UPLOAD

    246

    Barclays27Feb2014Final

    Published: July 05, 2020

    my first upload

    Comments

    Barclays27Feb2014Final

    • 1. Slide38 Barclays February 2014 Property of CrossRate Technologies, LLC Not for Distribution without Permission Confidential
    • 2. Slide30 What is CrossRate Ø An ECN designed to enhance dealer eco- system (Not an All-to-All) Ø Directs the On-the-run flow from Small Franchise Dealers to CrossRate’s Liquidity Providers Ø Unique Features = Vastly Superior ECN
    • 3. Benefits to the Barclays Trading DeskAdditive to Existing Business Benefits to the Barclays Trading Desk Additive to Existing Business •Substantial Incremental Flow üFact: 90+% of Small Dealer on-the-run Flow is Exhausted through Public Markets, not Tradeweb, Bloomberg or Bilateral Boxes (est 40%+ of primary dealer volume). •Toxicity Free Flow and Venue ü Execution Where BarCap Sees Value •Opportunity for much Higher Internalization Rate •Trading Desk participates in 20% Direct Revenue Share •Efficient Access to Long Tail of Distribution •Combats/Gets in front of Disintermediation Threat •Founding Dealers Maintain Control of Critical Business Issues
    • 4. Q1 CrossRate Liquidity Consumer Q1 CrossRate Liquidity Consumer •36 Primary and Non-Primary Dealers make up vast Majority of Flow •40% Fed Equiv Share, $90 billion Daily Estimated Volume •All Except 2 Exhaust more than 90% of On-the-Run Flow to Public Markets •Majority Mostly Use Tradeweb for Off-the-Run’s •Each “Founding Member” Liquidity Provider Receives $48.8mm of value from CrossRate participation
    • 5. Slide14 5 Dealers. Big Shark vs. Little Shark? No. Shark and Remora! Large Dealer Small Dealer Not This… …But This! Predatory Relationship Symbiotic Relationship Confidential
    • 6. Efficient Access to “Long Tail”The Symbiotic Large-Small Dealer Relationship Efficient Access to “Long Tail” The Symbiotic Large-Small Dealer Relationship Ø Small Dealer Coverage ü Clients Value/Need Small Dealer Relationships ü High-Touch Distribution Model ü Unique, Entrenched Client Set ü Same Clients, Different Behavior Small Dealers are not Exiting the Business and are of Considerable Value to Liquidity Providing Dealers 6 Confidential
    • 7. The CrossRate Solution The CrossRate Solution
    • 8. Slide10 Liquidity Provider1 Liquidity Provider2 Liquidity Provider3 Liquidity Provider4 Liquidity Provider5 Providers CrossRate Aggregation Platform 8 Liquidity Provider6 Flow Bilateral Box Aggregator Ø Streaming ‘Generic” Prices Anonymous Router Ø Screen Prices + “Fee” to Access Pool’s Special Features Streaming Prices Liquidity Consumer1 Liquidity Consumer2 Liquidity Consumer3 Liquidity Consumer4 LiquidityConsumer5 Liquidity Consumer6 Liquidity Consumer7 Liquidity Consumer8 Liquidity Consumer9 Liquidity Consumer10 Consumers Aggregation Venue Screen Pool CrossRate
    • 9. Slide76 Three Unique Features 9 Confidential
    • 10. Slide12 The “Cost” of Toxicity Random Flow ----> Positive Returns --->Tighter Markets 0 10 Toxic Bid-Offer Spread “Clean” Bid-Offer Spread Normal “Clean” Flow Abnormal “Toxic” Flow “Cost” of Toxic Flow Negative Returns for Liquidity Providers Positive Returns for Liquidity Providers MEAN Confidential
    • 11. Slide52 Increasing Internalization Shift From Public Markets Means More Revenue 50% 50% 95% 5% 30% 70% 20% 80% 100% 100% HFT Large Dealer Small Dealer Move to More Profitable Internal/CrossRate Markets Public Internal Public Internal Currently CrossRate
    • 12. “Dark” ExecutionProtecting Liquidity Providers, Increasing Efficiency  “Dark” Execution Protecting Liquidity Providers, Increasing Efficiency
    • 13. Deal DynamicsTotals Year 3, Projected Base Case Deal Dynamics Totals Year 3, Projected Base Case Confidential 13 1. 6 Members 2. Represents 20% of CrossRate’s routing revenue 3. Per 1% Dealer Market Share
    • 14. Barclays: Capital Ask and Projections Barclays: Capital Ask and Projections Capital: $1.6mm (5 Dealers Minimum) for Effective 8% Ownership (Equity +Rev Share)
    • 15. Slide39 Experience Managing Both Large (Citi) and Small (RBC) US Treasury Franchises 300+ Meetings Birth of Concept Validation/ Refinement Consortium Building Current Status CrossRate Evolution - Fall 2012 to Present •Liquidity Consumers •Liquidity Providers •Tech/Ops Providers •Market Structure Experts •End-Clients •Regulatory Bodies •Citi, MS, BAC, CS Committed to Consortium •Tradition as Provider of Tech/Ops •2nd Iteration of Term Sheet •Broaden Consortium to either 5 or 6 max. •Forming “Core” Consortium of LP’s (C, BAC, MS) •Identifying 90+ Potential Users, 36 High Probability Q1 Users Confidential
    • 16. Slide55 Two Types of Flow for Large Dealer CrossRate is Additive, Providing Incremental Flow and Value Current Franchise • Current Franchise Business Remains Intact ü Normal Client Inquiry ü Voice and Electronic (Phone, Tradeweb, etc.) ü Client Relationships are Intact and Unencumbered ü Access to all present ECNs, IDBs, Bilateral Boxes • Conventional Use of Resources ü Human and Electronic Trading and Distribution ü Relationship Management and Research • Purely Electronic, Streaming Prices • Connects Providers to Aggregated Small Dealer Flow ü Different Clients/Same Clients (Different Behavior) ü Access to up to 90% of Public Market Exhaust ü As Much as 40% of Fed Equivalent Market Share (90+ users) ü Toxicity Free = Positive Returns for Providers • Efficient Use of Resources- Higher Returns ü Utilizes and Captures Superior Technology Advantage ü Lowers Human Cost of Servicing “Long Tail” Additional CrossRate Flow
    • 17. Slide66 Base Case Daily Volume Calculation Federal Reserve Statistics, Billions of Dollars, 2Q2013 Total Daily Coupon Volume Primary Dealers Adjustments for Ineligible Transactions (Rolls, Non-Actives, Hedges, etc.) Adjustments for Double Accounting Total Target Daily CrossRate Volume Wallet 36 Day-1 (Q1) Users, 90+ Total Users $97 Billion
    • 18. Slide75 Reference Liquidity Consumer Dealer Profile $22.4 Billion in Flow Split between 5 Participating Dealers ($4.5 Billion average per CR Liquidity Provider)