WEG : Quarterly benchmarks on financial intermediation - 4th Quarter 2019

Execution of orders on behalf of third parties

During the fourth quarter of 2019, the volume of orders placed on the spot market by financial intermediaries operating in Portugal totalled 19,190.7 million euros, 8.9% less than in the previous quarter and 42.8% more than in the same period in 2018.

Orders on private and public debt decreased compared to the third quarter with 9.2% and 11.9%, respectively while shares registered and increase of 20.2%.

Off-market transactions represented 31.9% of total amount of orders, increasing by 22.1% up to 6,112.5 million euros. The internalisation of orders dropped 14.9% down to 7,685.8 million euros. Transactions in domestic markets weighed 8.2% of the total in the fourth quarter and amounted to 1,572.7 million euros, 8.6% more than in the previous three months.

Banco Comercial Português was the financial intermediary with the highest market share (37.0%) in the equity segment, followed by Banco de Investimento Global (16.0%) and Caixa - Banco de Investimento (13.2%). Public debt orders were led by BNP Paribas - Sucursal em Portugal, with a market share of 97.4%, followed by Banco Comercial Português (1.1%) and Caixa - Banco de Investimento (0.8%). As to private debt, BNP Paribas - Sucursal em Portugal had the largest market share, with 72.3%, followed by Banco Santander Totta (17.4%) e do Haitong Bank (5.5%).

In the futures market, the traded value between October and December totalled 11,427.2 million euros, less 65.7% than during the previous three months and 180.4% more than in the same period of 2018. CFDs represented 46.6% of total orders executed in this market, and the amount traded in this financial instrument was 5,320.9 million euros. Futures contracts weighed 1.6% of the total and options, 17.6% and other derivatives, 34.3%.

Derivative contracts were the most sought-after underlying asset in the period considered (48.6% of the total amount), with orders totalling 5,550.8 million euros, followed by short-term exchange rates, which weighed 29.2% on investment decisions.

Derivatives orders were mostly internalised (51.5% of the total), while 45.9% were executed off-market, 1.6% on domestic markets and 1.1% in international markets.

Reception of orders on behalf of third parties

Between October and December, the value of orders received on the spot market by financial intermediaries registered at the CMVM amounted to 19,741.7 million euros, 8.5% less than during the previous three months and 23.1% more than the same period in 2018.

Resident investors accounted for 45.7% of the value of orders received, amounting to 9,017.8 million euros, a 10.5% increase over the third quarter of this year. Conversely, non-resident investor orders increased by 20.0% down to 10,723.9 million.

Public debt was the most sought-after financial asset (65.3% of the total) although registering a quarterly decrease of 11.5%, followed by private debt and shares, which amounted to 2,948.2 million euros and 2,831.7 million, respectively.

Regarding the investment by country, Portugal received 31.6% of the value of orders (2,221.8 million euros), followed by the United Kingdom (26.2%) and France (20.0%).

The traditional channels (telephone, fax, face-to-face) are still the most used means for order transmission (75.6% of the total). The use of the internet for transmission of orders grew quarterly by 6.2%.

In the forward market, the volume of orders received by financial intermediaries stood at 30,426.6 million euros, a decrease of 42.5% compared to the previous three months. CFDs (52.2% of the total amount) and futures (27.7%) were the financial instruments most used by investors during this period, while as to underlying assets, preference was indices (29.3%) and exchange rates (27.3%).

Trading for own account

In the spot market, the value traded by the financial intermediaries for own account decreased by 3.2% down to 50,458.2 million euros in the fourth quarter of 2019, compared to the previous three months, decreasing by 12.7% apropos the same period.

Public debt was the most sought-after security for trading for own account with 53.3% of the total amount. Transactions in private debt securities rose 224.1% during the period under consideration, up to 11,367.2 million euros.

In the equity segment, the value traded for own account increased by 3.6% compared to the third quarter, having decreased by 24.2% over the same period of 2018. The most traded national securities were those of BCP (25.7% of the total), Jerónimo Martins (9.7%) and Mota Engil (8.5%).

In the futures market, the value of trading for own account fell 34.0% down to 7,146.7 million euros. Of this amount, 81.6% was for trading purposes, while 18.4% was for hedging.

Futures contracts were the most widely used derivative financial instrument in trading portfolios, accounting for almost all the trading value. Medium and long-term interest rates and short-term interest rates were the preferred underlying assets of financial intermediaries, representing respectively 53.5% and 33.2% of total derivatives.

Granting of credit for securities transactions

The amount used[1] on credits granted for transactions in securities totalled 1,682.3 million euros between October and December, a decrease of 5.4% than in the previous quarter. Of this amount, 42.0% was granted by ABANCA - Sucursal em Portugal and 27.1% by Caixa Geral de Depósitos and 22.1% by Banco Comercial Português.

Registration and deposit of securities on behalf of third parties

The amount of registration and deposit of securities on behalf of a third-party amounted to 238,254.8 million euros in the fourth quarter, 6.7% more than in the previous three months and 5.7% more than in the same period of 2018. Resident clients accounted for 78.9% of the total amount by end December, with 46.0% operating on regulated markets.

Registration and deposit of securities for own account

The amount of registration and deposit of own-account securities amounted to 125,573.3 million euros in the fourth quarter, 4.3% less than in the previous quarter and 11.9% more than in the same period. Resident issuers accounted for 67.0% of the total amount, with 44.9% operating on regulated markets.

Equity situation and economic and financial indicators

The net fees charged by brokerage firms and financial brokerage companies stood at 7.5 million euros in the third quarter, which represents a decrease of 19.1% over the same period. Assets and liabilities, adjustments for transactions pending settlement, increased during the same period by 6.7% and 8.1%, respectively.

Own equity and equivalent of financial intermediaries represented 17.2% of liabilities at the end of September, against 18.7% in the same period of the previous year. Return on equity was 10.6%, against 15.2% in September 2018.

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^[1] The amount used is calculated based on the balance recorded at the end of the previous quarter, plus the values used and subtracted from the quarterly redemptions.