Enhancing its Franchise
OTC Markets Group (OTC:OTCM) provides regulated marketplaces offering a cost-effective solution for targeting US investors. In Q114, Market Data Licensing revenues grew nearly 40% on Q113 as OTCM increased fees for the first time since 2009. Critically, it also significantly grew its subscriber base. With recent strengthening in OTCQB requirements, and the development of OTCQX Banks, OTCM now has options fitting companies in all stages of their equity-market development. Corporate services fees should grow in 2015 with the new premium services now on offer.
Q114 Market Data Licensing (MDL) revenue uplift
The key feature in Q114 was the 39% increase in MDL revenue. Around two fifths of the growth came from an increase in the subscriber base. OTCM also introduced new pricing effective from 1 January 2014 with minimal client losses. Management believes the fee structure has been brought only in to line with peers. Trading services revenue saw a modest increase, with greater quote activity somewhat offset by lower subscriptions (fewer active dealer users). In corporate services the reduction in OTCQX clients has continued, especially in the resource sector. Cost control was good (up 2% on Q113).
2014 franchise enhancements
OTCM has made a number of changes that should improve the differentiation of its marketplaces. The OTCQB incremental requirements should enhance investor confidence in securities traded on this marketplace. The changes are designed to make OTCQB a better venture stage, premium marketplace with fee based services. OTCQB will also be open to international issuers. The disclosure requirements take effect 120 days after the issuers’ financial year ends and we expect most customers to make the decision to stay on the new OTCQB in Q115 following most companies December 2014 year end . In addition, a new premium service targeted at regional banks (OTCQX Banks) has also been launched.
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