FXCM CEO Niv on Q4 2014 Results - Earnings Call Transcript
Mar. 13, 2015 1:57 AM ET | About: FXCM Inc. (FXCM)
Operator
Good day, ladies and gentlemen and welcome to the Q4 2014 FXCM Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, today's conference is being recorded.
I would now like to turn the conference over to Jaclyn Klein. Ma'am, you may begin.
Jaclyn Klein - IR
Thanks, operator. Good afternoon everyone and thank you for joining us for the FXCM Inc. fourth quarter 2014 earnings conference call.
Joining me today are Drew Niv, FXCM’s Chief Executive Officer; and Robert Lande, our Chief Financial Officer.
A live audio webcast, a copy of FXCM’s earnings release, which was sent earlier this evening and presentation slides used during the conference call are all available at www.fxcm.com under the Investor Relations tab. A replay of this conference call will also be available later tonight on our Web site.
Before I turn the call over to Robert, I would like to remind everyone that in today’s remarks, we will refer to certain non-GAAP financial measures, including adjusted EBITDA, non-GAAP adjusted net income and non-GAAP adjusted net income per share. These measures should not be considered in isolation from or as a substitute for measures prepared in accordance with Generally Accepted Accounting Principles. Reconciliations of these non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings release on the Investor Relations portion of our Web site. As usual, this call is intended for investors and analysts and may not be reproduced in the media in whole or in part without the express written consent of FXCM.
Before we begin, we would like to remind everyone that in remarks and responses to your questions that we provide today may contain forward-looking statements. These statements do not guarantee future performance and undue reliance should not be placed on them. These statements are based on current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated in any forward-looking statements, including risk associated with the events that took place in currency markets on January 15, 2015 and the subsequent financing agreement, as well as those identified in the Risk Factors section of our Annual Report, Form 10-K filed with the SEC and available on our Web site. As such factors may be updated from time to time in our SEC filings, FXCM assumes no obligation to update any forward-looking statements.
And with that, I would like to turn the call over to our CFO, Robert Lande.
Robert Lande - CFO
Thank you, Jaclyn. I propose going relatively quickly through Q4 and 2014 results and then hand things over to Drew to talk about where we are today following the events of January 15 and the way forward.
First quarter 2014 was a strong quarter for FXCM and we recorded the third highest adjusted EBITDA in FXCM history. Our revenues of $134.7 million increased 16% sequential and 19% year-over-year. GAAP EPS was $0.35 per diluted share versus $0.05 per diluted share in Q3 '14 and $0.08 per diluted share in Q4 '13. Under GAAP Q4 included a $7.1 million or 16% share items from remeasuring our tax receivable agreement. We have eliminated that item in our adjusted results.
Adjusted EBITDA was $40.8 million, up 43% sequentially and 53% year-over-year. Adjusted EPS was $0.20 per diluted share versus $0.11 per diluted share in Q3 '14 and $0.10 per diluted share in Q4 '13. Adding back tax effected amortization and stock based compensation, adjusted EPS in the quarter would have been $0.27 per share. Quarterly retail and institutional volume in the fourth quarter increased 40% and 20% sequentially and year-over-year on the improved trading conditions but also as a result of our launch in targeted markets of discounted pricing and displaying commissions instead of marked up spreads.
In fact our quarterly volume of $1.4 trillion in our retail FX business and $1.1 trillion in our institutional business were both records for FXCM. And this isn't a function of the improved environment but very much a function that trading expanded as we expected in the jurisdictions where we launched our new pricing. And for the whole year revenues were $463.8 million, adjusted EBITDA was $107.3 million, GAAP EPS was $0.39 and adjusted EPS was $0.35. All in all, a pretty good year given the extraordinary low volatility in the currency markets really until the end of August of last year.
Turning to Slide 4. This is a snapshot of our retail business over the past three years. You can see it. As I just mentioned, it was a record quarter for volume, average daily volume and daily average revenue trade. In the top right graph you can see we did $69 per million on average, which was a reflection of the reduction in prices that we did in various jurisdictions where we launched a commission instead of a markup structure. And that is pretty much in line to what we signaled to you when we put out December metrics back in January.
Turning now to Slide 5. Most of you should be familiar with this Slide that presents our cost excluding V3 which was acquired at the beginning of Q1 '14. These are the numbers on the top ex V3, and I think you can see it was a very strong quarter for cost controls with our lowest operating cost in total in years. Compensation expense fell to $20.6 million with lower bonuses paid and a continued reduction in headcount. Marketing, communication and technology and G&A all were contained or reduced and trading costs went up as this is somewhat of a variable item that tracks our Lucid volume.
Finally, on Slide 6 you can see the year-over-year comparison, revenues were up 19% from the previous year's Q4. Adjusted EBITDA up 53% from the previous year's Q4. Adjusted EPS doubling to $0.20. And all of this accomplished in a quarter as you can see at the bottom, which was improved with CVIX at 8.5 but not that dissimilar to Q4 '13s 8.3 on the CVIX on average.
So with that I will finish talking about last year and turn things over to Drew now to talk about the state of our business today and the way forward for us following the events of January 15.
Drew Niv - CEO
Thank you, Robert. Turning to Slide 7. As many of you know on January 15th of this year, Swiss National Bank discontinued its currency floor for the Swiss Franc against euro. When that happened, the Swiss Franc moved further and faster than any major currency has moved in 40 plus years that currencies have been floating. Our customers suffered significant losses which resulted in negative equity balances or debit balances as we call them, owed to us of approximately $276 million.
For a more complete description of the market movements of the Swiss Franc and its impact on FXCM and the retail FX industry in general, I encourage you to listen to the narrative which is posted on our Web site, www.fxcm.com on bottom right.
The following day, January 16, FXCM entered into financing agreements with Leucadia National for $300 million. We discussed the details of this financing back in January after it was completed so we won't go into detail again today. All agreements are available on our Web site. We will give you an update though on the progress we are making towards our near-term milestones for repayment.
Moving to Slide 8. What I would really like to focus on is on the core strength of the FXCM business despite the events of January 15.
We remain in a very strong competitive position globally in all of our market places and here are some metrics that demonstrate this. We are $303 million in consolidated operating cash, that’s our own cash; $1 billion of customer equity 195,000 active retail FX accounts; regulatory capital of $252 million which exceeds our minimum regulatory requirements by $159 million.
Although note that this number is reduced somewhat when one factors in cash we leave on deposits at clearing banks as well as capital buffers required by regulators to actually operate in their jurisdictions.
On an operating basis, the company has restored itself to the strong competitive position it has prior to the adverse events of January '15. We saw a few negligible losses on the white label front, so most of these relationships remain completely intact. Our average weekly account opening stats remain identical in number to the period before SNB with the exception of slightly lower average balances. The only meaningful negative impact customer wise, retail customer wise, has been with very high network customers who maintain accounts but have swept big balances away awaiting signs that we are still in business.
Some institutional customers have also pulled out of Fast Match in our other institutional businesses and those losses have played a role in our strategic thinking going forward.
Moving to Slide 9. With a strong platform, global brand and the same team that propelled us to the leadership position we occupy in retail FX, our near-term strategy is two important prongs. First, we plan on making significant near-term reductions in our loan obligation to Leucadia through the sale of non-core assets and cash generated from our profitable operations to repay the full loan by the end of this year.
In parallel, we are accelerating the growth of our core business through a number of FX and CFD initiatives. I would like to provide some more color on both of these strategy components on Slide 10.
FXCM is a global FX business spanning retail and institutional markets. Not too long ago the company was an extremely successful business almost entirely focused on retail FX. We believe that retail FX business, our core legacy and strength, represents the most exciting growth opportunity for the business going forward. This enables us to sell businesses outside of retail FX or into retail FX in selected geographies and use those proceeds to pay down our debt and focus on our core business where we remain an industry leader.
We have decided to exit the Japanese and Hong Kong retail markets selling our locally regulated subsidiary in each country. The sales will not only generate meaningful proceeds but will also liberate over $50 million of cash which currently resides in these two entities. We have multiple bids for each subsidiary and are seeing significant competition for these properties. We are in active discussions to select the best bid and move towards closing in the near future.
On the institutional side, we are starting the process to sell our stakes in the Fast Match, Lucid and V3 Markets.
We have received many unsolicited indications of serious interest from many credible bidders for Lucid and Fast Match and believe auction process for these properties once gets on the way will be very robust.
Fast Match in particular will benefit from the recent sale of Hotspot by Knight Capital. We saw a very aggressive and robust auction. Fast Match has in a short period of time risen to become a major competitor within the institutional ECN segment, successfully competing against companies that have been established for 10 years or more. As a benchmark of the value that these ECNs command, Hotspot was recently sold by Knight for $365 million in cash and contingent tax payment of up to $70 million.
While smaller than Hotspot, Fast Match has grown much more rapidly. We believe it's technology and architecture position to be much superior to Hotspot and the next leader in the FX ECN platforms. Lucid has been one of the leading and most successful algorithmic market makers in FX and is expanding outside of FX. V3 Markets, our most recent acquisition is a high-frequency trader of primarily listed products in futures and options.
And finally, FXCM Securities in London is a small trading desk offering listed products such as options, futures and equities to UK customers. As for those of you who have been following us, it's the legacy that we inherited from buying ODL Securities in 2010. We believe that the sale proceeds plus cash freed from the balance sheet of these entities could exceed $250 million which would go a long way towards repaying if not fully repaying the Leucadia loan.
Moving to Slide 11. Our second strategic thrust it accelerating the growth in our core business. To do this, we have three principal objectives. One is broaden our CFD business through the agency model offering an introduction of -- and offer an introduction of single share CFDs. Two, is expand our FX market share through continued innovation, and three, launch a dealing desk model for small and retail customers so increase our dollar per million yield.
Moving to Slide 12. Let's look at each of these in a little more detail. Broadening our CFD business with an agency offering and introduction of single share CFDs is an initiative you have heard us speak about before. As described in earlier presentations, we will be introducing this over the course of 2015 and believe it will have a material impact on our revenues when fully introduced. Given the events of January '15, this has been somewhat delayed but should be back on schedule very soon.
We are still confident in our ability to capture over the next few years, 10% to 20% of what we estimate as a $2 billion pie of CFD revenue amongst our competitors. FXCM has been recognized as an industry leader in FX for many years, both for share of our trading volume and for our innovation, product and service excellence. Continuing that history of innovation, we are introducing new features and tools to retail market that are commonplace or even standard in the institutional market.
Some of these include providing market depth and the real-time [sentiment] [ph] and volume indicators to traders. Institutional traders have had some of these for years, we will now make them available for retail space. Some of these features aren't even available for most institutions that trade FX and generally have historically fed the fears of an unequal playing field between big banks, HFTs versus the general customer base at large. We believe that with all the recent news in the FX industry and the SNB event being just the latest to hit its credibility, increased transparency is key to increasing market share. We will continue to rollout our commission initiative in targeted markets displaying commission for trade rather than the markup. We believe this is a more transparent way to price and is the direction that the retail FX is moving to and we wanted to move there faster.
On Slide 13, our third initiative to accelerate growth in our core business is the launch of a hybrid desk model for small retail FX accounts. These are accounts with less than $20,000 of deposits. While these accounts maybe large in number, they still represent much less than half of our trading volume. So the majority of our volume will remain on our agency model. This sub-segment of our client population values narrow spreads and higher leverage. However, they represent less risk and a dealing desk model than larger clients.
By switching to a dealing desk model for this segment, we believe we can generate higher dollar per million yields without corresponding increase in risk. This segment of accounts was the fastest to recover post-January 15 and represents an opportunity for us to take share from our competitors. Most importantly a transition towards a dealing desk model for small accounts will allow us to profitably serve a corner of the market we were previously about to abandon. This will also have the effect of significantly increasing our dollars per million yield on trade. As the year progresses, we will be able to better estimate about dollar per million as it shifts upwards.
Moving to Slide 14. We have our February operating metrics. You will note that after a strong surge in trading volume in Q4 that carried into mid-January, volumes have come down in February. February ADV of $13.3 billion represents growth over a year earlier figures but a drop from recent strength we have seen. Industry benchmark for February volumes have declined between 50% and then 45%. The volatility has picked up in March driven principally by euro and the dollar. Retail active accounts grew to a record level in February, another indicator that despite the challenges we face, in January '15 our core franchise remained very strong.
Institutional volumes dropped in February, the principal contributor was lower volatility with post-SNB dislocation in the market also contributing. With that, I will turn this back to the operator for questions.
Question-and-Answer Session
Operator
[Operator Instructions] And our first question comes from the line of Mike Adams of Sandler O'Neill. Your line is now open.
Michael Adams - Sandler O'Neill
So first question on some of the negative customer equity balances. I know you said you are going to forgive the vast majority of those but of the small, call it 10% or so of clients where you are going to try to recover some of the negative debit balances, have you had any success there? I know it made up a big percentage of the negative equity in total.
Drew Niv - CEO
We have just started in a few select jurisdictions and it's too early. I mean we have a little bit of success, it's too early to say how much that’s going to impact -- or how successful that’s going to be in the near-term. So we don’t know yet.
Michael Adams - Sandler O'Neill
Okay. And then kind of building off that, I know April 16 is a key date in terms of -- that’s when there is a contingent financing fee that might be payable if the term loan balance is over $250 million. Is that -- are you guys pretty confident you will get the term loan paid down by then to avoid that fee?
Drew Niv - CEO
Yes. We have got multiple ways to do that and we are fairly confident that it's going to happen.
Operator
Thank you. And our next question comes from the line of Ashley Serrao of Credit Suisse. Your line is now open.
Ashley Serrao - Credit Suisse
Just so, Robert, you identified about $159 million excess capital and I heard the commentary around regulatory buffers and some cash you need to trade as well. So what does that number look like after you include all of that and is any of that -- are you able to use any of that to repay the loan?
Robert Lande - CFO
The answer is yes and that plays into what Drew just said that we feel pretty good that we will be able to repay the $60 million on April 16. And in fact we have already repaid 12, if you noted in our press release. So it moves around actually depending on customer open position. Even when you get, apart from just that there is buffers that regulators require, there has been just the overall concept that you don’t want to go straight down to the minimums or even close to the minimums regardless of buffers. Because if there wasn’t a buffer, because you could be all of a sudden in a regulatory shortfall. So it's a good amount of surplus. It's come down a bit when you start to factor these things in but that still does leave us with a decent amount of capacity to deal with the upcoming April 16 payment.
Ashley Serrao - Credit Suisse
Okay. That makes sense. And then the expected sale of these non-core assets. You know you spoke to the potential, the EBITDA and we are doing our assumptions around what those will sell for. But can you just also flush out potential expense savings that selling all these non-core assets would generate. And then are you also evaluating anything else above and beyond in terms of further expense initiatives?
Drew Niv - CEO
So I would say that we have not yet quantified what it will be but it is not insignificant item. That there was a lot of corporate overhead attached to all these subsidiaries, an enormous amount of work that was not directly attributable to cost which [indiscernible] in those entities, done for those entities to some extent. And I think that’s something that we do not have flushed out yet 100% but we will be able to -- we are fairly confident we will be able to reduce costs. Depending on how the year goes and depending on volatility in FX markets and things like that, how much more discounting we do and how quickly the asset sale progress and therefore the interest costs of the loans go down. That’s going to determine a lot of other things. But we are very confident, the presentation we went over, I think that we are very confident in the asset sale process. It's going. Initial feedback is it's going really well. The first few properties are going for a higher than expected numbers. We feel very strong with the other properties. We will go for even more money. So this is something that we are very confident in our future.
The [onset] [ph] of asset sales, the aim for this year for the core business is to grow it more aggressively. And so any expenses we will trim will be very much related to the non-core business. The core business, we will be seeking to actually spend more money on marketing even compensation and other things partially for retention, partially for obviously a more aggressive expansion of the retail business. So there will be some cost savings that will be offset by increases to grow the core business much more aggressively.
Ashley Serrao - Credit Suisse
Okay. And I guess my final question is, with respect to the core business. Can you just talk about the mindset of the retail FX client since the SNB actions? What have you seen? Have you seen clients trying to come back or have some clients totally left the asset class? Just any observations would be helpful. Thanks.
Drew Niv - CEO
Sure. What I would say is, I am obviously being horribly over-generalizing so I am going to insult lots of people by doing this but for sake of this conversation, if you put people into three buckets, one is sort of your average small FX trader at FXCM. I will say fairly quickly confidence for those people resumed. So while we took a hit in the beginning, their confidence resumed very quickly. They are back to trading in the same manner as they were trading before. We have not noticed very much of a difference. The accounts signups for those customers, that customer group, is still the same. Everything is still the same. And a lot of our strategy going forward is to, especially in the near term is to capitalize on that.
That partly is explained by the fact that most of these customers are not in the U.S. where they are not hit by so much publicity about what happened to FXCM. They also outside the United States have a [seg] [ph] funds protection as well as, for example in the U.K. entity, have £50,000 of insurance on their money. And so the people, small clients in those amounts, generally feel fairly secure with us. For example in Canada they have $1 million of insurance. So there is a lot - in most of our -- because almost 90% of our customers are from overseas, generally speaking, they enjoy greater protections legally under those rules than U.S. rules allow for. And so we feel confident that those customers are actually fairly good and we think conversation with those customers have normalized and everything is fine. And that is obviously the bulk of the customer.
Now where we took the hit, as I said in prepared remarks, is high net worth customers. As you can imagine insurance doesn’t cover most of their money. We have not seen a lot of closed accounts. We have seen people sweep balances out. Those people are waiting for us to show signs that we are repaying back our debt and we are still going to be around. And I think some of this will be helped by time and some of this by us virtually us being here six months from now, a year from now, two years from now. And some of this will be helped by the fact as we release the press releases on asset sales etcetera, I think people will see that we are not going anywhere and we will come back as well. And that’s beginning to happen but still early days.
The class trader that has disappeared, I would say permanently, was a small group of traders but I would say it was a good group of traders, who do not trade as frequently but generally were larger than average traded currencies like euro, Swiss where were very boring. Were represented as much safer historically, currency to trade. Traded for income or around, like for carry trade or in the case of euro, Swiss, traded around very narrow band. Generally were more buy and hold type guys. Like I said larger customers. Their account profitability tended to be on average higher than the average Joe were. Generally speaking while not a large group, were very good customers of ours and our business model encouraged those customers because those customers obviously were profitable on an average, much more so than the general population.
Obviously it's those customers that have been burned. Oddly enough, the people that are the most conservative have been burned the hardest by this event because the behavior of certain unnamed central bank. And I think it is that something where that class of customer is not coming back and that is not the majority of FX traders out there. It was not the majority of trading volume. FXCM as an example, stopped trading and closed on all positions, stopped trading and [13 guarantee] [ph] payers that had some similarities with the euro, Swiss in the sense that they had a large involvement of government manipulation in them.
Trading in those currencies made up a very small fraction of trading at FXCM but again was this same group of customers that on average did really well. It's something that prior to the SNB event, it's something that we thought was a good thing obviously. And it was on general in the last decade or so, a very good thing for those clients. But not the case obviously on January 15.
Operator
Thank you. And our next question comes from the line of Ken Worthington of JPMorgan. Your line is now open.
Ken Worthington - JPMorgan
First, are either regulators or Leucadia, requiring that you manage the businesses that you will continue to stay in differently or more conservatively than you had managed them before. And if you so, what changes are they requesting that you make in terms of management?
Drew Niv - CEO
So I think, first the easy one is, Leucadia does not have operational control of FXCM so it is not able to dictate that. So is not involved in those decisions and has made obviously the call to invest in turnarounds of this business. [indiscernible] and is banking on it turning around. I think the regulators obviously don’t dictate business policy but obviously are -- you know it is not just U.S. regulators but regulators around the world are making everybody not just us, look carefully at risk management issues, liquidity issues. Things that obviously this event has brought up as being important. This is something that’s happening across the board in the FX industry.
So are some things being managed much more -- sorry, are many things being managed much more conservatively because of regulations, yes. But I would say overall thrust of the business is generally the same.
Ken Worthington - JPMorgan
Okay. Second, you have made -- you have grown in part for acquisition. Is growth through acquisition still possible under your arrangement with Leucadia.
Drew Niv - CEO
Theoretically anything is possible that would require permission. But because of the cap on what we can spend money on is in the priority obviously, given the high cost of capital of the loan. These two repay back the loan so what I would say is, the real answer is, that as a decision that we have made is until the loan balance is zero, that we are not going to be, you know as our thinking right now, until the loan is paid off, we are not going to be doing acquisitions and as of right now that is something that just makes a lot of sense.
Ken Worthington - JPMorgan
Thank you. And then lastly from me, once the loan is paid off, is the next step for you to start to "pay down the other tranches" or do you leave the other tranches kind of outstanding forever and you just kind of run the business and if you trigger scenarios that would require you pay down the tranches, you do it but it's not a priority or focus?
Drew Niv - CEO
Correct. I think after the loan is paid off, our plan is and as well what Leucadia has tied to, in its own payments, is to run the business long term and not to worry about the sale of the business or things that we are not planning to do.
Operator
Thank you. And our next question comes from the line of Lee Jagoda of CJS Securities. Your line is now open.
Lee Jagoda - CJS Securities
So, Robert, is there a way to say something post the asset sales that you laid out, assuming they all got done, on a trailing basis, what would revenue and EBITDA look like on whatever is left.
Robert Lande - CFO
Well, EBITDA you can see, what the EBITDA of these assets were and you know what we did last year. I unfortunately don’t have the revenue number around these. I think you will have a pretty good feel for it in the K. I don’t want to guess but it is here, I mean Lucid probably was in the 50s -- I don’t know, $75 million of revenue here associated with these assets. Fast Match as you know is not consolidated. $75 million to $100 million of revenues of that. I can't really say anymore than that. I mean we are hoping that these assets will generate cash to pay down substantial or all of the debt. And we are planning on growing the business with all the initiatives that Drew laid out. So we are hoping that what is left which will be the U.K. entity where most of the customers are and the U.S. entity, as well as the Australian entity that we are retaining. That’s going to be able to generate a good amount of EBITDA and revenue that there is a very attractive significant player in the retail FX and CFD business going forward.
Drew Niv - CEO
Lee, and I would that we obviously have all the data that we could approximate what our revenues would have been for the small clients under a given desk model. And I can tell that while we are not ready to give guidance because we are not sure of how many clients will transfer it to the model. I can't really say an exact timing on how that transition will be and how fast and how complete it will get within a year. But if you assume they all moved tomorrow, earnings will be significantly high on a core basis.
Lee Jagoda - CJS Securities
And have you disclosed what percentage of the accounts fall under the small, retail FX customers versus the rest.
Drew Niv - CEO
I think we disclosed like in earlier conference calls and as you know, like all brokerage firms, majority of our accounts, I think this was two quarters ago, our average account balance, this is not current, our average account balance two quarters ago was about $7500. As you can imagine most of our clients are $20,000 and below. That was not most of our trading volume and most of our revenues but that was most of our client. We are going to obviously be releasing different numbers. This is unfortunately going to be done jurisdiction by jurisdiction. It's starting in emerging markets. Different regulatory regimes is going to be a little bit different but it's something where -- although, what I perceive is the bulk of the clients are going to be moving towards just the bulk of the trading therefore the bulk of the volumes still going to be an agency volume. We know for sure is that if you look at revenue for small clients on a principal basis versus an agency basis, on a principal for small clients far, far outweighs the revenues from agency.
It's in the large clients where that is, generally speaking, more equal and where the risk/reward of taking risk on large clients is we think is not worth it and want to maintain so the clients are most picky about this. We want to maintain our agency posture. And I think of that and the clients obviously this matters most to. Obviously, all clients will have a choice. They don't have to switch to principal. It's just something they are going to have to consent to but this is something that we are going to either have to consent to a [indiscernible] have the option of outing out off. But this is something that we are going to try to tale our small clients go to principal, large clients go to agency. And we think that optimizes revenue pretty significantly as well as risk and the other things as well.
Lee Jagoda - CJS Securities
And on the institutional side, given that some of the institutional clients may have been a little bit hesitant to come back to the platform. What's the feedback then from your sales team and your sales force regarding the challenge of signing up new and getting the existing guys to come back.
Drew Niv - CEO
So what I would say is it depends on the institution. So the very large, kind of blue chip institutions, those clients, majority of them or all of those clients never face FXCM as our current party. They faced, one of the prime brokers in FXCM was just an executing broker for them. So they don't have the [indiscernible] exposure to FXCM whatsoever. Now despite that some people are overly conservative and have been slow to migrate back and tell you that that's -- that is you are making progress on that every day. Because, again, it's an irrational fear because those clients have no exposure to us whatsoever. There is a segment of institutional clients, especially for emerging markets, smaller institutions that have margin accounts here therefore have credit exposure to us.
Those clients, I sort of lump them in with the high net worth clients, as the clients that have reduced our exposure. So FXCM as we would expect to, that would be the case and we are slowly making our progress. I would say that that's where, institutional clients is where our progress is going to be the slowest. In getting back to the table as you can see from volumes, those things are -- they are down more than the retail volumes. They are recovering slower. So as you saw in the metrics slide, our retail volumes recovered by 11% in March so far, March to date over February. So partially because obviously the months are more volatile than February which is pretty quiet and partially because of some customers, more customers coming back.
But I think that there is a -- it's going to take longer for the larger clients but we think that within six months this is something that is largely going to work itself out. And obviously as we have said in the prepared remarks, a lot of our non-margin businesses, the give up businesses were, it’s Fast Match where people are not facing us. FXCM plans to be out of, in the next six months or so, from the remaining of those businesses most possibly much sooner. And we think then volume for those businesses recovers to what the historical standard is and their growth rate is back.
And obviously part of our decision to get rid of the institutional business is that the road to recovery in institutional business is going to be longer, where in the retail business we have actually had, as I said, a pretty good recovery already.
Operator
Thank you. And our next question comes from the line of Bill Katz of Citi. Your line is now open.
Neil Stratton - Citi
Hi, this is actually Neil Stratton filling in for Bill. Just wanted to ask a question around the changes to the trading policy with fewer currency payers and higher margin requirements. What do you think the impact -- is there any way to quantify the impact.
Drew Niv - CEO
There's two separate issues. So one, the reduction of currency pairs has minimal impact to volumes because those currency pairs represented a very small percentage of the volume. It is also where the industry as a whole including banks, have raised margin requirement to very very high. So even someone who is offering those pairs is offering them at such high margin requirements that volumes as negligible as t was before, it's ever more so today.
We have made a decision that even that’s not safe enough and it's just worth not to have them. But, again, it doesn’t take anything from volume. What has impacted volumes obviously is the reductions in leverage to certain customer groups that obviously has impacted volume part of the bringing back the dealing desk model or the principal offering is to be able to offer high leverage to those people we took some leverage away from because, obviously, it's not the same risk in a principal as it is in an agency. Obviously, conversely so, it is riskier in an agency environment to provide high leverage. And so we are curtailing that in an agency model by bringing that in the dealing desk model which will enable us to ramp volumes for those customers up more as well.
Neil Stratton - Citi
Okay. And as a follow-up, there was a pickup in the revenue per million on the institutional side. Can you go over some of the factors that might have been inhouse, sustainable that is.
Drew Niv - CEO
So it's a mix shift of just how Q4 as you saw from the results was a good quarter all around and as we spoke to in earlier quarters before that, as volatility finally return in Q4 to currency markets, you started having more directional investors and traders that were obviously the market was not just dominated by high-frequency and in shorter term [indiscernible] and the directional business is higher revenue capture business goes okay, higher commissions. And I think that that's true in every asset class, FX is no exception. And it's something that just lay relatively dormant as of mix on the clients because of the stale nature of volatility of the last few years. But as that came back we actually saw a really good quarter there. And we think that if you look at over the course of the year, why we are very optimistic about the prospects of getting some proceeds for the businesses we are selling, is because the FX business, the institutional business is back. Obviously currencies are in the front page and it is now of interest and the macro funds FX again and that bodes well for pretty much the entire value chain from ECNs to the market makers. The HFTs and the, as well as just the hedge fund customers themselves of banks. And I think that the market should do very well and that’s why we think are very optimistic about the proceeds we are going to get.
Operator
Thank you. And our next question comes from the line of Niamh Alexander of KBW. Your line is now open.
Niamh Alexander - KBW
Robert, if I could just clarify with respect to Leucadia facility. So it sounds like you are really lining out quite a lot of businesses that add up to quite a lot of capital towards the repayment of the loan. Is there a scenario that we might have missed in the dossier and what scenario does that right to force a fail in three years go away and that whole kind of tranching of the consideration in the event of a fail. Like if you fully pay down the loan by a certain time, I guess we are trying to figure out how to value the stuff for public investors and that’s something that really weighs on it.
Robert Lande - CFO
No, the right to -- it's annual right that starts in three years from January '16. And then have the right to, can trigger a sale of all or a portion of the business and it is not tied to whether the loan is repaid. So right now what our game plan is is to repay loan and grow this business into something more than what it is right now.
Drew Niv - CEO
I think one of the things that what we intend to do and I think that Leucadia has so far concurred that this is the right approach, is to not run the business -- I mean we are obviously selling assets to pay the loan, but post loan the plan is to run the business for a long run without selling it. We think there is more value in running it as a growing concern without selling it. We think that they agree with that. They have said so in their press releases as well and I think that that’s something we -- obviously, things can change but that is the current thinking that everybody has right now.
Operator
Thank you. And I am showing no further questions at this time. I would like to turn the conference back over to Jaclyn Klein for any further remarks.
Jaclyn Klein - IR
On behalf of Drew, Robert and everyone here at FXCM, I’d like to thank you for joining us this evening and we look forward to speaking with you next quarter. Thanks, operator.
Operator
Thank you. Ladies and gentlemen, that concludes today's conference. You may now disconnect. Have a great day.
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