Listed on Euronext in Amsterdam, the market maker for exchange traded funds increased its profits almost tenfold last year. It is now looking to move closer to its French counterparties for the start of business in early July.
Flow Traders is moving to Paris, opening a branch to complete its European network and as part of its growth strategy. The activity should start at the beginning of July.
Already present in London since 2018 and Milan since 2020, the Dutch company entrusts the daily management of its French activities to Pierre-Antoine Jaunatre, Institutional Trader ETF within the company since 2014.
Flow Traders also has offices in New York, Singapore, Hong Kong and Kluj in Romania. The company employs approximately 550 people worldwide, 370 of whom are based in Amsterdam and 104 in New York.
8000 FTEs in 40 countries
Flow Traders' aim is to get closer to its institutional counterparties in France, while the company says it wants to ensure the liquidity of an ever-increasing number of financial products and asset classes.
Pierre-Antoine Jaunatre will initially be accompanied by a single employee, Vitold Berte. The company is located on rue Saint Georges in the 9th arrondissement.
Often presented as one of the world's leading high frequency traders, Flow Traders rejects this term: "Flow Traders acts as a market maker, offering investors and market participants permanent buy and sell prices on nearly 8,000 ETPs (Exchange Traded Products) in 40 countries and on 180 different markets", clarifies the company.
ETPs are fast-growing exchange-traded financial products that replicate the performance of an index or an asset class. These low-cost passive management instruments reflect the performance of an underlying asset such as a stock market index (Exchange Traded Funds), a commodity (Exchange Traded Commodity) or take the form of debt securities (Exchange Traded Notes).
According to Blackrock, flows into European equity ETFs in April reached a monthly high since July 2000 at $3.8 billion, or about EUR 3.15 billion.
"We have entered into liquidity contracts with the major issuers of these instruments (e.g. Blackrock, Amundi, Lyxor, Deutsche Bank and Vanguard)"explains Pierre-Antoine Jaunatre.
"In addition to our presence in the secondary market, we also have access to the primary market to respond to investor requests to subscribe to new units of these open-ended funds from ETP issuers"He continues.
Diversification of instruments
The market maker is now extending and diversifying the range of instruments on which it operates to other OTC assets, such as options, currencies or even crypto-currencies, but also and especially corporate bonds.
"Due to the very important development of credit ETFs (index products representing corporate bond indices) and the growing interest of institutional investors, Flow Traders also intervenes in the bond market to build representative baskets of these indices by buying or selling securities or to hedge our exposures and positions in real time," adds Pierre-Antoine Jaunatre.
These ETFs, for example Blackrock's iShares iBoxx $ Investment Grade Corporate Bond ETF or LQD, may contain several hundred or even several thousand securities.
If Flow Traders does not recognize itself in the term of high frequency trader, market making is however generally attached to this family of players, as it requires a high speed of execution and efficient IT infrastructures.
In a 2017 study of CAC 40 stocks, the Autorité des Marchés Financiers (AMF) acknowledged the contribution of these companies to market liquidity, while putting their contribution during periods of severe turbulence into perspective. Its main findings were as follows:
Strong support
-"High-frequency trading players are an important support to liquidity in ordinary time. They are present more than 90% of the time at the best limit (best price offered to buy or sell) and represent on average 80% of the quantity present at the three best limits of the order book. They gradually enter the order book and thus help to reduce the spread (the difference between the prices offered for buying and selling) at the beginning of the day, but withdraw significantly from the book ahead of expected announcements that could affect prices.
On average, high-frequency traders consume more liquidity than they bring in, especially during periods of higher volatility.".
Founded in 2004, the company has been listed in Amsterdam since 2015 and has a market capitalization of €1.6 billion.
Its share price has risen almost 25 % to €33.7 since the beginning of the year. Highly profitable, Flow Traders posted a net profit of €464.5m in 2020, almost ten times the previous year's figure. This yielding stock, which distributed a dividend of €6.5 per share in 2020, is regularly recommended by analysts and portfolio managers.
Flow Traders' main competitors are IMC and Optiver, two other Dutch companies, as well as the American Virtu or DRW.