Marex Group Q3 2026 Earnings Call Transcript

Marex Group (NASDAQ:MRX) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Marex Group reported a record quarter with a 53% year-on-year increase in revenue to $743 million and a 75% increase in adjusted profit before tax to $176 million.

The company expanded its capabilities through acquisitions such as Levmet and Web Traders, contributing significantly to earnings, and is focusing on structural growth to offset cyclical market factors.

Marex Group’s FX franchise has tripled revenues since acquiring Hamilton Court, without increasing risk, and the Prime and Clearing segments continue to win larger institutional mandates.

The acquisition of Winterflat expanded equity market-making capabilities, and the disposal of the custody business allowed a focus on margin improvement.

The company is investing in new growth areas such as prediction markets, tokenization, and compute futures, as well as expanding its clearing franchise in Asia through the planned acquisition of Brightpoint.

Marex Group’s acquisition pipeline remains strong, with several transactions close to signing, focused on clearing and prime services in Asia and Latin America.

The company maintains a strong balance sheet with ample liquidity and capital to support growth and acquisitions, targeting 10-20% adjusted PBT growth in 2027.

Full Transcript

OPERATOR

Rob Irvin, Group CFO; after their formal remarks, as usual, we will open the call to questions. Before we begin, I’d like to remind everyone that certain matters discussed in today’s call are forward-looking statements relating to future events, management’s plans and objectives for the business, and the future financial performance of the company that are subject to risks and uncertainties. Actual results could differ materially from those anticipated in these forward-looking statements and the risk factors that may affect results are referred to in Marex Group press release issued today.

The forward-looking statements made today are as of the date of this call and Marex Group does not undertake any obligation to update them. Finally, the speakers may refer to certain adjusted or non-IFRS financial measures on this call. A reconciliation schedule of the non-IFRS financial measures to the most directly comparable IFRS measures is also available in today’s earnings release. A copy of the release and investor presentation are available on the IR page of the Marex Group website at marex.com.

I’ll now hand the call over to Ian.

Ian Lowitt (Chief Executive Officer)

Good morning and thank you for joining us for our third quarter earnings announcement. Marex Group has delivered another record quarter with revenues and profits increasing both year on year and sequentially. Revenue for the quarter increased 53% year on year to $743 million, while adjusted profit before tax rose 75% to $176 million. The adjusted profit before tax margin was 24%. Adjusted return on equity remained very strong at 36%, reflecting our high-return-on-risk business model.

Adjusted earnings per share increased 73% to $1.75. For the first nine months of the year, revenue reached $2.1 billion and adjusted profit before tax increased 63% to $495 million. On a trailing twelve months basis, adjusted basic earnings per share was $6.25. These results demonstrate our ongoing success executing our strategy. We’ve purposefully expanded our capabilities, diversifying our earning streams to build a more resilient business capable of delivering sustainable growth, and the third quarter is a further illustration of our strategy working in practice, as I’ll discuss in more detail later in my remarks. While our individual businesses are obviously impacted by market conditions, our goal is to create a portfolio of businesses which can deliver sustainable growth across a range of market environments.

The operating environment for commodities remained favorable in the third quarter, where elevated prices, volatility, and exchange volumes continue to provide a supportive backdrop. Exchange volumes in aggregate are up 20% year on year, above the historical growth trend of 8% to 10%. In the third quarter, volumes remained robust, increasing 2% over the second quarter levels, although they were down 8% on the very strong first half. Equity markets and volatility associated with those markets were somewhat softer following a strong first half, which affects our Prime and Solutions businesses.

Together with a seasonal summer slowdown, this would ordinarily have pointed to some reduction in earnings following a very strong second quarter. However, we delivered another record performance with adjusted profit before tax increasing 6% sequentially. It is instructive to unpack how we were able to grow in the third quarter given that backdrop of the summer slowdown and a somewhat less supportive market overall compared to the first half of the year, as this helps to illustrate what we mean by structural growth offsetting cyclical factors. In the third quarter we benefited from the structural growth associated with the acquisitions of Levmet and Web Traders, both of which are already making important contributions to earnings and performing well above their pre-acquisition earnings run rates.

These businesses have broadened our capabilities across physical commodities and equity derivatives, creating a larger and more diversified market-making franchise. The Winterflat acquisition has also expanded our equity market-making capabilities. The disposal of its custody business in the second quarter has enabled us to focus on improving margins as we integrate the retained business into Marex Group. We’re also seeing a material expansion of our FX franchise. Since the acquisition of Hamilton Court in July last year, revenues have tripled on a run-rate basis. Importantly, this isn’t being driven by taking on additional risk as we have materially tightened our risk standards. We’ve consolidated three separate offerings into one, improved the client mix, and increased average ticket sizes. We’ve also offboarded approximately 200 clients where we saw limited potential for profitable growth.

Combined with Marex Group’s broader relationships, geographic reach, infrastructure, and ability to invest, these changes are enabling the business to grow very quickly. In Prime and Clearing, we’re also continuing to win larger institutional client mandates and to deepen existing relationships. In Prime, third quarter revenues of $115 million doubled year on year and were only modestly below the $120 million we made in an exceptionally strong second quarter given the softer equity market backdrop. In particular, the repricing of AI-related stocks, which impacted balances in certain retail ETFs, one might have expected a more significant decline sequentially.

While our third quarter balances are somewhat lower than the second quarter, average share gains offset some of the market impact and balances remained at around twice the level of a year ago. The improved brand and position of our Clearing franchise is apparent in the conversations we are now having with clients. The following is an example of how our brand is improving and the receptivity to do business with Marex Group. As recently as two years ago, a leading hedge fund with whom we were looking to expand an existing execution relationship into Clearing wouldn’t even engage in a conversation about Clearing with Marex Group.

Then a year later, when we were able to initiate the discussion, the conversation was about why they wouldn’t move their Clearing business away from their existing banks. Now, following their decision to clear one product with us, the conversation is about what additional business they can do with us. That’s a microcosm of what’s happening more broadly. This ongoing progress is apparent in the growing number of clients generating more than $5 million in annualized revenue, which is now up to 82 from 49 in 2025 and 36 in 2024.

At the time of our IPO, we had a narrower franchise with earnings heavily influenced by external factors, specifically interest rates and exchange volumes. We’ve deliberately expanded into activities with different, less correlated earnings drivers, building a portfolio of businesses that can perform well in different environments. Successfully executing that strategy has resulted in consistent earnings growth over the longer term, with year-over-year adjusted PBT growth in 19 of the past 20 quarters, including every quarter since our IPO.

Central to our strategy is attracting new, potentially large institutional clients onto our platform and then growing the business we do with them. Providing attractive new services is a cost-effective way to engage with these sophisticated clients, in addition to providing potentially important structural growth. On our second quarter earnings call, I shared with you the example of our cross-margining solution for U.S. Treasury futures and cash across the CME and DTCC, providing clients with improved capital efficiency.

We’ve seen very strong client interest, with six clients now live and a further 15 in the pipeline, including several very large and sophisticated hedge funds. In prediction markets, we are seeing strong institutional demand for access. We recently went live on Kalshi as an FCM and already have six major institutional clients ready to trade with us. This includes two hedge funds we have been prospecting for some time. We also plan to go live on Polymarket, further expanding the venues available to our institutional clients.

We’re also seeing momentum gradually build around tokenization, and we see opportunities both to provide additional services to our existing institutional clients and to participate in what could become a significant new market. During the quarter, for example, we executed the first OTC swap on the Canton Network with DRW, referencing a fully tokenized index. Our work is being well received by participants already active in the space, and we continue to invest and work with our partners on its development.

Another area where we see opportunities to innovate is compute — the processing power needed to run AI models. Investment in AI and related infrastructure is expected to exceed $1 trillion annually, and we are focused on finding a way Marex Group can provide services. We’re already seeing commodity hedging activity from participants in this space, which contribute to our current earnings. There is also a lot of work underway to develop new hedging products, including what are being referred to as compute futures.

Marex Group intends to participate in the development of these markets both as a clearer and market maker, and we have the infrastructure in place to support these products as they become available. We’re working with exchanges and other market participants on the development of contracts that could provide effective hedges, helping establish pricing data and educating potential users, while providing market access and liquidity to support institutional participation.

It’s very early in this process, but we’re willing to experiment and work with clients and other participants in the ecosystem as the market develops. We don’t know how significant these markets will ultimately become, but we believe there is value in being involved at an early stage. I’ll now hand over to Rob to go through the financials in more detail.

Rob Irvin (Chief Financial Officer)

Thanks, Ian, and good morning, everyone. We delivered another strong performance in the third quarter, building on the momentum established in the first half. Revenue in the quarter increased 53% year on year to $743 million, with strong growth across all four segments. Total adjusted expenses increased by 44%, driven by performance-based compensation tied to strong revenues, continued investment in technology and infrastructure, and the integration of acquisitions.

We continued to expand margins, with adjusted profit before tax margin increasing to 23.7%. Adjusted profit before tax increased 75% to $176 million. We also increased net provisions for credit losses by approximately $7 million during the quarter, primarily reflecting an increase in our Stage 1 expected credit loss provisions. Importantly, the increase does not reflect a deterioration in underlying credit quality or concerns relating to any individual client exposures.

For the first nine months, revenue increased 47% to $2.1 billion and adjusted profit before tax increased 63% to $495 million. I’ll now take you through each business segment, starting with Clearing. Clearing had another strong quarter, with revenue increasing 27% year on year to $170 million. Average clearing client balances were $18.7 billion, up 41% year on year and materially higher than the Q4 2025 average of $14 billion. Robust new client onboarding added more than $1 billion in balances year to date, ahead of our annual target, and we continue to deepen relationships with existing clients.

This drove a 35% increase in clearing net interest income to $83 million, as balance growth more than offset the year-on-year reduction in interest rates. Net commission income increased 16% to $77 million, reflecting client wins and increased activity from existing clients. Adjusted profit before tax increased 26% to $85 million, with the margin broadly stable at approximately 50%. For the first nine months, adjusted profit before tax increased 14% to $222 million.

Agency and Execution delivered another strong quarter, with revenue increasing 40% year on year to $361 million. Securities revenue increased 58% to $286 million, led by strong growth in Prime, FX, and Equities. Prime revenues doubled year on year to $115 million, reflecting the increased scale of the business and continued growth in institutional client relationships. FX revenue more than doubled to $59 million, reflecting strong growth in corporate FX following the acquisition of Hamilton Court last year, alongside continued momentum across the broader FX franchise.

Equities revenue increased 23% to $66 million, supported by increased CL securities lending and equity derivatives. These performances more than offset lower Energy revenue, which declined 4% to $72 million. Adjusted profit before tax increased 73% to $115 million, with the margin expanding to 32%, reflecting the greater contribution from higher-margin securities activities, including Prime and FX. For the first nine months, adjusted profit before tax increased 68% to $323 million, with the margin increasing to 31%.

Market Making delivered another excellent quarter, with revenue more than tripling year on year to $151 million, albeit from an unusually low prior year base. Growth reflected strong organic performance, particularly in metals, together with contributions from recent acquisitions. In a favorable operating environment, metals revenue increased to $91 million, reflecting elevated prices and volatility, which supported client activity and hedging demand across precious and base metals, including copper.

Performance also benefited from the contribution from Levmet following completion of the acquisition in June. Securities revenues increased to $36 million, benefiting from Winterflood and the addition of web trailers following its acquisition in August. Energy and agricultural revenues also increased, supported by strong client activity. Adjusted profit before tax increased to $58 million compared with $7 million in the prior year period, with the margin expanding significantly to 38%.

For the first nine months, revenue increased 165% to $409 million and adjusted profit before tax increased to $158 million. Turning to Hedging and Investment Solutions, which delivered revenue of $61 million in the quarter, up 26% year on year. Hedging Solutions revenue increased 42% to $32 million, supported by continued client onboarding and strong demand for hedging products across commodities and FX. Financial Products revenue increased 13% to $29 million, driven by continued growth in structured product issuance and new client wins. Adjusted profit before tax increased 15% to $14 million, with the margin at 23% compared to 25% in the prior year period.

Lower equity volatility impacted Financial Products during the seasonally quieter summer period, decreasing revenues and margin versus the second quarter. For the first nine months, revenue increased 68% to $225 million and adjusted profit before tax increased 145% to $71 million, reflecting the continued growth and increased scale of the business. Turning now to net interest income at the Group level. In the third quarter, NII was $36 million compared to $39 million in Q3 2025, as higher interest expense more than offset the growth in interest income. Interest income grew by $28 million year on year, reflecting $6.6 billion of higher average balances, which more than offset a 60 basis point reduction in the average Fed funds rate. However, higher interest expense related to the Group’s $500 million senior debt issuance completed in April and structured note issuances in Solutions reduced net interest income overall.

As we’ve said previously, we continue to hold significant liquidity headroom. While this creates a modest near-term headwind to Group NII, it reflects a deliberate and prudent decision to maintain substantial liquidity headroom, strengthening the balance sheet and preserving our capacity to support clients and pursue future growth opportunities. NII increased by $6 million compared with the second quarter, primarily reflecting the 10 basis points increase in the average Fed funds rate.

Turning to the balance sheet, approximately 80% of our assets continue to be directly driven by client activity, which is highly liquid and largely self-funding in nature. Total assets increased to $45.4 billion at 30 September, reflecting continued growth across the franchise, particularly within our Prime business. After netting client assets and liabilities, the residual balance sheet is primarily comprised of corporate cash and other assets funded by Group liabilities, including our structured notes and senior debt issuances.

We continue to manage capital and liquidity conservatively, with our internal framework designed to support the Group’s growth, maintain substantial financial flexibility, and underpin our investment-grade credit ratings. Following our redomicile to Bermuda, the Group is no longer subject to consolidated FCA capital and liquidity requirements. However, our regulated entities remain subject to their applicable local requirements, and we continue to manage the Group against conservative internal standards consistent with our previous consolidated framework.

Our key benchmark remains maintaining sufficient capital to support our investment-grade credit ratings. Our risk-adjusted capital ratio was 12.3%, comfortably above the 10% level S&P defines as strongly capitalized, and we remain comfortable with our capital headroom. On liquidity, we finished the quarter with $8.9 billion of total funding sources, up from $6.2 billion at year end, and $1.3 billion of liquidity headroom, providing significant capacity above our internal assessed requirements.

Taken together, our capital, liquidity, and funding position remains strong and provides the flexibility to continue supporting Marex Group and executing our strategy. Finally, closing with risk management, average daily VaR for the first nine months was $5.6 million, reflecting the increased scale of the business and the market environment. Eighty-seven percent of trading days were profitable, with 100% of weeks and months generating positive trading revenue. That concludes the financial review, and now I’ll hand you back to Ian.

Ian Lowitt (Chief Executive Officer)

To conclude, the third quarter was a further demonstration of our strategy working in practice. We’re executing against the priorities we’ve laid out, growing our existing businesses, winning mandates from larger institutional clients, and expanding our capabilities through acquisition and innovation. The market backdrop remains favorable, particularly in commodities, and based on what we can see today, we expect that to continue in the near term.

While market conditions will of course vary, we’re focused on what we can control: executing our strategy, gaining market share, deepening client relationships, and integrating acquisitions. Looking ahead, the announced acquisition of Brightpoint will further strengthen our clearing franchise in Asia and enhance our access to China, creating additional opportunities for growth in 2027. Our acquisition pipeline remains very strong, and we see further opportunities to expand our capabilities and support future growth. With our S&P RAC ratio above 12%, this gives us meaningful capacity to fund future acquisitions. We are currently in the middle of our budgeting process and, based on what we see today, remain very comfortable with our target of delivering 10 to 20% adjusted PBT growth in 2027 from this year’s level.

We have a clear strategy, we’re executing against it, and the results continue to demonstrate that it’s working. Thank you.

OPERATOR

We will now begin the question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Bill Katz with TD Cowen.

Bill, your line is open. Please go ahead.

Bill Katz (Analyst at TD Cowen)

Okay, thank you very much. Good morning, good afternoon, everybody. Thank you for taking the question. So I was most intrigued by the slide in the deck that sort of spoke to some of the incremental growth opportunities. You sort of laid out the cross-margin on the treasury side, the prediction markets, the compute futures, if you will. Could you maybe double-click into that a little bit and spend a little more time on the cross-margin opportunity set?

And maybe the prediction markets — those seem to be probably most near at hand in terms of the opportunity and how we might try and quantify that. And then related to the prediction markets, there’s been some pretty fast development of KPIs by CBOE and some others. I’m just sort of wondering if you could talk about your activity or interest level in getting involved with that as well. Thank you.

Ian Lowitt (Chief Executive Officer)

Yeah, sure. Yeah, I mean, we’re also sort of excited about those opportunities that we sort of highlight on that slide. You know, in terms of the cross-margining product. I mean, I sort of think about this in two ways. I mean, one is just the cost. The fact that you’re sort of getting really attractive clients onto your platform and you’re doing it in a way that doesn’t require you to provide any sort of subsidy of any kind. So they’re actually excited to come onto your platform.

And as we found, you know, once somebody’s on your platform, you’re just in a different league. You know, you’re no longer part of the very large world that are trying to get access. You’re actually part of the inside. So that’s probably the biggest value to us. You know, away from that, you know, it feels like it’s, you know, a few tens of millions of dollars of revenue associated with sort of the existing set of clients. So, you know, it’s probably in the 15 to 20 run rate at the moment. You know, what level it gets to, I don’t know. You know, at some point we won’t be the only person providing that. But like right now we have an opportunity to bring people on and have them use our platform.

You know, in terms of prediction markets, you know, we only recently set up to clear Kalshi again. You know, it’s not so much the size of the revenue that it’s contributing now. It’s the fact that it’s getting you, you know, into a really strong position with, you know, key, key prospects and that the people at those sort of prospect firms that are involved are, you know, very senior, often the principal owners of those funds. So that’s very exciting to us.

Again, very hard for me to, you know, assess what, you know, the revenue contribution will be from that activity itself. But, you know, the level of interest is extremely high. So that’s, you know, that’s sort of a positive.

Bill Katz (Analyst at TD Cowen)

Okay, thank you.

OPERATOR

Your next question comes from the line of Patrick Moley with Piper Sandler. Patrick, your line is open. Please go ahead.

Patrick Moley (Analyst at Piper Sandler)

Yes, good morning. Thanks for taking the question, Ian. Maybe just following up on Bill’s question, maybe digging more into the compute. I think last quarter when it came up, you guys said you hadn’t looked into it too much and it was a big part of the prepared remarks this quarter. So I guess it sounds like the opportunities moved up the priority list. Could you maybe just talk about what you’re seeing, where that, you know, demand is coming from?

Is it coming from hyperscalers that you already work with or is it in reaction to some of the exchange-driven product development that we’ve seen here recently? Thanks.

Ian Lowitt (Chief Executive Officer)

Yeah, sure. So I think that, you know, it’s sort of worth just sort of noting that, you know, obviously there’s a huge amount of spend, you know, in this space and there’s actually a lot of hedging that’s going on, you know, around a lot of these products, you know, whether that’s, you know, hedging out copper or that’s hedging out, you know, some of the power requirements. So the fact is we are participating, not in some way just through the normal course of our business with regard to, you know, some of the people who are investing, you know, these massive sums in building up this infrastructure, you know, with regard to compute.

You know, I think that, you know, some of our sort of key partners are quite engaged in this, you know, and have a lot of interest. And as a result, you know, we’re being, you know, sort of consulted around this a fair amount in the course of the last quarter. You know, it’s also apparent to me that if these products do take off in some sort of meaningful way, that it has the potential to take down some of the sort of noise that you see around some of the companies here. So, I mean, if you could actually sell some of your, you know, sort of production forward by way of example, you know, then I think that takes some of the concerns away around, you know, the mismatch of timing between expense and revenue.

So I do think it’s, you know, it’s potentially quite important as a way to sort of stabilize these marketplaces. You know, I had no view on, you know, when this gets sort of approved by the regulators, and it appears as though that’s sort of being pushed off a little bit. So it doesn’t appear that it’s sort of imminent, but it is an area that I think we are engaged in, as you say, to a differentiated extent versus where we were a quarter ago. It’s not a massive effort on our part, but it’s one where the potential marketplace, as I think you’ve written about, is very substantial.

And if it is going to take off, players like Marex Group will have some part to play in their development.

Patrick Moley (Analyst at Piper Sandler)

All right, great. Thanks for that, Ian.

OPERATOR

Your next question comes from the line of Dan Fannin with Jefferies. Dan, your line is open. Please go ahead.

Dan Fannin (Analyst at Jefferies)

Thanks. Good morning. So, Ian, wanted to follow up on some of your comments around M and A. You talked about a very active pipeline, so I was hoping you could expand upon that. And then also you’ve been quite active year to date and maybe just update us on the integrations of the businesses. I think you mentioned in the con in your prepared remarks, Winterflood in terms of that happening. And then obviously a couple of deals this quarter that were announced.

Maybe some updates in terms of contribution from that, as well, please.

Ian Lowitt (Chief Executive Officer)

Sure. Well, look, I mean, you know, we’re really, really sort of pleased and excited with, you know, how the acquisitions have gone. You know, obviously we’ve talked a lot about, you know, the success we had with the Cowen acquisition, which was the basis of our very successful prime business. Going further back, I mean, ED&F was a transformational deal, you know, sort of for us. You know, we talked in the remarks about, you know, the success we’ve had with Hamilton Court.

And again, I think it just is a demonstration of, you know, what can happen if you take sort of a franchise that’s sort of small, having some set of challenges in the market, you may get part of Marex Group and all the sort of advantages they have sort of turn into a lot of growth. In terms of what we’ve needed more recently, Winterflood as, you know, a sort of negative goodwill deal, and it’s certainly sort of broadened our participation in equity market-making. And I think we’re pleased with both the integration as well as, you know, how that sort of broadened out that part of our franchise. You know, Levmet has been, you know, really terrific.

I mean, you see it in the, you know, in the increase in market-making revenues, and Levmet really has been very impactful in the course of the quarter and I have a lot of enthusiasm for what that’s going to do to diversify the franchise and provide an additional meaningful sort of growth vector for us. And Webb has also had, you know, a terrific start. So, you know, the transactions we’ve completed this year have been really, they’ve worked well, they’ve integrated, you know, sort of per the plan and we’re sort of excited about their prospects.

Obviously, we talked a bit about Brightpoint, which again, you know, likely to close early part of next year and again creates a real vector of growth for us in China, which is a priority area for us. I think I’ll actually just pass over to Paolo who’s here with us, who has information about all the rest of the pipeline.

Paolo

Thanks, Dan. In terms of the immediate pipeline, we have, I would say, four transactions where we’ve agreed commercial terms there. So in the size range that is sort of most common for us, somewhere around the sort of revenue and contribution range that you’re seeing for something like Brightpoint, which is a clearing business. I would say they lean towards clearing and prime in terms of services and they’re also, in terms of sort of geography, the majority are either Asia or Latin America.

So four transactions that I think, you know, are close to signing and with those sort of characteristics. There’s probably another four to six transactions that are a little further away. But it is really encouraging the number of opportunities that we’re, you know, we’re being asked to review, that we’re being shown, the number of transactions we’re participating in where, you know, it’s a competitive process. So, I mean, of those where commercial terms have not been agreed, you know, again, there’s a sort of very interesting mix that perhaps is a little bit more agency and execution focused.

Prime, perhaps, you know, elements of prime. But, you know, it’s surprised me just how many of these opportunities we’re seeing. And I think in, you know, in most cases, you know, we’re well positioned to be able to, you know, be competitive with, you know, these purchases.

Ian Lowitt (Chief Executive Officer)

And I’ll just sort of make the additional point, you know, Dan, that, you know, we’re sitting in a capital position where our REC ratio is like 12.3%. You know, 10% is investment grade. So we have, you know, close to $300 million of capital that we can deploy in a way and still remain, you know, at the investment grade level.

Dan Fannin (Analyst at Jefferies)

Great, thank you.

Ian Lowitt (Chief Executive Officer)

Thanks, Dan.

OPERATOR

Your next question comes from the line of Jeff Schmidt with William Blair. Jeff, your line is open. Please go ahead.

Jeff Schmidt (Analyst at William Blair)

Hi, good morning. The prime services revenue continues to grow at a high rate. Where’s that growth coming from? Is it mainly the on-balance-sheet business now or is the prime of prime still growing at a high rate? And, you know, how much is the leveraged ETF component at this stage?

Ian Lowitt (Chief Executive Officer)

Yeah, I think that, you know, we’re very pleased with, you know, how that business has performed, you know, through the course of the year. You know, it does have sort of those three components that, you know, we described. So, you know, the on-balance-sheet business, the prime of prime, and the outsourced trading. I mean, the on-balance-sheet prime, you know, is the largest component of it, but it’s not the whole of the business. And, you know, I think that while we don’t anticipate that, you know, it will continue to grow at the same pace, I think we remain quite optimistic about its future.

Paolo, do you want to add anything to that?

Rob Irvin (Chief Financial Officer)

Yeah. Hi. Hi, Jeff. I mean, just to sort of reinforce that, you know, it’s more on balance sheet than it’s prime. I mean, in terms of the contribution, I think the ability to generate high returns is much greater when it’s on balance sheet, even if the number of clients that we’re bringing on is roughly equal in terms of those two offerings. In terms of the total balance sheet levered ETFs, you know, it’s an important contribution. It’s a relatively small amount, you know, if we look at the sort of assets under management that we’re supporting. But, I mean, it’s a much higher-margin business, obviously being a little bit softer with the sell-off in AI and AI-related stocks. But balances have been very stable in totality. If you take out some of this day-to-day volatility, they’ve been very consistent through the third quarter.

And even going into October, we’ve seen levels of activity on that side of the business that are comparable to the third quarter and, sort of, point in time, maybe a little bit softer towards the end of the period. But overall it remains a stable balance and an important contributor, given that the growth is largely on balance sheet. I think Ian’s point about the pace at which it’s going to grow: it’s going to be a little bit more constrained than it has been because it uses capital, and so we have to manage within our capital resources, and that will slightly, I think, constrain growth. And it’ll probably mean that it’s more comparable to the growth of the firm as a whole rather than the very fast growth that you’ve seen this year. We’re not going to repeat 100% growth. I wouldn’t expect.

We’ll try.

Jeff Schmidt (Analyst at William Blair)

Yep, that makes sense. And then NII was a little bit lighter than expected despite strong growth in client balances. Was that mainly related to higher funding costs and liquidity you’re maintaining? I think you had been pointing that out. Or did deploying more balance sheet into the prime business have an impact as well? Just trying to think how to, you know, how do we think about that trade-off. Thanks.

Rob Irvin (Chief Financial Officer)

So, look. Thanks, Jeff. I think NII came in broadly where we were expecting. So if we decouple the two parts, obviously what drives our net interest income is the client balances. The client balances have grown very significantly this year. We got a little bit of a pickup in the quarter as the average Fed funds increased. And then, obviously, going against that is our interest expense, which is from the Solutions structured notes and from the senior debt issuance.

Obviously, during the quarter we were long liquidity. Again, some of that liquidity we made a conscious decision to deploy into our trading businesses. These trading businesses typically are self-funding, but it allows us to shield against the negative carry, and obviously we could pull that back if we needed to. Did that cover what you were looking for?

Jeff Schmidt (Analyst at William Blair)

Yes, it did. Thank you.

OPERATOR

Your next question comes from the line of Alex Blostein with Goldman Sachs. Alex, your line is open. Please go ahead.

Alex Blostein (Analyst at Goldman Sachs)

Hey, Ian. Good morning, everyone. I wanted to go back to Slide 6. You provided some interesting color just around the number of clients with over 5 million. I think you spoke to some of these metrics in the past, but they continue to improve. So as you think about the incremental cross-selling opportunity, which products and maybe which segments do you see the most compelling runway for you guys to further expand this? Just thinking through, you know, kind of on an organic basis, which one of these segments is likely to see the most uplift from this cross-selling momentum?

Ian Lowitt (Chief Executive Officer)

Yeah, well, thanks, Alex. I think that, you know, as we sort of think about this, it’s important to make a couple of points. One is that the clients that are now in the $5 million plus bucket are clients who almost without exception are clients who are already clients of the firm. So we’re not going out and finding $5 million clients. I think we’ve had one this year. But the vast preponderance is just growing clients who are already at the firm, and we have 250 to 300 clients that are in that $1 to $5 million bucket that are the targets that are going to grow up.

So part of what is driving this is clients who are already clients of the firm, and we’re able to expand the amount of business we do with them. As we look at the data, you don’t see any one area that is a massive recipient of this. It really does have flows in every direction. So execution clients help drive clearing. Sometimes clearing mandates drive execution. We have futures clients, futures clearing clients, that are now becoming prime clients. Some of the prime clients get introduced and become execution clients. Solutions clients actually are introduced to a range of the firm’s capabilities, including clearing and others.

So, as we look to say, if cross-selling is the big driver of organic growth, does that favor one particular segment over another? I mean, the only segment which is hard to see is market making, and that’s more because we actually don’t attribute client revenues to market making. So I don’t see the cross-selling effort as being anything other than cross-firm and contributing to all of the segments growing.

Alex Blostein (Analyst at Goldman Sachs)

Got it. That’s helpful color. Thank you. And then one more if I could sneak one in. Encouraging to hear you guys talk about 10 to 20% growth next year despite obviously coming off a really robust year this year. One, could you comment on the more near-term backdrop you’re seeing in the fourth quarter? October’s behind us and it’s been a bumpy month, so curious how October is trending or how has it done so far. And then as you look at 10 to 20%, is it fair to assume that’s largely organic growth that you commented on?

Are you including some of the deals that are kind of closer in the pipeline?

Ian Lowitt (Chief Executive Officer)

Yeah, well, I mean, obviously we’ve had a really, really strong nine months. We’re almost at $500 million of PBT. As I think about the environment, what we described on the last earnings call was an environment in the third quarter that felt a lot like the average of the first half. And I think that’s how it’s played out, in quite an even way across the three months. And then as we look at October, we’re seeing the same thing again. So we’re seeing an October that looks like the average of the year, from a market perspective and from a performance perspective.

And so I think that’s all part of what’s giving us confidence around our ability to continue to perform strongly through the year. I mean, obviously there’s the expected slowdown around the Christmas holidays. But we do think that we’ll continue to operate in and around the level we’re currently operating, and that reinforces our confidence going into next year. We have that confidence in part because essentially all the businesses are exiting the year in a much stronger position than they entered the year. Some of that is as a result of the acquisitions that we’ve closed this year. So Lev Met and Web, which, sort of, stage two closes, will have a full-year effect associated with them.

I think that as we think about the growth next year and we think about the 10 to 20%, what we really are considering, at least from a budgeting perspective, is the full-year effect of the acquisitions that we’ve completed this year and Brightpoint, but we have not included explicitly the impact of other acquisitions that might close because we just don’t know that they will.

Alex Blostein (Analyst at Goldman Sachs)

Got it. Helpful. Thank you, guys.

Ian Lowitt (Chief Executive Officer)

Thanks, Alex.

OPERATOR

Your next question comes from the line of Ben Budish with Barclays. Ben, your line is open. Please go ahead.

Ben Budish (Analyst at Barclays)

Hi, good morning and thanks for taking my question. Maybe just following up on some of those last comments on inorganic growth. Curious if you could quantify how much Lev Met contributed to the metals market making business in Q3. It does look like things have sort of actually stepped up in the first half of the year, obviously Q3 even stronger. If you could unpack what’s going on there — spreads, volatility, volumes, inorganic — what do we need to know?

Thank you.

Ian Lowitt (Chief Executive Officer)

That’s quite a lot. Well, look, I think that as I think about metals in particular, I think we have the strongest, if not one of the strongest, franchises. So when you’re in an environment like the one we’ve been in, it’s not surprising to me that Simon and the team are delivering such strong results. And you certainly see that in this year. Lev Met is, in PBT terms, delivering — actually together with Web — low teens of PBT in the quarter. So it’s a nice contributor and it’s showing the power of that.

So some of the increase that you’re seeing in Q3 versus Q2 is a result of Lev Met. But a lot of what you’re seeing in terms of the improvement in ’26 versus ’25 is the improvement in the environment and the share gains we have in our metals franchise.

Ben Budish (Analyst at Barclays)

Okay, very helpful. Maybe a follow-up on some of the newer growth initiatives. Thinking specifically about prediction markets and maybe compute futures, how do you think about the potential for volume? For prediction markets, we sort of see existing volumes; compute futures, it’s harder to say. But the potential for volume and capacity as these kinds of products get off the ground — and maybe if you could talk about prediction markets more specifically — how should we think about market volumes relative to what institutions could handle?

And maybe talk a bit about how you’re thinking about managing risk there and being able to effectively hedge, given the level of liquidity in those markets, excluding sports. Thank you.

Ian Lowitt (Chief Executive Officer)

Well, I mean, just for clarity, we’re participating as a clearer here. So we’re not a market maker on prediction markets. All we’re doing is providing our clients access to those exchanges, but they want to do it in a cleared format rather than having direct access themselves. And that is a trend that we think persists. For the sophisticated institutional clients that we deal with, they see the protections that they have being a cleared client versus having direct access as being extremely valuable.

And so all of them are looking for access to those markets in that way. The potential firepower of all of those guys is absolutely enormous. But how much they’re actually going to transact in prediction markets and how much they’re using it as a way to get data signals that they then express in other markets, I have no view of. For us it’s really responding to customer demand to have access. I think it’ll be decently profitable because the amount you make to support that access is quite attractive relative to other things of comparable amounts of notional invested.

But what the take-up is of that set of clients we don’t really have a particular view on. So it’s primarily for me about getting access to those clients, and to the extent that it really takes off in some material way, then that’s obviously just added profitability for us.

Ben Budish (Analyst at Barclays)

All right, very helpful, thank you.

OPERATOR

If you have a follow-up question, you are invited to press star one to raise your hand and rejoin the queue. Your next question comes from the line of Bill Katz with TD Cowen. Bill, your line is open. Please go ahead.

Bill Katz (Analyst at TD Cowen)

Thank you very much. So just a couple cleanup items actually. When you talk about 2026, are you including the credit provision that you took early in the year as sort of the normal backdrop? Just want to make sure we’re thinking about the right run rate here. Secondly, I was wondering if you could talk a little bit about, as you think about the deal pipeline, the timeline to which you think you might be able to close these. And you mentioned that they’re running at the same size as one of the previous deals you announced pre-synergy.

So would you anticipate getting the same kind of synergies from those transactions? And then the last question is a broader question. Sorry for all the questions. As you think about the business and you continue to scale, I was wondering if you could update your framework around the operating margin or the adjusted PBT margin potential. Thank you.

Rob Irvin (Chief Financial Officer)

Okay. So, you know, when I sort of think about 2026, I think of it sort of on an as-reported basis. So in the first quarter we got the benefit of sort of higher revenues in some of our businesses because of the higher volatility and we had idiosyncratic sort of credit loss. So I think of the reference point as including the impact of the good and the bad, which includes the credit loss. So we’re not backing out the credit loss, if that’s your modeling question.

When we talk about the base for 2026, you know, in terms of… I think the second question was around synergies from acquisitions.

Bill Katz (Analyst at TD Cowen)

Yeah, synergies and time.

Rob Irvin (Chief Financial Officer)

Do you want to take that, Paola?

Paola

So, I mean, of the four transactions that we talked about, Bill, as having agreed commercial terms, I think that the likelihood is that the majority will be signed in this quarter or in the first quarter. Closing those transactions is dependent in almost all cases on regulatory approval. So there’s a bit more uncertainty there and that does vary by region. So, for example, in Latin America that might take a little longer, or is likely to take longer.

Typically, once we’ve signed it, somewhere between three and five months to closing. So in terms of, you know, the timing of the impact of these transactions, it’s going to be the ones that we talked about as being, you know, highly probable or sort of close to signing. You probably won’t see much impact until the second half of next year.

Ian Lowitt (Chief Executive Officer)

And then in terms of operating margins, I mean, I think that, you know, we talk about this. You know, we don’t manage to operating margins, so operating margins are sort of the outcome of a whole range of things. So, you know, operating margins are going to be a function of, you know, revenue mix. And obviously, you know, the shift of revenue into, you know, higher-margin activity helps, but it’s also in that sense a function of, you know, the work that we’re actually doing to improve margins even in lower-margin businesses.

And those can be, you know, quite material as well. You know, it’s a question of how much we invest. And, you know, as you’ve probably got a sense from our commentary, you know, we are continuing to invest in new products and we’re excited about the prospects of those and feel that, you know, if we’re going to deliver on our strategy, which is having enough structural growth to offset cyclical factors, then that’s absolutely the right thing for us to be doing. But that obviously impacts margins. You know, as we grow, we get, you know, some scale effects both in terms of, you know, the impact on support and control as well as on our fixed cost base.

And I think, you know, all of those things sort of talk to gradually improving margins. You know, we’ve talked about how we think we could, you know, previously we talked about how we thought we could get to the mid-20s. And obviously this year we’ve taken a nice step in that direction. We’ve, you know, sort of gone from 21 to 24. And we also believe, you know, as we’ve spent more time thinking about it and thought about, you know, the role that technology is going to play in, you know, raising productivity, the potential to, you know, improve controls but also output through AI, I think that’s also sort of margin enhancing.

So, you know, we thought that we could get to 30 and, you know, as we’re getting closer to 30, I think we’ll reassess and say, you know, what our next view is of, you know, what we can actually generate. But, you know, broadly, you know, we see a series of trends, all of which should be increasing margins, but in a, you know, probably at a slower pace than we saw this year just because, you know, this year we’re just seeing so much impact because the revenue growth is so high.

Paola

And sorry, Bill, just to go back to your question on the synergy opportunities. I mean, you know, I would say that, you know, given that these businesses that we’re looking to acquire are in that clearing and prime space, you know, it’s reasonable to assume that the same type of revenue synergies we expect from the announced transaction from Brightpoint BPI, you’d see in these other transactions. We very much expect that moving these businesses onto our platform is significantly revenue accretive.

And just to sort of make that point, I mean, we’ve really, you know, we’ve seen that this year with FX, where revenues are sort of close to triple the run rate that we saw pre-acquisition. That’s only been closed for less than 18 months, and it’s an area where we continue to invest. We are expecting to have a payments capability live towards the end of this quarter, certainly by the first quarter. And I think that sort of enhances that offering as well as giving us another sort of organic growth stream.

So we answer your question, Bill.

Bill Katz (Analyst at TD Cowen)

Absolutely. Thank you for being so kind, taking all them. Appreciate it.

Paola

No problem.

OPERATOR

Your next question comes from the line of Chris Allen with KBW. Chris, your line is open. Please go ahead.

Chris Allen (Analyst at KBW)

Morning, everyone. Thanks for the question. Just kind of following up on the comment, just in terms of on FX, the revenue tripled. I’m just trying to think about the deals that you’ve done. Which ones are at potentially full capacity, or which ones there’s significant room for expansion, either by injecting more capital, cross-sell into your customer base? Hamilton Court obviously seems like it’s reaching its potential. I’m just wondering what other ones have a clear path to growth from here?

Ian Lowitt (Chief Executive Officer)

Look, I think that, you know, we’ve been very pleasantly surprised by the opportunity that FX represents. And so while Hamilton Court I think has been, you know, a great success for us, I think that we certainly believe that, you know, we can build an even bigger business, you know, on that business model, expanding sort of geographically and making ongoing investments. So we certainly don’t think that it’s hit its maximum. I’m personally extremely excited about sort of the opportunity that, you know, Lev Med represents because it’s essentially, you know, sort of magnifying some of the strengths we have in our metals franchise by giving us opportunity to extend out into, you know, some physical products and enhance some of the things that we were doing for clients before. So I actually think that that could be, you know, quite substantial for us. And then I think, you know, obviously we can’t speak to the acquisitions that Paola’s referenced, but, you know, those will also help advance the franchise.

And then Brightpoint, you know, if we can utilize all the sort of connectivity that Penny and the team at Brightpoint have into China to sort of expand our engagement with that absolutely huge market, you know, then that in and of itself could be, you know, a massive accelerant for the firm. So, you know, we’re always sort of conservative in what we say we’re going to be able to deliver with regard to those acquisitions. But notwithstanding that, they do, when made a part of our franchise, represent sort of growth vectors that, you know, in the past have proven to be very substantial.

And there’s nothing in sort of the existing crop that suggests that they’ll be different in kind and that they won’t represent the same sort of growth opportunity.

Chris Allen (Analyst at KBW)

Thanks, guys.

OPERATOR

All right, your last question comes from the line of Ben Budish with Barclays. Ben, your line is open. Please go ahead.

Ben Budish (Analyst at Barclays)

Hi, thanks for taking my follow-up. Just wondering if you could talk a little bit about the Solutions business. It looked like the structured notes balance actually stepped up quite a bit quarter over quarter, but the revenues have been trending down off a very strong Q1. I understand things can be lumpy, and I think you talked a bit about some of that structured issuance flows through interest expense. But if you could help us understand what exactly is going on in there.

Is there anything timing related? How do we think about the relationship between either headcount or balances to revenues going forward? Thanks.

Ian Lowitt (Chief Executive Officer)

Sure. Well, I think that the broader backdrop there is, you know, the business is doing really well. It’s grown, you know, very substantially, nine months on nine months, and even, you know, if you look at the third quarter to third quarter, it’s actually up, you know, sort of whatever it is, 28, 30%. So, you know, the business is doing extremely well. You know, the hedging solutions business is, you know, continuing to grow in a very steady way, and the financial product business, you know, has more variability to it.

I mean, what I actually take away from it is really that the first half was the very unusual revenue opportunity for that business, and that’s associated with very high levels of volatility that we saw in the first half. As one thinks about what we’re trying to do as a firm, which is build a portfolio of businesses that are going to perform well through a bunch of different market environments, then you want some businesses that are going to do really well in some of those environments, like we saw in the first half, and Solutions certainly did that, and recognize that in environments that are a little less supportive, they’re not going to do quite as well. And I think that’s really the only sort of takeaway for this.

I think the volatility in equities was down. The rate of change in volatility was lower, and that’s also an important input for that business. You know, there were s