, has been expanded to include an additional area: a pre-IPO ecosystem is being created – especially for young, innovative companies. These organisational changes will enable us to better meet new client needs, and to tap sales potential which we have not been able to explore to date. We have already successfully implemented many parts of this programme.
“In one and a half years, Deutsche Börse Venture Network – our growth financing platform – has mobilised more than €1 billion for funding innovative ideas. We are connecting European start-ups and growth companies with an international investor base to build an ecosystem for growth.”
member of the Executive Board,
responsible for Cash Market,
Pre-IPO & Growth Financing
With Group Sales, Group Business & Product Development and Group Marketing, we have established three centralised functions, thus already noticeably improving coverage of our top clients, and enhancing our cross-divisional offers. The task of onboarding new clients is now also in one hand, leading to a significant acceleration of the process.
State-of-the-art information technology is a key competitive factor as well as a driver of innovation. Nowadays, our software development takes place within the framework of a product organisation which realises business objectives in cooperation with market operations. This strengthens profit responsibility, product innovation and client orientation. At the same time, we consistently pursue the introduction of modern technologies, processes and tools – such as cloud computing and continuous deployment – in the development and operation of our products. Combined with agile working methods, we develop and operate top-quality software that sets the standards within our industry. Our clients benefit from the quick realisation of their requirements, and from enhanced product innovation – whilst being able to rely upon the established track record of our infrastructure in daily operations.
responsible for IT & Operations,
Data & New Asset Classes
“Information technology is a competitive factor as well as a driver of innovation. In this regard, we consistently focus on state-of-the-art technology, processes and tools. Clients benefit from our enhanced agility and innovative strength in product development, whilst they can rely upon our established track record in operations.”
Rewarding good performance
In order to strengthen the responsibility for profit and loss, we have introduced a new remuneration system for members of the Executive Board and top level management immediately beneath Executive Board level in 2016: in the year under review, we used the same performance parameters for both groups for the first time. Step by step, we will roll out the performance assessment system to cover further management levels. We are now evaluating which elements of this system will in future also be applied to our other employees. Our objective remains the same: to raise the Group’s attractiveness for the top talents in our sector, and also to increase performance orientation on all levels.
It remains our goal to invest into new markets and asset classes at a faster pace than in the past. This is why we revised our financial planning for the period up until 2018, and already identified opportunities for additional organic growth. We set clearly defined targets for profit growth, in the course of which we emphasise the importance of safeguarding the scalability of our business model: that is, to distinctly expand the number of transactions, at minimal cost.
As such, for 360T we invested into a new clearing solution and a completely re-drafted open order book for foreign-exchange trading. We expect this to generate further growth. EEX – principally an energy exchange but also a comprehensive commodities marketplace – is active in very dynamic markets which offer further growth potential. The investment fund services area of our post-trade services provider Clearstream is also geared for growth. We also expect further stimuli especially from TARGET2-Securities, the European Central Bank project aimed at harmonising cross-border securities settlements within Europe. As the largest participant in this new system, we can use it to offer our clients additional services. Finally, we also see growth opportunities in the index business, as they provide the underlying instruments for passive investment strategies – which are increasingly gaining popularity.
“Our staff are dedicated to using further regulation and projects like TARGET2-Securities as continuing opportunities to support our customers’ business.”
member of the Executive Board
responsible for Clients,
Products & Core Markets
On a long-term horizon, these initiatives also aim at decoupling us from the cyclical nature of our core markets. Historically low interest rates have had a dampening effect on many of our business areas. We want to mitigate this effect by carrying out activities on markets with lower (or ideally contrasting) cyclicality, thus creating favourable conditions for significant further growth.
Against the background of these growth opportunities, we will also adhere to the objectives of our financial planning for the period up until 2018. Index derivatives at Eurex, the index business and EEX have performed particularly well during the financial year 2016. We are also continuing our successful cost management, with the objective of structurally reducing our costs and, thus, enhancing our efficiency and creating additional scope for growth.
Chief Financial Officer
“Our target is to grow earnings by 10 to 15 per cent every year. We remain firmly committed to our active cost management and attractive capital management.”
Enhancing our network of cooperations
In the world of exchanges, growth is largely created through consolidation. The largest exchange organisations owe their top positions – among other factors – to successful acquisitions and mergers. And Deutsche Börse is no exception – a significant part of our growth is attributable to consolidation. Indeed, we created our integrated business model this way. We want to continue to actively shape the consolidation processes within our sector. Thus, we want to create favourable growth conditions and be able to meet the leading exchanges in the US and Asia at eye level.
Our positive stance on cooperations in Asia also remains unchanged. The fact that global wealth distribution is undergoing changes in favour of China and India, accompanied by the rise of an affluent middle class in those regions, are two points no long-term oriented business strategy can ignore. We are already successfully cooperating with the Korea Exchange and the Taiwan Futures Exchange (TAIFEX), jointly offering products based on their respective blue-chip indices. We are also collaborating with the Bombay Stock Exchange (BSE) via a strategic alliance. Since 2013, BSE markets have been operating on T7®, Deutsche Börse’s trading architecture. And with the launch of CEINEX, we founded a worldwide unique cooperation with key Chinese players in the capital markets.
Enhancing our investments
Pursuing a growth strategy also implies cutting loose from low-growth stakes, and ceasing unsuccessful initiatives. In the past year, this included the divestiture of the International Securities Exchange, the news agency Market News International and the securities information provider Infobolsa.
However, we also invested in Digital Assets, an innovative company active in the field of blockchain technology. In November 2016, we acquired a stake in figo, a Hamburg-based fintech: figo is Europe’s first “banking service provider”, offering third parties innovative services through banking functionality. By integrating figo’s application programming interface (API), they can link their applications, products and services to more than 3,100 financial sources in a very short time.
With DB1 Ventures we have introduced a platform that invests in new holdings and actively manages the already existing minority shareholdings of Deutsche Börse. That way, we want to make use of the full potential of our strategic investments. Our focus lies on fintech businesses in their seed phase and growth stage. We reinforce promising partnerships in our portfolio, divesting those that fail to develop sufficient potential. Sustainability is also an increasingly important criterion.
Therefore, we will continue to examine our portfolio of businesses and investments, whilst maintaining our very sound balance sheet structure and attractive dividend policy.
The bottom line is: Deutsche Börse Group has laid the groundwork for accelerated growth and structural cost reduction. But there is still a lot left to do. We will continue to exercise cost discipline and work at reducing the dependence of our income on economic cycles and at expanding our business model. Our strength lies in setting up and operating liquidity pools in which our clients’ transactions flow together – and which are thus beneficial for private business as well as for the public. Effective risk management is our top priority. Growth and safety go hand in hand. That is what “Accelerate” is all about.
“Accelerate” is our way to become the leading market infrastructure provider.