Deutsche Boerse AG

XETRA:DB1

Q2-2025 Earnings Call

[Operator]

Good afternoon, ladies and gentlemen, and welcome to the Deutsche Börse AG Analyst and Investor Conference Call regarding the Q2 2025 results. [Operator Instructions]

Let me now turn the floor over to Jan Strecker.

[Jan Strecker, executive]

Welcome, ladies and gentlemen. Thank you for joining us today to review our financial results for the second quarter of 2025. Present on today's call are Stephan Leithner, our Chief Executive Officer; Gregor Pottmeyer, Chief Financial Officer; and Jen Schulte, member of the Executive Board. Stephan and Gregor will provide an overview of our performance and key developments during the quarter. Following their remarks, we will open the line for your questions. The presentation materials have been distributed via e-mail and are also available for download on our Investor Relations website.

As usual, this call is being recorded and a replay will be made available shortly after the conclusion of today's session.

With that, let me now hand over to you, Stephan.

[Stephan Leithner, executive]

Thank you, Jan, and welcome, everyone. Before we dive into the results, I would like to take a moment to acknowledge two significant transitions within our leadership team. First, I would like to express my deepest gratitude to you Gregor, our long-standing CFO, who will be stepping down at the end of September as announced last year in December. While today is not a farewell, it is Gregor's last of 64 quarterly earnings calls, what an achievement and what an era comes to an end. Gregor, you have been an integral part of Deutsche Börse for over 15 years. When you joined in 2009, our annual revenues were only slightly above EUR 2 billion, and they will reach EUR 6 billion as we expect at the end of this year.

But more important, especially for this audience, our market capitalization was just around EUR 9 billion, and today, it is around EUR 50 billion, an amazing journey and it is really your business focus, your financial acumen and dedication that have been instrumental in driving all of these developments. Under your leadership, we have strengthened our financial foundations and you significantly contributed to Deutsche Börse's position as a leading global market infrastructure provider. On behalf of the entire organization, I extend our heartfelt thanks for your remarkable contributions and wish you all the best and certainly, the remaining few weeks we give opportunities to celebrate some of that and look back and forward.

At the same time, I'm delighted that Jens Schulte will assume the role of CFO on October 1. Jens joined us in June from thyssenkrupp, where he also served as CFO. He brings extensive experience in financial management and capital markets to the role. His expertise and leadership will undoubtedly strengthen our executive team as we execute our strategic priorities and deliver value to our stakeholders. Jens, we're delighted to have you on board. I look forward to working closely with you to shape the future of Deutsche Börse.

Jens, why don't you introduce yourself in a few words.

[Jens Schulte, executive]

Yes. Thank you very much, Stephan, and welcome, everyone, also from my side. Let me briefly introduce myself. So I started my career at McKinsey where I worked on the Deutsche Börse mandate early on. And so this experience gave me a strong appreciation for the company's strategic relevance and its role in global markets. And then after McKinsey and some time I spend at Goldman Sachs, I held senior finance roles at Siemens, Hilti, Schott and most recently, thyssenkrupp. In these roles, I led finance organizations through transformation, growth and operational excellence, always focusing on transparency, performance and long-term value creation. Over the past few weeks, I've had the opportunity to visit several of our locations and meet many of my colleagues.

And I can tell you, I'm impressed by our strong corporate culture, the dedication of our teams and the entrepreneurial mindset that propels this organization forward. As I'm preparing to step into the CFO role, I look forward to continuing the company's strong financial trajectory and equally importantly, building a close, open dialogue with the sell side and our investors. Your insights and perspectives are important to me, and I look forward to regularly engaging with you. Thank you.

[Stephan Leithner, executive]

Thank you, Jens. With that, let me turn to the agenda for today's call, where we will discuss our financial performance, strategic developments and the outlook for the remainder of 2025. The results of the second quarter demonstrate the strength of our diversified business model and our ability to deliver consistent growth in a dynamic market environment. As always, we remain focused on executing our strategy to drive secular growth while capitalizing on short-term market opportunities.

Now let me walk you through the key highlights of our performance. In Q2, our net revenue without treasury results at 10% growth, once again slightly exceeded our own expectations. This was driven by a combination of continued secular growth across all of our businesses, and also, secondly, positive inflows into European assets. This demand for European -- for Europe reflects growing investor confidence in European markets, fueled by a combination of expectations for improving macroeconomic conditions, attractive valuations relative to other regions and increasing risk-based reallocation to European equities and debt instruments. We see these drivers as sustainable in the medium term, supported by structural trends, such as an ongoing integration of European capital markets and the region's focus on innovation and sustainability. While short-term volatility may or may not persist our diversified portfolio and strategic positioning enabled us to benefit from these trends over the long term.

We already see a positive impact in the ETF assets under management in our index business, the stronger cash equity volumes and the sustainable high growth in fund processing. Let me walk you through the key areas. In Investment Management Solutions, we saw good momentum, primarily fueled by double-digit growth in our Software Solutions business, SimCorp, 10% as expected. This growth was mainly driven by the strong development in SaaS net revenues, which accounted for more than 60% of software sales in the second quarter. Among others, this was driven by 1 of the largest U.S. public pension funds we signed up in April, as we mentioned on our last earnings call already.

Additionally, at the end of June, we signed up French insurer, AXA, which will enhance portfolio monitoring and financial risk management with our solutions. Overall, we gained 7 new clients in Q2, which is exciting development. We have also seen continued good momentum in the analytics business of Axioma. This together confirms our decision to combine the two companies. In the second leg of our Investment Management Solutions segment, ISS STOXX, the environment remains challenging. We're experiencing long sales cycle and delays in regulations that would benefit our business. Public discussions, particularly in the U.S., add uncertainty, but also they increase the demand for tailored client solutions.

We believe this is a temporary dynamic similar to historic cycles we have seen before, and we remain confident in a return to stronger growth in the medium term. We are focusing on leveraging our expertise in stewardship solutions, Index, Corporate Solutions and Market Intelligence to capitalize on structural industry trends, especially the growing demand for environmental, social and governance data and analytics. We also expect the expansion of digital platforms and innovative index solutions, including sustainability and thematic indices to drive recurring revenue growth. In our second areas around trading and clearing, we achieved double-digit growth in most markets.

Our commodities business continued its secular growth trajectory, I would really call it a very fast development, supported by robust structural demand. Cash equities benefited from the increased demand for European equities I alluded to earlier. Meanwhile, our FX business gained market share, strengthening our competitive position and in financial derivatives, we made further progress in the fixed income products, achieving 11% net revenue growth without treasury results. At the same time, equity derivatives faced headwinds due to market dynamics. Since April, the normalization of equity market volatility and the steady rise of markets to new record levels have significantly reduced the hedging needs for market participants.

Our Fund Services and Securities Services segments continued to perform well, driven by high levels of custody and settlement activity and Gregor will give further details later. This was supported by continued growth in debt outstanding, higher equity market levels and inflows from European assets, all of which contributed to a very strong quarter in the post-trade businesses. So let me now turn to cost. Operating cost growth was in line with our expectations, and we are fully on track to achieve our target of 3% growth for the full year in cost. Our disciplined approach to cost management enables us to invest in strategic initiatives while achieving operating leverage.

Based on our new steering methodology without treasury results, a 10% increase in revenue translates into a strong 19% increase in EBITDA. Even including the treasury results, there was still scalability with 4% revenue growth translating into 5% EBITDA growth. On implementing our group level strategic levers, let me make a few comments here. First, on capital management. The implementation continues we have also made further progress with our share buyback program during the second quarter. By the end of last week, we had purchased Deutsche Börse shares worth around EUR 235 million. This leaves approximately EUR 265 million remaining to be executed by the end of November.

As the second strategic lever topic, let me comment on our organic growth outlook. We confirm our guidance for 2025, which is based on our expectations of continued secular growth and inflows into European assets. After 2 strong quarters in 2025 of net revenue growth without treasury results, we're even more confident that we will achieve the guidance that we've given for the full year. This helps us to offset some normalizations in equity market volatility and slight headwinds from a weaker U.S. dollar. Our diversified business model positions us well to navigate these dynamics and deliver on the commitment, as I mentioned before.

As a third element around our strategic progress besides the capital management and growth, let me comment on the IMS implementation. You have seen the strong SimCorp and underlying momentum and performance in Q2. Regarding ISS STOXX, we are making steady progress on the dual track process for the 20% minority investment held by General Atlantic. No decision has been taken. The dual track process includes, however, the steps that we have mentioned before to prepare for a potential IPO. Such an increasing visibility of the business that we have given over the last few months has certainly helped to clearly position the value proposition.

For example, this was done during the Investor Day a few weeks ago and during subsequent meetings of the management team with the buy and the sell side. We continue to believe that ISS STOXX is a highly attractive business and an IPO would offer several advantages. These include a market-driven valuation for the business and the currency for potential smaller bolt-on M&A. Additionally, an IPO would further underscore the independence of the research offering and increase the visibility of ISS stocks among institutional clients. The team is doing excellent work in presenting the quality of the business.

In summary, our strategy is on track and the second quarter of 2025 was another successful period for Deutsche Börse. We demonstrated our capacity for consistent growth and our ability to quickly capitalize on market opportunities as the global investment realignment continued and the concept of a stronger European savings and investment union gained traction. Our diversified business model, our disciplined execution and a focus on secular growth drivers position us well for the rest of the year and to achieve our Horizon 2026 objectives beyond this year.

With that, I will hand over to Gregor for the details on the overall results and the individual segments.

[Gregor Pottmeyer, executive]

Thank you, Stephan. Also I'm not ready to say goodbye. It's clear that my time at Deutsche Börse is coming to an end. After many years of serving this remarkable organization, I'm deeply grateful for our shared journey. It has been a privilege to work alongside talented colleagues, dedicated partners and engaged investors. Together, we have navigated dynamic markets, driven structured growth and built a resilient financial foundation for the future. I'm proud of what we have achieved, and I'm confident in the strength of the team that will continue our mission. Thank you for your trust, collaboration and continued support of Deutsche Börse. I look forward to watching the group's continued success in the years ahead.

But now let us turn back to our results, starting with the first half year on Page 2 and 3 of the presentation. Altogether, the net revenue development in the first and second quarter of the year was slightly above our expectations. In addition to the underlying secular organic growth, which was in line with our general expectation of an 8% CAGR, we saw additional growth from market volatility and the flows into European assets. The impact of market volatility was slightly larger in the first quarter. But these tailwinds quickly faded after volatility peaked at the beginning of April. In contrast, during the second quarter, we began to see more benefits from the influx into European assets across the group.

In terms of the operating cost development in the first half year of 2025, we saw a couple of different drivers. Higher provisions for share-based compensation resulted in a 5% overall increase in operating costs. This was due to our share price outperformance in the first quarter and the stronger U.S. dollar at the beginning of the year. Also, the U.S. dollar weakened during the second quarter. It was still a slight headwind to operating costs during the first half of the year. The 3% increase in underlying operating costs was in line with our expectations. This increase was primarily driven by inflation and additional investments in the group growth areas. Operating cost growth benefited slightly from lower exceptional costs.

This is mainly due to the EUR 15 million termination fee in the second quarter of last year related to the agreement between EEX and NASDAQ to acquire the Nordic power derivatives business. As you saw in this year's second quarter results, we have begun to recoup some of the termination fee. This brings me to Page 4 in the details of the second quarter results. Overall, net revenue increased by 4% to EUR 1.5 billion. Despite the further treasury result decline compared to the first quarter, we nearly matched the total net revenue level achieved in Q1. Compared to the second quarter of last year, the treasury side declined significantly. About 2/3 of this decline was driven by the net interest income due to lower interest rates.

As Stephan just explained, net revenue increased by a strong 10% again without the treasury side. This exceeded our own expectation by a slight margin mainly due to inflows in European assets and the EUR 10 million exceptional revenue effect from the partial reimbursement of the termination fee between EEX and NASDAQ. Operating costs increased by 3% year-over-year. This growth was primarily driven by 3 key factors. First, inflation continues to have an impact. Second, we made targeted investments to support our strategic initiatives and long-term growth, particularly in technology and infrastructure. Third, we experienced lower exceptional costs, which was mainly related to EEX.

Overall, our cost development remains well controlled and aligns our strategic priorities ensuring we maintain a strong balance between investment and efficiency. As a result, EBITDA without treasury result demonstrated high operating leverage, increasing by 19%. Cash EPS increased modestly to EUR 2.96 in the second quarter. This is primarily due to a onetime tax income of EUR 28 million that was recorded -- that we recorded in Q2 last year. Excluding this onetime tax effect from last year, our underlying earnings performance continues to reflect the business operating leverage. I will now turn to the results of the segments, beginning with Investment Management Solutions segment on Page 5.

The segment is split into 2 parts. The first part is Software Solutions, which is the combination of SimCorp software business and Axioma's analytics business. Stephan has already explained the broader dynamics of the Software Solutions business. Looking at the different revenue line items, SaaS revenues increased by 21%, while on-premise revenues declined by 4%. This trend is primarily driven by existing clients moving to cloud and new clients typically being SaaS-based right from the outset. The annual recurring revenue was EUR 621 million at the end of the quarter. This represents an 18% increase compared to the previous year based on constant currency.

Due to the end of period nature of the KPI foreign exchange rate fluctuations can be significant. We continue to see disproportionate ARR growth in North America, which amounted to 30%. And APAC which amounted to 47%. The 15% ARR growth in EMEA was driven among other factors by the AXA win that Stephan mentioned earlier. These numbers also compare very favorable to those of our main peers. The second part of the segment comprises the ESG and Index business of ISS STOXX, which saw a net revenue decrease of 1%. Our Index business showed some improvement in performance with net revenue increasing by 4%. However, we continue to face headwinds from prolonged sales cycles in other parts of the business, particularly in Market Intelligence.

On a constant currency basis and excluding volume-related costs, the development was more favorable. Revenue grew by 4% at the ISS STOXX legal entity level in the second quarter. This growth was supported by solid contributions from both core segments. The index business performed strongly with revenue up 8% and the Stewardship and Corporate Solutions business performed well, growing revenue by 5% combined. These results underscore the strategic value of ISS STOXX within our group portfolio and its role in supporting sustainable long-term growth. The significant increase in EBITDA in this segment is mainly due to a disproportionately lower operating cost growth.

Additionally, the result from financial investments was slightly negative in the second quarter of last year as opposed to a small positive contribution this year. Now let me turn to Slide 6, which shows the Trading & Clearing segment. In financial derivatives, we saw a notable benefit from increased fixed income activity with net revenue without the Treasury result up 11%. This growth was driven by double-digit increases in fixed income futures and OTC clearing revenues. The repo business also improved its performance after a weaker first quarter and produced high single-digit growth. However, at the same time, equity volatility has moderated since April and is now a modest headwind for the equity and index derivatives part of the business.

Some of the volume effect in equity derivatives has been offset by an increase in average revenue per contract. This was not directly related to pricing, but rather mainly due to the decommissioning of the link to the Korea exchange for after-hour trading of KOSPI products. Because of the smaller contract sizes, the fee for those products were much lower. Our commodity business delivered a very good performance. Again, supported by strong activity in European power derivatives and gas spot markets. That said, margin fees declined slightly primarily for U.S. power derivatives, which partly depend on U.S. interest rates. Additionally, revenue also included the small exceptional effect of EUR 10 million we mentioned earlier.

Our ambitions to expand the business from a geographic perspective are also becoming more visible in revenues. Our offering in Japan, for instance, is expected to contribute a medium to higher single-digit million euro amount of net revenue this year. Cash equity continued to benefit from a significant increase in demand for European equities as well as strong inflows into European ETFs. This reflects a broader trend of investor rotation into European markets and growing interest in passive investment strategies. Finally, in foreign exchange, we achieved net revenue growth across all product lines, supported by new client wins and expansion into additional geographies. This diversification is helping to broaden our revenue base and enhance the resilience of the FX business.

In the Fund Services segment on Page 7, we continue to see strong performance. The positive momentum is supported by higher equity market levels, new client and portfolio growth and inflows into European assets. As a result, we maintained high levels of assets under custody and settlement transactions. Additionally, we saw a notable step-up in assets under administration within our funds distribution business, which now exceeds EUR 700 billion. This growth highlights the increasing relevance of our fund service offering and our ability to support clients across the full investment life cycle. With disproportionately lower operating cost growth, there was significant operating leverage in this business and we achieved a higher double-digit EBITDA growth with and without the treasury side.

Lastly, let me touch on our Securities Services segment on Page 8. This segment was positively impacted by continued fixed income issuance and higher equity market levels, both of which supported sustained high level of assets under custody and settlement transactions. These trends reflect the ongoing strength of capital markets activity and our central role in post trade infrastructure. On the interest income side, while we saw a slight increase in average cash balances of 4%, net interest income declined primarily due to impact of lower interest rates compared to prior year.

To conclude, let me touch on our outlook for the full year 2025 on Page 9. We are reaffirming our guidance for the year, which is based on our expectation of continued secular growth and sustained inflows into European assets. In April, spikes in equity market volatility led some to perceive our guidance as conservative. However, volatility has normalized since then. Additionally, we anticipate minor foreign exchange headwinds for the remainder of the year. Therefore, we are confident that the net revenue of around EUR 5.2 billion and EBITDA of around EUR 2.7 billion, both without the treasury result, are still very realistic targets.

These figures are also in line with the current consensus sales side expectations. In addition of that, we continue to expect the treasury result of more than EUR 0.8 billion for 2025. Based on current interest rate expectations and slightly lower cash balances compared to the last couple of months, we currently internally forecast a treasury result of around EUR 830 million. This is slightly lower than our expectation from 3 months ago, but the analyst consensus has also decreased significantly to broadly these levels. On the cost side, we maintain our expectation of around 3% growth in operating expenses for 2025 reflecting disciplined cost management alongside strategic investments.

This concludes our presentation. We now look forward to your questions.

[Operator]

[Operator Instructions] The first question comes from Arnaud Giblat from BNP Paribas Exane.

[Arnaud Giblat, analyst]

Hi, everybody. I just want to congratulate Gregor. It's been great working for you over these 64 quarters, can't believe it's been that long. I guess if I may -- I'll ask my question on interest rates. So clearly, you've seen a lot of activity happening there. If I think about your Capital Markets Day and your targets, you talked about a EUR 300 million step-up to come over the years, that being back-end loaded in your plan. Could you run through the catalyst again for that step up, mainly switching to perhaps sitting on the short-term pricing retiring the field, sorry, on the short-term rates or growth in LTC. Just wondering if you could run through the steps in the catalyst and where we are there.

[Gregor Pottmeyer, executive]

Yes. Thanks, Arnaud, for the question and having the chance to make a transfer that we continue to believe that we achieved our fixed income road map is a plus EUR 300 million until 2026. So you have seen the plus 11% increase in the first quarter and again in the second quarter. And obviously, for the second half, we expect a higher growth rate due to the activation -- client activation account, the new EMEA regulation. And so far, we onboarded another 600 clients in the first half year. So we have now 2,100 clients on fund level. That's obviously impressive. But out of this 2,100, just 350 are active. So more than 80% are not active in the first half year. And this will obviously change within the next 6 to 12 months. And therefore, we are confident that we will get a tailwind out of that.

Secondly, the European €STR derivatives. So here, we make also good progress. So the €STR, we have roughly a 50% market share. And in the Euribor, we have a 6% to 7% market share, right? So that's obviously good progress. And therefore, so far, we are also on track to deliver that. Thirdly, the repo business, we saw a turnaround now in June with a significant step up here. So in the first quarter, we have seen a strong decline.

And in the second quarter, even if it was purely June, where we saw the pickup, it was a 9% revenue increase for our repo business. So far, we expect also that the repo business will contribute to the overall guidance. And our core business, so our ETD business has continued to be right on track on a very high level. And we don't think that this high level will disappear over the next 18 months and continue to happen on a high level. So overall, again, I'm confident to achieve our targets, and we expect higher growth rates already in the second half year 2025.

[Operator]

The next question comes from Benjamin Goy from Deutsche Bank.

[Benjamin Goy, analyst]

First, maybe on the FX impact, you can confirm what the headwind was in the second quarter, was the 4% growth more like high? And also, you mentioned the minor headwinds from the FX going forward. Does it mean like you take a stable euro-dollar rate from here? And if I can squeeze the second one just simply because you haven't provided a number, I think, recently, the EUR 700 billion in assets under administration in some services seems like quite an impressive growth rate versus the last disclosure you gave at more than EUR 400 billion. Any chance to split that down in market performance or performance effects and what was net new money or when you actually have your market share gains?

[Gregor Pottmeyer, executive]

All right. So starting with the FX impact. So overall, I think I gave you some indication what is an FX impact. So EUR 0.01 has an impact of EUR 7 million in revenues and of EUR 3 million in cost. So assuming a EUR 1.17 for the second half year, so then the FX rate would be EUR 1.13 for the full year compared to EUR 1.18 last year, so it would be EUR 0.05. So then we have EUR 50 million less cost and EUR 35 million less revenues. So that is the item what we are talking about. So it's not a big impact, definitely not on the cost side. So if it would be EUR 50 million, right, a little bit more on the revenue side, obviously. So it would be EUR 35 million. So that's basically the rough sensitivity of FX.

[Stephan Leithner, executive]

And it's quite focused or as you would expect, is on the one hand side, on the ISS STOXX business, as we alluded to earlier. That's why there is also the difference between our reported Q2 number for the segment as well as vis-a-vis what the currency adjusted is and the second area is obviously on the NII side that it has an impact. Those are the two main context for this.

Let me take your second question on the EUR 700 billion of assets under administration, which indeed we are proud of. I think they are, first and foremost, a documentation to the very strong partnerships that we have. Some guess in the market has been going on around what big additional lump we have added in Q1 and Q2, and the guesswork is probably pretty right in terms of a major continental European consolidation that has resulted in additional volume moved to us. We talked earlier on the big-size partnerships. So the step-up, if I had to give a rough indication is 50-50 between what is additional market volume that we have won versus what is upside from valuation dynamics.

[Operator]

Next up is Bruce Hamilton from Morgan Stanley.

[Bruce Hamilton, analyst]

If I could add my congratulations to you, Gregor on a very fine innings. In terms of the question I had more high level, I guess, just on the made-for-Germany initiative, you've been associated with that. I just wondered if I could get a sense of any kind of concrete steps you'd be taking in terms of either sort of investments, CapEx or how to support that improved investment climate approach? And then secondly, just on the fixed income business. The improvement in the rate per contract seen year-over-year, can you just sort of remind me what drove that? I don't think it's because you've switched on fees on STIRs yet. So I guess it's something else. So just to understand that, please, would be helpful.

[Gregor Pottmeyer, executive]

Thanks a lot for picking up on Made for Germany initiative, which I think is a strong documentation of the turnaround support and the sentiment that the wider German industry has. I know it's not our narrow field here, but many people talked about the deindustrialization and the move away and noninvestment in Germany or in Europe, but internationally and outside the EUR 600 billion of commitments that were documented, which, again, if you compare it to the emotional feeling of 0 investment in Germany. So those are big numbers they match very much and strike additional tone on what the government itself from infrastructure and defense has talked about.

What is relevant for us is Deutsche Börse is really two elements in this. On the one hand side, there is a clear commitment, and that's the first time ever in Germany that the capital markets is an instrumental part of making this happen. There are a number of changes that I talked about when it comes to the funding models of pensions. Again, are those revolutionary? Yes, in a cultural sense, not in an amount sense, but they will create different momentums. We're very much involved around that. There is a lot of initiatives related to funding of growth companies and also securing the attractiveness of the IPO space in Europe. There's a big win initiative. It is called a multibillion that is now talked about being doubled.

So then would move to EUR 25 billion plus in terms of pre-IPO financing, which I would very much expect to really translate into a stronger pipeline over time. So again, there are a number of points that link back to us. Our own commitments and our own statements in this context has been very much in line, obviously, with our strategy. So it's a continued investment in our trading platforms as well as continued investment in terms of the transformation of the business on the technology side, and that's very much in line with what others have been doing.

So it's just one proof point in aggregate of the strengthening momentum in Europe because no question, German turnaround will have a signaling value for the rest of Europe and also for the savings and investment Union. On your fixed income improvement, a more specific question in terms of the average per contract, now, there's really two drivers to that, one is a mix development, but also some pricing measures.

[Operator]

Our next question comes from Enrico Bolzoni from JPMorgan.

[Enrico Bolzoni, analyst]

So one, again on fixed income, please, if I may, and especially on the €STR, you mentioned that you have a very good market share of volumes. I noticed you have a very good market share also of open interest now, and it keeps growing. I think it's around 30% now. Can you please help us understand what are the KPIs that we can monitor to get a sense of when you might be in a position to switch the pricing on and perhaps also remove the incentives that you're paying? Do you need to hit around 50% of open interest versus ICE? Or are there other elements to consider to figure out potentially when you can start to monetize. So that's my first question.

And my second question is on the active account rules that I appreciate kickstart only at the very end of the quarter in June, but we're now to the end of July. So I was wondering if you can provide some colors in terms of what additional level of activation you've seen in July so far? And whether you saw a relevant number of these accounts of these clients choosing Eurex clearing to not just clear the minimum amount required by the regulation. But going beyond that, and perhaps starting to clearing a bit more also in other products to benefit from gross margins.

[Gregor Pottmeyer, executive]

Yes, Enrico. So I think I covered it in earlier answer, but I will repeat it a little bit. So again, in the €STR, we made great progress. So 50% market share that's obviously the key number for us. And in Euribor, we have some 6% to 7% market share. And so -- and €STR is getting more important, it's currently 17% to 18% market share compared to the 82% to 83% with regard to Euribor. So that is the main focus also how we internally measure that. And with regard to our incentivization, yes, currently, we have a holiday fee. That's true. We have to make our decision in the second half year whether we want to continue with that kind of incentivization or whether we stop it. So final decisions are not made here.

With regard to the active account rule, I just mentioned that we had great progress in onboarding another 600 clients on fund level. So that's obviously good. I also mentioned that just 350 are active. So another 1,750 have to get active. And so far, we are very confident that this will gradually phase in, right? So there's not a big jump now what we see in July, right? So it will gradually phase in. But until year-end, there will be significant progress from our perspective.

[Stephan Leithner, executive]

So we expect you, Enrico to come back with that question on the next call.

[Enrico Bolzoni, analyst]

Just one clarification. What I wanted to understand rather than just how many clients get activated, whether you have any insights on whether these clients will choose you not just to tick the box and comply with the regulation, but actually do more because I guess that's a real opportunity if they can move big volumes, big nominal rather than just the 5 trade for each subcategory. So I was just wondering whether from your conversation with clients, do you have any insights that actually that will happen.

[Gregor Pottmeyer, executive]

So they have to comply with the new rules, right? So -- and the only thing that we not know in all the details what is the amount and the size of their portfolio, what they manage. Therefore, it's a little bit difficult for us to give very, very precise forecast here. But in general, they all have to comply with new regulation and the penalties not to comply are very drastic. So therefore, they will comply.

[Stephan Leithner, executive]

But also to your point, Enrico, how much widening we see I mean we are prepared for that. We have made an adjustment to the organizational setup. We have brought the sales efforts more closely together. So I would really hope that as a result, we'll be able to position better the broader proposition beyond just the regulatory minimum compliance.

[Operator]

The next question comes from Andrew Coombs from Citi.

[Andrew Coombs, analyst]

Firstly, just to echo thanks to Gregor to a fantastic extent. Your commitment was never in question even when you had COVID and presenting at Investor Day. I want to ask 2 questions, if I can. Just firstly, the language around ISS STOXX, it hasn't changed. Just still talking about a dual track process. Can you just elaborate on your thought process there? Is it purely a case of valuation or determine whether you proceed with an IPO or a buyout of the minorities?

And then secondly, I just wanted to come back to your point on the revenue per contract on equity derivatives. I think you said part was due to the smaller contract size but you also talked about decommissioning of a link to an exchange. So if you could just elaborate there if this is a permanent step change in the revenue contract.

[Stephan Leithner, executive]

Let me take your first one on the ISS STOXX to track. The thought process is the one I alluded to earlier. There is a number of the benefits that we really see in the context of the IPO. That's why a lot of hard work is going on around that. But at the same time, decisions really again need to be taken together with our partner, General Atlantic as well as in light of the then prevailing market conditions.

[Jan Strecker, executive]

On KOSPI, maybe quickly. So since 2021, we have been providing the after-hours trading for the Korean Stock Exchange. This is basically retail products with a very small contract size and fees. So RPC is low single digit. And since they've extended their capabilities, we basically in June, have transferred the business back to the Korean Exchange. So we've discontinued that for good. And therefore, the positive RPC impact will also be sustainable.

[Operator]

The next question comes from Michael Werner from UBS.

[Michael Werner, analyst]

Gregor, it's been a pleasure, and I'm looking forward to congratulate you. I wanted to ask you, we saw Deutsche Börse announced the potential to give up the banking license in both, I believe, Eurex and Clearstream, I was just wondering if you could provide a little color as to the thought process behind this as well as any cost capital or any other financial impact this might have on Deutsche Börse, if and when those licenses are given up.

[Stephan Leithner, executive]

Thanks, Mike. Very good question. Indeed, we have just recently announced that as part of the changes that are happening at the European level. And again, it's always which progress is the European Capital Markets Union making. These are good two steps that resulted from a lot of hard work, including our regulatory colleagues to make Europe more competitive. So on the one hand side, the ECB, as you will have seen, has announced that CCPs are going to get a direct access to the Central Bank and not only banks will get direct access. So that's been a structure that has been in place internationally. It was a structural disadvantage of Europe that is going to be taken away.

And as a result, we will move to bring a singularly CCP regulated entity and not anymore a double regulated banking and CCP. So that's a significant simplification, which we expect to have over time benefits on cost as well as on the capital side. It will also, however, need us to balance how we look at the investability of the assets. But again, I think in aggregate, a very positive step that makes us globally more competitive.

In a similar way, we have seen a development on the CSD side, where we, again, our Clearstream Banking Frankfurt is double regulated banking as well as CSDR we will be able to return the banking license, we will concentrate and continue to provide banking-based services out of our international CSD in Luxembourg, and that's a simplification and closer integration where we expect a meaningful saving in operating cost. Again, that is in a single-digit million, but is a good number over the next 2 years.

This will actually still take time to implement, but it has also had a very positive response from clients, which is an important part. So again, two good examples of how we simplify the structure, how we benefit from European progress, in aggregate will make our scaling benefits even more pronounced.

[Operator]

The next question comes from Hubert Lam from Bank of America Securities.

[Hubert Lam, analyst]

I've got a question on Software Solutions. Obviously, back on track with 10% growth in the quarter. Should we expect now this to be the run rate going forward? Also give us any potential updates on the client pipeline. And for the overall IMS, I guess, growth has been slower than expected in 2025, as we know. So are you still confident you can still achieve the 9% revenue CAGR by next year in IMS?

[Stephan Leithner, executive]

Thanks. On the Software Solutions, as you said, we talked earlier. I think for the second half in aggregate and then quarter-by-quarter, we know it's more volatile, but we feel very confident to continue and get to the quarterly 10% or per quarter 10% increase number that we talked in our last call about. The pipeline is very solid. We see a fantastic, continued client engagement, both in terms of new client wins. I mean you've seen the #7. That's a pretty good and among those very exceptional names.

But more important for us is not just the new wins, that always takes a bit of time, I call it, but more important is the shorter-term upsell opportunities continue to come through very nicely, including the Axioma, as I alluded to earlier. So again, I feel we are in aggregate there on good track. When it comes to IMS, you also picked up on the differentiated momentum between the two segments now. I think our overall story is very much intact, but we will need to see what exactly it means for the 2026 horizon once we have more visibility at the end of the year. But we don't change the outlook in aggregate. But I think we'll certainly need to see when we end 2025 where we are.

[Operator]

Next up is Ian White from Autonomous Research.

[Ian White, analyst]

I'd also like to add my thanks and congratulations Gregor. I really appreciate the support you've given me during my coverage. Just a couple of quick follow-ups, if I can. The guidance for 3% cost growth, I guess I'm a little bit surprised that hasn't just been revised slightly in light of the FX moves we're seeing in 2025. Could you just explain maybe a bit of the rationale there and could you just explain whether or not the 3% growth guidance includes the increase in variable compensation, just the way it's been set out on Slide 3 makes you think that maybe you're holding that separately to the 3% growth.

Just a couple of quick clarifications there, please. And just on fixed income, again, just in terms of the road map and things that are coming through the pipeline, what sort of revenue increment do you see from the introduction of EU bond futures and cross margining in the repo and futures business. Do you think we should expect to see notable sort of P&L impact there in the second half of those things coming online?

[Gregor Pottmeyer, executive]

So starting with your cost questions. So I can confirm that the 3% cost growth is an all-in number, so that includes FX impact, and it includes share-based payments compensation. So very clear. All in, we expect -- continue to expect a 3% cost growth.

Second, with regard to your questions on fixed income and gross margining so overall, that is one of our key arguments, right? So offering gross margining across the different products. So on OTC interest rates for clearing on repo business, on our ETD business, our spare business, so that's the benefit we can offer to our clients to offer here capital efficiency. We intensively work on our internal platforms that we get the best result out here for our clients. And we are confident that we are very well positioned, and that is one of the key arguments to realize at the end of the day that Eurex is the home of the euro from the short term to the long-term cut.

[Operator]

The next question comes from Tobias Lukesch from Kepler Cheuvreux.

[Tobias Lukesch, analyst]

Yes. Also, Gregor, thank you very much. It was a pleasure. Quickly on the Made for Germany and also maybe in conjunction with the savings and investments union from EU. You mentioned the potential benefit on the IPO side. Is there a change maybe in tone, you think if the German government to be a bit more proactive in push maybe European themes a bit further. So my question is, is there even more potential just on the German spending? And could that, at the end of the day, really drive the trading and clearing top line growth to some extent in coming years? And would you potentially also see some partnerships, joint ventures with other market participants to further foster this idea?

[Stephan Leithner, executive]

Tobias, thank you very much. I mean, time is almost too short on this call to answer that properly and comprehensively. But indeed, I do believe that the and I mentioned it earlier, for the first time ever that Deutsche government has genuinely committed to capital markets being a priority and is also anchored a bit in the history of the [indiscernible] others. So I think that is an important signal that goes beyond Germany. Now with respect to the savings and investment union, it will make the German government very proactive in contributing to getting real progress there.

With respect to the European Union, I can't judge exactly, but the door has been opened. There is certainly with the earlier issuance of own bonds and I alluded in other forums to the point that the ESM just recently, for example, has joined the clearing side on Eurex, which wouldn't have been technically required. So we see that widening momentum. I think the increase of debt, not just in Germany and others clearly benefits in our business on the Clearstream side. So that European progress that we expect has a very broad resonance in our businesses. And I do believe that we will see that reflected also from the European level.

[Jan Strecker, executive]

All right. There are no further questions in the pipeline. So therefore, we would like to conclude today's call. Thank you very much for your participation. And please do feel free to reach out to us directly for your further questions. Thank you.