2019 Annual Report
and Consolidated Financial Statements

The global, diversified financial
technology company

LMAX Exchange Group Limited (LMAX Group or the Company) is the holding
company of LMAX Exchange, LMAX Global and LMAX Digital.

50 La Colomberie, St. Helier, Jersey, JE2 4QB, Channel Islands
LMAX Exchange Group Limited, Yellow Building, 1A Nicholas Road, London W11 4AN
www.LMAX.com | info@lmax.com | +44 20 3192 2555

ear ended 31 ecember 2019 | e istered number 125453

Introduction: about the LMAX Group

Delivering a transparent,
neutral, global marketplace
for all participants
The LMAX Group is a global, diversiﬁed ﬁnancial technolo y com any and a leadin o erator of
institutional execution venues for electronic FX and cry tocurrency tradin
Our revolutionary minimalist technolo y delivers one lobal market lace throu h exchan einfrastructure in London Ne Yor and Tokyo ensurin com lete trans arency o en access anda level playin ﬁeld for all market artici ants
As one of the fastest ro in ﬁnancial technolo y com anies in thee have a solid resencein all the ma or FX markets around the orld includin Euro e North America and Asia Paciﬁc
LMAX rou technolo y has also been consistently reco nised in resti ious business andﬁnancial technolo y ran in s includin the eloitte Fast 50 and he Sunday imes Tech Trac
100
Our ra idly e andin lobal institutional and rofessional client base is a testament to our
distinctive business model that delivers efﬁcient market structure and trans arent recise
consistent execution to all market artici ants

The institutional exchange for global FX
LMAX Exchan e o erates lobal institutional FX exchan es and an FCA re ulated M F A
central limit order boo (CLOB) execution model offers streamin ﬁrm limit order li uidityfrom to tier ban s and non ban institutions trans arent rice discovery no last loo
re ections and full control over tradin strate y and costs

The regulated brokers for global FX
LMAX lobal is a leadin re ulated broker for FX metals and commodities orld ide Servicin
retail brokers and rofessional traders LMAX lobal offers execution services and access toinstitutional ﬁrm limit order li uidity and ti ht s reads from the LMAX Exchan e CL B

The institutional spot cryptocurrency exchange
LMAX i ital is a re ulated institutional s ot cry tocurrency exchan e Based on rovenro rietary technolo y from LMAX rou LMAX i ital allo s lobal institutions to ac uire tradeand hold the most li uid di ital assets BTC E
ntroduction

LTC BC and X

safely and securely
5

LMAX Group | 2019 Annual Report and Consolidated Financial Statements

Contents
Highlights ............................................................................................................................................................................9
CEO’s statement ............................................................................................................................................................ 10
Principal risks .................................................................................................................................................................. 14
Statement of Directors’ responsibilities in respect of the financial statements.................................. 20
Independent auditors’ report to the members of LMAX Exchange Group Limited ........................... 21
Consolidated statement of comprehensive income........................................................................................ 25
Consolidated statement of financial position .................................................................................................... 26
Consolidated statement of changes in equity ................................................................................................... 27
Consolidated statement of cash flows .................................................................................................................. 28
Notes to consolidated financial statements ....................................................................................................... 29
1. Accounting policies ...................................................................................................................................... 29
roﬁt efore ta ............................................................................................................................................ 36
3. Taxation............................................................................................................................................................. 39
4. Capital Re-organisation ............................................................................................................................. 40
5. Intangible assets............................................................................................................................................ 41
6. Property, plant and equipment................................................................................................................ 42
7. Trade and other receivables ..................................................................................................................... 43
8. Inventories....................................................................................................................................................... 44
9. Cash and cash equivalents ........................................................................................................................ 44
10. Trade and other payables ........................................................................................................................ 45
11. Related party transactions ..................................................................................................................... 46
12. Business Acquisitions and reorganisation ....................................................................................... 47
13. Post balance sheet event ........................................................................................................................ 47
14. Financial instruments ............................................................................................................................... 48
15. Developments in reporting standards and implementations................................................... 55
16. Registered address and country of domicile ................................................................................... 55

6

Contents

Year ended 31 December 2019 | Registered number 125453

Contents
Company statement of comprehensive income ............................................................................................... 56
Company statement of financial position ............................................................................................................ 57
Company statement of changes in equity ........................................................................................................... 58
Company statement of cash flows.......................................................................................................................... 59
Company notes to the financial statements ...................................................................................................... 60
1. Accounting policies ...................................................................................................................................... 60
2. Financial income............................................................................................................................................ 60
3. Investments in subsidiaries....................................................................................................................... 60
4. Property, plant and equipment................................................................................................................ 63
5. Trade and other receivables ..................................................................................................................... 63
6. Cash and cash equivalents ........................................................................................................................ 64
7. Trade and other payables........................................................................................................................... 64
8. Share capital.................................................................................................................................................... 65
9. Related parties ............................................................................................................................................... 65

Contents

7

Year ended 31 December 2019 | Registered number 125453

Highlights

2019 financial highlights
VOLUMES US

3.5

$tn

18%

REVENUES

62

$m

3.1

40

2.5

50

25%
Compound Annual GrowthCompound Annual Growth

’17

’18

GROSS PROFIT

’19

57

$m

’17

’18

EBITDA
$m

26

44

28%

35

42%

20
13

Compound Annual GrowthCompound Annual Growth

’17

’18

’19

’17

’18

’19

CLIENT FUNDSEBITDA MARGIN

$m

243

46% 46%

11%

’19

38%

226

22%

163

Compound Annual GrowthCompound Annual Growth

’17

’18

’19

’17

’18

’19

› Gross revenues of US$62m, 23% annual growth from 2018
› Gross profit of US$57m, 28% annual growth from 2018
› Statutory EBITDA of US$26m, 29% annual growth from 2018
› Operating profit of US$20m, 54% annual growth from 2018
› EBITDA margin of 46%, 1% improved from 2018
› Client funds held of $243m, 8% annual growth from 2018
› Trading volume across exchanges of US$3.5 trillion, 15% annual growth from 2018
› Continued growth of international exchanges
Highlights

9LMAX Group | 2019 Annual Report and Consolidated Financial Statements

CEO’s statement

Overview
During a period of consistent low level of volatility in 2019, where volumes
at most major venues have declined and margins have contracted formonoline institutional transactional businesses, LMAX has delivered strong
growth in both volumes and revenues while continuing to invest in its global
distribution, market leading technology and best-in-class service for our clients.

David Mercer, CEO

We view this as a vote of confidence in our award-winning, robust proprietary technology andour ability to consistently deliver efficient market structure and transparent, precise, consistentexecution — which has set us apart from the competition over a number of years.
2019 was the year that LMAX Group demonstrated the value and resilience of our unique global
market access business model, servicing banks, funds, brokers, professional and retail traders.
Access to 100% of the FX market doesn’t just differentiate our business proposition, it’s a sourceof diversified and consistent revenue streams. A diversified revenue mix ensures the resilienceof our financial performance in all market cycles and has seen us lead the way for growth andprofitability metrics within the industry.
LMAX Group successfully managed through a difficult trading environment, that also saw FX
volatility on major currencies fall to multi-year lows with annual growth across all KPIs.
LMAX KPIs (USD)

2017

2018

2019

GrowthVolumes (bn)

2.5

3.1

3.5

18%

Client Funds (m)

163

226

243

22%

Revenue (m)

40

50

62

25%

Gross Profit (m)

35

44

57

28%

EBITDA (m)

13

20

26

42%

Along with the strong results achieved, we also managed to pursue strategic initiatives.
Key business developments in 2019 include:› Investment in overseas expansion: The Group has strengthened distribution capabilities in the
EMEA region with the acquisition of a CySEC regulated broker LMAX Broker Europe Limited(formerly known as CB Capital) in Cyprus. The Group’s global presence now includes 11
offices worldwide, servicing clients in over 100 countries.

› Achieved market leadership in spot cryptocurrency trading: LMAX Digital, our sixth exchange, isalready the third largest spot cryptocurrency exchange globally and has delivered 81% quarteron-quarter volume growth on average since launch.

› Continued investment in technology and people: Ongoing technology investment has focusedon ensuring resilience, security and increased capacity of our exchanges. New strategic seniorappointments have strengthened the institutional sales coverage in Asia Pacific and facilitated
rapid expansion of LMAX Digital.

10

CEO’s statement

Year ended 31 December 2019 | Registered number 125453

CEO’s statement
Strategic Goals› Increase market share› Maintain a quality service to clients› Broaden global reach› Technical innovation› Investment in research and development› Attract, develop and retain the best people

The Exchange business continues to be of core importance to the Group and, due to the scaleof the attainable market, presents the biggest opportunity for future volume growth. We remain
extremely bullish on the growth prospects, especially in North America. Total volumes grewby an impressive 14% year on year, despite consistently low levels of volatility in 2019, which
resulted in most major venues reporting declines. Clients are responding positively to our offeringand clearly value our independent status and distinctive business model focused on providing
consistent, best-in-class service.

With its global reach and multi-asset capabilities, LMAX Global continues to expand and services
over 4,000 clients, including broker-dealers, funds, and professional traders. We are particularly
pleased about the outstanding contribution from our EMEA and AsiaPac business, where revenue
growth was achieved, despite challenging trading conditions and restrictive product intervention
measures being introduced by the European Securities and Markets Authority (ESMA). With
clients in 100 different countries and 11 ofﬁces orld ide e remain in expansion mode andhave built out our multi-hub offering to maximise growth potential.

Our most recent business, which was launched only in Q2 of 2018, has already achieved market
leadership in spot crypto currency trading. LMAX Digital, the leading institutional digital asset
exchange, is already the third largest spot cryptocurrency exchange globally and delivered 81%
quarter-on-quarter volume growth since launch. It is the fastest growing exchange within theGroup, breaking even ithin ﬁve months of launch and is well placed for further growth with theanticipated entry of banks and funds. LMAX Digital was awarded a Distributed Ledger Technology(DLT) license by the Gibraltar Financial Services Commission (GFSC) in April 2019 and aims to playa crucial role in helping cryptocurrencies to become part of mainstream capital markets.

CEO’s statement

11

LMAX Group | 2019 Annual Report and Consolidated Financial Statements

CEO’s statement
Overview of Corporate Governance
LMAX Group recognises that its overall structure is subject to the direction of its shareholders,
who are responsible for appointing Directors to the Board and authorising the Directors todelegate any of their powers or discretions.
The Board of Directors is responsible for agreeing the Company’s strategy and for monitoring
progress with the execution of the firm’s strategy against agreed targets. The Board has overall
responsibility for promoting the long-term sustainable success of the Company for the benefitof its members as a whole, providing leadership and direction, including in relation to culture,ethics and values, and ensuring effective engagement with and encouraging participation fromshareholders and other stakeholders.
Certain governance responsibilities have been delegated by the Board to Committees of
the Board, to ensure independent oversight over financial reporting, internal controls, risk
management, remuneration and reward.
The Chief Executive Officer has delegated authority for:

› The development and execution of strategy› Leadership and development of the Company’s executive management team
below Board level› Day-to-day decision-making relating to, and management of, the affairs of the firm
› Delivering financial performance in line with the Company’s agreed budget› Organisational design of the Company’s operations› Client management, marketing and global sales
The Finance Director has delegated authority including financial management of the Company,
the stewardship of Group assets, the safeguarding of client money and assets, financial
reporting, capital and liquidity risk management and investor relations.
Below Board level, the Company operates a number of executive management committees.
The CEO is supported by the senior executive management committee, comprising the Chief
Executive Officer (CEO), Finance Director (FD), Chief Operating Officer (COO), Chief Technology
Officer (CTO) other senior executives. It supports the CEO in the proper performance of his
duties, including to optimise the execution of the Company’s strategy agreed by the Board, andprovides advice and support to executive management in the day-to-day running of the firms’
operations.
The FD, in the proper performance of his duties, is supported by the Client Money and Assets
Committee relating to oversight arrangements and operations in respect of the holding andsafeguarding of LMAX Global client money and assets. The COO has delegated authority inrespect of trading and operations and business change and also leads the Operational Risk
Committee and the Control Functions Oversight Committee, which oversees the work of
regulatory control function managers in the execution of their responsibilities.
12

CEO’s statement

Year ended 31 December 2019 | Registered number 125453

CEO’s statement
Future Outlook
We are extremely excited for the year ahead and expect our core FX business to continue its
growth trajectory, reflecting the increasing demand from all client segments for firm limit-order
liquidity and transparent, precise, consistent execution. We are entirely focused on our mission tobuild the leading global electronic FX and crypto trading businesses.
We see further opportunities to continue leveraging our technology to launch new exchanges,
whether it’s setting up more FX matching engines globally or building exchange infrastructure fortrading other asset classes, just like we did with LMAX Digital.
Another strategic growth area for us is to capitalise on the potential of our market data offering.
Our ability to gather firm limit order liquidity market data from all client segments, often notaccessible through primary venues, puts us in a differentiated and advantageous position comparedto other players. This will be a key growth story for us in the next decade.
We will continue to monitor industry developments and are mindful of the macroeconomic,
technological and regulatory evolution. We are committed to continuing to invest in technology andstrive to deliver operational excellence, while investing for growth across our core businesses. We
will also further invest in our market-leading proprietary technology, which is the key enabler of thecompany’s business model, building on the US$100m of investment to date to ensure the primacyof our execution venues as we expand the strength and breadth of our distribution capabilities in
key growth markets.
On behalf of the Board,
David Mercer, Director
04 November 2020
Yellow Building, 1A Nicholas Road, London, W11 4AN

CEO’s statement

13

LMAX Group | 2019 Annual Report and Consolidated Financial Statements

Principal risks
Risk Profile
Risk management is central to the long-term success of the Group and to the resilience of ouroperations. LMAX Group has well-established processes for identifying and managing risks. The
Board sets the Risk Appetite and monitors how well risks within each business are mitigated andcontrolled. The emphasis of risk management within the Group is to support a sustainable businessmodel with the capacity to manage all the risks it faces, and to be able to continue to offer its
services under sustained financial market volatility and stressed conditions.
The Company operates in a dynamic competitive environment, facing risks relating to market
conditions and its competitive position. The level of revenue in any period is largely driven bycommission and funding income, which is a factor of the volume of trading and position sizes
held overnight by the Group’s clients. The revenue mix is determined by trading conditions, wherehigh market volatility usually results in increased levels of trading and commissions but reduced
position sizes and funding income; conversely low market volatility usually has the opposite
impact.
The Company pro-actively manages its liquidity and capital adequacy risk through ongoing stresstesting and more formally through its regulatory reporting. The Operational Risk Committee
assesses operational risks, including those arising through technology, people, process and external
events. The Group faces conduct risk relating to how it deals with its clients and the markets it
operates in, and manages this through investment in systems, people and training to ensure ourmanagement of conduct risk meets the very highest standards. This includes ensuring we further
embed our client-first culture, while continuing to work closely with all our regulators to protect the
integrity of the financial markets.
LMAX Group operates in a number of geographic regions which affects how it is able to market
and provide its services to clients. The regulations relating to the products and markets in which
the business operates are continually evolving. The Group welcomes any advice by regulators to
improve client outcomes, and also recognises some changes adversely impact it or the activities of
its clients as the industry adapts.
Capital adequacy risk
Regulated entities of the Group are required to hold sufficient regulatory capital to cover
their risk exposures, valued according to applicable rules, and manage capital adequacy risk
through regulatory capital policies and seek to ensure that they hold sufficient capital to operate
successfully and adhere to regulatory requirements.
The Group manages its capital resources with the objectives of facilitating business growth whilst
complying with the regulated entities’ capital resources requirement. LMAX Exchange and LMAX
Global undertake an annual Internal Capital Adequacy Assessment Process (ICAAP), whilst LMAX
Digital undertakes an annual Financial and Non-Financial Resources Assessment (FNRA), both ofwhich assess a firm’s capital requirements, including the application of a series of stress-testing
scenarios, to its base financial projections. The assessments are reviewed and challenged by the
Board.

14

Principal risks

Year ended 31 December 2019 | Registered number 125453

Principal risks
Liquidity risk management
Liquidity risk is the risk that a firm is unable to meet its financial obligations as they fall due.
LMAX Global manages this through the application of its Liquidity Risk Management Policy.
During the year, LMAX Global was classified as an ILAS (Individual Liquidity Adequacy Standards)
BIPRU firm and is regulated under the rules contained in BIPRU 12 of the FCA Handbook.
LMAX Global carries out an Individual Liquidity Adequacy Assessment (ILAA) each year and uses
a number of measures for managing day-to-day liquidity risk, including the level of total liquid
assets of its prime broker margin requirement and of same-day available cash.
The Group manages its liquidity centrally and ensures that it has sufficient liquidity to meet its
financial liabilities when due, under both normal circumstances and stressed conditions. These
liquidity requirements must be met from the firm’s own liquidity resources, as client money cannot
be used for its operations.
Clients
Our revolutionary, minimalist technology delivers one global marketplace for FX — throughexchange infrastructure in London, New York and Tokyo; ensuring complete transparency,
open access and a level playing field for all market participants. All clients of LMAX Exchange
are members of the exchange and have signed up to a public rulebook with all members treatedequally. LMAX Exchange has most of the world’s largest banks as its clients, the majority of whom
have been members of the Exchange since 2012.
We ensure that commitment to our customers is embedded in our culture and strategic
initiatives and there is regular dialogue between LMAX Exchange and all of its clients. The
Company has enhanced its relationship support team across the year in London, New York andSingapore. This enables us to develop our products and services specifically to meet the needsof our global client base.
Central to our commitment to our customers is the transparency and quality of our order
execution. LMAX Exchange is an advocate of no last look trading and processes 100% of client
trades automatically, never requoting prices. Should a better price become available for customers
during the dealing process, our innovative price-improvement technology enables customers toreceive that better price during trade execution.
LMAX Global has three main categories of clients: institutional, professional and a small numberof direct retail clients. We offer clients the opportunity to be classified as professional tradersin the EU and UK, under MiFID categorisations. However, we require them to demonstratecompliance with a set of rigorous eligibility criteria to ensure that they are suitably qualified forthis designation. LMAX Global predominantly provides services to institutions, including asset
managers, hedge funds, STP brokers and broker-dealers providing direct access to major hedging
counterparties.
We ensure that commitment to our customers is embedded in our culture and strategic
initiatives, and we regularly seek and review feedback from our clients. This enables us todevelop our products and services specifically to meet the needs of a global client base.

Principal risks

15

LMAX Group | 2019 Annual Report and Consolidated Financial Statements

Principal risks
In addition to dealing directly with clients, LMAX Global services clients introduced through third
parties who do not have their own front-end offering and want to take advantage of our awardwinning technology and expertise. They introduce their clients to us, and we provide execution
services and back-end support. The introducer manages the client relationship. We carefully
assess the risk and potential returns from introducers, and only partner with reputable institutions
that are committed to the same rigorous standards of regulatory compliance as ourselves, and
who fit our risk profile.
Credit risk
LMAX Global is exposed to credit risk as a result of placing collateral with prime brokers andtherefore losses may occur due to the default of the prime broker. The selection of good credit
quality CCP and non-CCP counterparties are fundamental, as too are the ongoing periodic
assessments.
Concentration risk is monitored daily to ensure that pre-defined thresholds limits are notexceeded, with corrective action taken immediately to prevent this.
Credit risk also relates to customers and counterparties being unable to meet their obligations
to LMAX Global either in part or in full. This is minimised through prudent levels of margin being
required to cover exposures, which is dynamically monitored through the trading platform.
LMAX Global makes a judgement on the credit quality of their customers based upon thecustomer’s financial position, the recurring nature of billing and collection arrangements and,
historically, a low incidence of default.
IT security
As an online business, the integrity, security, stability and operational robustness of IT systems
are critical for ongoing performance. Technology failures may impact our clients and the orderly
running of markets on our Exchange, potentially leading to a loss of trading volumes. Ensuringthat appropriate protections are in place to detect and prevent any intrusion such that all
systems are safeguarded against hackers, email viruses, attacks and other forms of cybercrime
is essential. Any failure in these measures could significantly impact the Group’s reputation andhence financial performance. As part of the systems infrastructure, management regularly reviews
system security and conducts external Cyber audits.
The Group is pro-active in its monitoring of technological developments and opportunities suchas artificial intelligence and blockchain in order to seek efficiencies or increase security, quality,
and integrity.
Impact of the economic environment
The economic environment remains a risk to the growth plans of the Group, and whilst
management continue to monitor its effects upon our customer base, management believes that
due to a mature and diversified customer base and product mix the Group is well positioned to
manage any adverse impact.

16

Principal risks

Year ended 31 December 2019 | Registered number 125453

Principal risks
Financial market volatility, measured by various indexes such as VIX, has been at historically
low levels over the last five years. It is expected that an increase in the general level of financial
market volatility would be beneficial to revenues, which are therefore partly dependent upon
macroeconomic conditions. This was the case in Q1 of 2020 which saw unprecedented levels ofmarket volatility as a result of macroeconomic uncertainty caused by the COVID-19 pandemic.
COVID-19
The novel strain of coronavirus (COVID-19) that first surfaced in China was declared as apandemic by the World Health Organisation on March 11, 2020 impacting countries globally. The
effects of the COVID 19 outbreak did not have any significant detrimental impact on the Group’s
performance in Q1 2020, which was robust. The Group’s business continuity plan was put to test
during this period, with 95% of employees successfully transitioning to working from home and no
disruption to systems uptime and reliability. However global economic uncertainties remain, which
may yet impact our business and customers. The Directors anticipate no downturn to business forthe next year as a result of this pandemic, but the ambiguity of the current situation may result insome disruption to the Group’s operations and financial conditions.
This is a non-adjusting post balance sheet event and an estimate of the future effect cannot be madeat this point in time as the situation is rapidly evolving.
BrexitConsidering the potential impact of Brexit whereby the UK no longer has access to the single
market, with the loss of the rights to passport services into other EU member states, the Group has
established a regulated operational client facing subsidiary in Cyprus. This provides certainty that
we will be able to offer regulated financial products in all EU member states following the UK’s exitfrom the EU, regardless of a deal being agreed with the EU to continue serving clients in the region.
Future outlook
We are extremely excited for the year ahead and expect our core FX business to continue its
growth trajectory, reflecting the increasing demand from all client segments for firm limit-order
liquidity and transparent, precise, consistent execution. We are entirely focused on our mission tobuild the leading global electronic FX and crypto trading businesses.
We see further opportunities to continue leveraging our technology to launch new exchanges,
whether it’s setting up more FX matching engines globally or building exchange infrastructure fortrading other asset classes, just like we did with LMAX Digital.
Another strategic growth area for us is to capitalise on the potential of our market data offering.
Our ability to gather firm limit order liquidity market data from all client segments, often notaccessible through primary venues, puts us in a differentiated and advantageous position comparedto other players. This will be a key growth story for us in the next decade.

Principal risks

17

LMAX Group | 2019 Annual Report and Consolidated Financial Statements

Principal risks
There continues to be regulatory focus on creating fair practises within the industry, which we feel
will drive more FX trading onto venues like ours. These developments are commensurate with theCompany’s vision of transforming global FX trading and driving change in the industry in order toencourage a fairer and more transparent marketplace.
Furthermore, the directors anticipate no significant downturn to business for the next year as aresult of the COVID-19 pandemic, but considering the ambiguity of the current situation, it may
result in some disruption to business and have financial implications for some of our clients.
Proposed dividend
The directors do not recommend the payment of a dividend for 2019 (2018: nil).
Directors
The directors who held office during the year and at the date of this report are as follows:› David Mercer› Edmond Warner (appointed 16 July 2019)› Edward Wray (appointed 16 July 2019)› Grant Pomeroy (appointed 16 July 2019)
Employees
The Group is committed to promoting and encouraging equal opportunities for all prospective
and current employees and actively promotes good employee relations. Management aims toeliminate any conditions, procedures and individual behaviour that can lead to discriminationeven where there was no intent to discriminate, with particular regard to race, gender, disability,
sexuality, age, religion and belief.
Management recognise that employees are key to both its present and future success and placesconsiderable value on the involvement of its employees. In order to maximise the potential of
every employee, management support the fundamental belief that there must be considerable
investment in training and development, a supportive and progressive working environment andemployee contribution and involvement in business matters.
Management continued its practice of keeping employees informed on matters affecting themand on various factors affecting the performance of the Group; this was achieved through formal
and informal meetings. Employees are consulted regularly on a wide range of matters affecting
their current and future interests.

18

Principal risks

Year ended 31 December 2019 | Registered number 125453

Principal risks
Independent Auditors
PricewaterhouseCoopers LLP were appointed as the auditors of the Group on 14 May 2018.
Pursuant to Article 113(1) of the Jersey Companies Act 1991, the auditors will be deemed to bereappointed and therefore will continue in office.
Disclosure of information to auditors
The directors holding office at the date of approval of the financial statements confirm that, so
far as they are aware, there is no relevant audit information of which the Company’s auditors areunaware; and have taken all the steps that ought to have taken as directors to make themselvesaware of any relevant audit information and to establish that the Company’s auditors are aware ofthat information.
On behalf of the Board,
David Mercer, Director
04 November 2020
Yellow Building, 1A Nicholas Road, London, W11 4AN

Principal risks

19

LMAX Group | 2019 Annual Report and Consolidated Financial Statements

Statement of Directors’ responsibilities in respect of thefinancial statements
The directors are responsible for preparing the Annual Report and the financial statements foreach financial year which give a true and fair view, in accordance with applicable Jersey law andInternational Financial Reporting Standards, of the state of affairs of the group and company
and of the profit or loss of the group and company for that period. In preparing those financial
statements, the directors are required to:› select suitable accounting policies and then apply them consistently;› make judgements and estimates that are reasonable and prudent;› state whether applicable accounting standards have been followed, subject to any material
departures disclosed and explained in the financial statements; and› prepare the financial statements on the going concern basis unless it is inappropriate topresume that the group and company will continue in business.
The directors confirm that they have complied with the above requirements in preparing theAnnual report and the financial statements.
The directors are responsible for keeping proper accounting records that disclose with reasonableaccuracy at any time the financial position of the group and company and enable them toensure that the financial statements comply with the Companies (Jersey) Law, 1991. They arealso responsible for safeguarding the assets of the group and company and hence for taking
reasonable steps for the prevention and detection of fraud and other irregularities.
So far as the directors are aware, there is no relevant audit information of which the groupand company’s auditors are unaware, and each director has taken all the steps that he or she
ought to have taken as a director in order to make himself or herself aware of any relevant audit
information and to establish that the group and company’s auditors are aware of that information.

20

Directors’ responsibilities for the financial statements

Year ended 31 December 2019 | Registered number 125453

Independent auditors’ report to the membersof LMAX Exchange Group Limited
Report on the audit of the financial statements
1. Qualified opinion
In our opinion, except for the possible effects of the matter described in the Basis for qualified
opinion paragraph below, LMAX Exchange Group Limited’s group financial statements andcompany financial statements (the “financial statements”):› give a true and fair view of the state of the group’s and of the company’s affairs as at
31 December 2019 and of the group’s and the company’s profit and cash flows for the year
then ended;› have been properly prepared in accordance with International Financial Reporting Standards(IFRSs) as adopted by the European Union; and› have been prepared in accordance with the requirements of the Companies (Jersey) Law
1991.
We have audited the financial statements, included within the Annual Report, which comprise:
the group and parent company statements of financial position as at 31 December 2019; thegroup and parent company income statements and statements of comprehensive income,the group and parent company statements of cash flows, and the group and parent company
statements of changes in equity for the year then ended; and the notes to the financial
statements, which include a description of the significant accounting policies.

2. Basis for qualified opinion
The group holds crypto currency balances on the consolidated statement of financial position
amounting to £25m as at 31 December 2019 on behalf of customers and for its own use.
The crypto currency market and the related infrastructure in place across the market to readtransactions and balances available in the block chain public domain are in their early stages.
Currently management uses open source tools to read the block chain network. Although theapproach is largely consistent across the market, we were unable to obtain sufficient appropriate
audit evidence supporting the existence of these assets as at 31 December 2019 as we wereunable to assess the reliability of these open source tools. Furthermore, we were unable to verify
the pairing of private keys with the public keys associated with the cryptocurrency balances andconsequently unable to verify the ownership of these balances. Consequently, we were unable todetermine whether any adjustments to these amounts were necessary.
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”)and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors’
responsibilities for the audit of the financial statements section of our report. We believe that theaudit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified
opinion.

Independent auditors’ report to the members of LMAX Exchange Group Limited

21

LMAX Group | 2019 Annual Report and Consolidated Financial Statements

Independent auditors’ report to the membersof LMAX Exchange Group Limited
Independence
We remained independent of the Group in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the UK, which includes the FRC’s EthicalStandard, and we have fulfilled our other ethical responsibilities in accordance with theserequirements.

3. Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which ISAs (UK)require us to report to you where:› the directors’ use of the going concern basis of accounting in the preparation of the financial
statements is not appropriate; or› the directors have not disclosed in the financial statements any identified material
uncertainties that may cast significant doubt about the group’s and company’s ability tocontinue to adopt the going concern basis of accounting for a period of at least twelve
months from the date when the financial statements are authorised for issue.
However, because not all future events or conditions can be predicted, this statement is not aguarantee as to the group’s and company’s ability to continue as a going concern.

4. Reporting on other information
The other information comprises all of the information in the Annual Report other than thefinancial statements and our auditors’ report thereon. The directors are responsible for the otherinformation. Our opinion on the financial statements does not cover the other information and,accordingly, we do not express an audit opinion or any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the otherinformation and, in doing so, consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the audit, or otherwise appears to bematerially misstated. If we identify an apparent material inconsistency or material misstatement,
we are required to perform procedures to conclude whether there is a material misstatementof the financial statements or a material misstatement of the other information. If, based on
the work we have performed, we conclude that there is a material misstatement of this otherinformation, we are required to report that fact. We have nothing to report based on these
responsibilities.

22

Independent auditors’ report to the members of LMAX Exchange Group Limited

Year ended 31 December 2019 | Registered number 125453

Independent auditors’ report to the membersof LMAX Exchange Group Limited
5. Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible
for the preparation of the financial statements in accordance with the applicable framework andfor being satisfied that they give a true and fair view. The directors are also responsible for suchinternal control as they determine is necessary to enable the preparation of financial statementsthat are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s andthe company’s ability to continue as a going concern, disclosing, as applicable, matters related togoing concern and using the going concern basis of accounting unless the directors either intend
to liquidate the group or the company or to cease operations, or have no realistic alternative but
to do so.

Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue anauditors’ report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detecta material misstatement when it exists. Misstatements can arise from fraud or error and areconsidered material if, individually or in the aggregate, they could reasonably be expected toinfluence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is
located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditors’ report.

Use of this report
This report, including the opinions, has been prepared for and only for the company’s members
as a body in accordance with Article 113A of the Companies (Jersey) Law 1991 and for no otherpurpose. We do not, in giving these opinions, accept or assume responsibility for any otherpurpose or to any other person to whom this report is shown or into whose hands it may comesave where expressly agreed by our prior consent in writing.

Independent auditors’ report to the members of LMAX Exchange Group Limited

23

LMAX Group | 2019 Annual Report and Consolidated Financial Statements

Independent auditors’ report to the membersof LMAX Exchange Group Limited
Other required reporting

Companies (Jersey) Law 1991 exception reporting
In respect solely of the limitation on our work relating to matters, described in the Basis for
qualified opinion paragraph above:› we have not obtained all the information and explanations that we considered necessary forthe purpose of our audit; and› we were unable to determine whether adequate accounting records have been kept by thecompany.

Under the Companies (Jersey) Law 1991 we are also required to report toyou if, in our opinion:› returns adequate for our audit have not been received frombranches not visited by us; or› the financial statements are not in agreement with the accounting
records and returns.

We have no exceptions to report arising from this responsibility.

Mike Wallace (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London, 04 November 202024

Independent auditors’ report to the members of LMAX Exchange Group Limited

Year ended 31 December 2019 | Registered number 125453

Consolidated statement of comprehensive
incomex
For the year ended 31 December 2019

Note

2019

2018

£’000

£’000

Revenue

2.1

48,59037,539

Cost of sales

2.2(4,326)(4,310)44,26433,229(28,917)(23,655)

Operating profit

15,347

9,574

Financial income-

236

Financial expenses(1,152)(1,134)

Profit before tax

14,195

8,676(1,719)(1,442)

12,476

7,234

(370)

35

12,106

7,269

12,051

6,734

55

535

Gross profit
Administrative expenses

Taxation

2.3

3

Profit for the year
Other comprehensive (expense)/income
Exchange differences on translation of foreign assets and liabilities
Profit and total comprehensive income for the year

Total comprehensive expense/income attributable to:Equity holders of the parent
Non-controlling interest

The results shown above are derived wholly from continuing operations.
The accompanying notes are an integral part of these financial statements.

Consolidated statement of comprehensive income25LMAX Group | 2019 Annual Report and Consolidated Financial Statements

Consolidated statement of financial position
As at 31 December 2019

Note

2019

2018

£’000

£’000

Non-current assets
Goodwill

12

318

-

Intangible assets

5

5,653

4,496

Property, plant and equipment

6

5,771

2,342

Trade and other receivables

7

318

-

Cash and cash equivalents

968,13450,659Trade and other receivables

7

53,94943,495Inventories

825,127

10,352

159,270

111,344

Current assets

Total assets
Non-current liabilities
Trade and other payables

10(10,918)(15,390)

Deferred tax liabilities

3.1

(366)

(220)

10

(135,308)(92,890)(146,592)(108,500)

12,6782,844

Share capital

1,000

1,000

Demerger reserve(8,615)(8,575)

Other equity

1,026

132

Foreign currency translation reserve

(258)

111

Retained earnings

19,1236,703

Equity attributable to equity holders of the parent

12,276

(629)

402

3,473

12,6782,844

Current liabilities
Trade and other payables
Total liabilities
Net assets
EquityNon-controlling interest
Total equity

The accompanying notes are an integral part of these financial statements.
These consolidated financial statements on pages 25-55 were approved by the Board on
04 November 2020 and were signed on behalf of the Board by:David Mercer, Director
04 November 202026

Consolidated statement of comprehensive income

Year ended 31 December 2019 | Registered number 125453

Consolidated statement of changes in equity
For the year ended 31 December 2019
Foreigncurrency
Share
Share translation
capital premium
reserve

Balance at
1 January 2019

Demerger
ReserveOther
equityRetainedearnings

Total
Non
parent controlling
equityinterest

Total
equity

£’000

£’000

£’000

£’000

£’000

£’000

£’000

£’000

£’000

1,000

-

111

(8,575)

132

6,703

(629)

3,473

2,844

-

-

- 12,420

12,42056

12,476

Profit for the year-

Other comprehensive
expense

-

-

(369)

-

-

-

(369)

(1)

(370)

Total comprehensive
income for the year

-

-

(369)

-

- 12,420

12,051

55

12,106

Acquisition of MI*

-

-

-

(40)

-

-

(40)

(3,126)(3,166)

Issue of shares

-

-

-

-

151

-

151

-

151

Premium on issue ofshares

-

-

-

-

743

-

743

-

743

1,000

-

(258)

(8,615)

1,026 19,123

12,276402

12,678

Balance at 31
December 2019

For the year ended 31 December 2018
Balance at 1 January
2018

971

1,177

80

-

-

7,530

9,758

7,801

17,559

LMAX ExchangeGroup Limited (NewHolding Company
incorporated)

1,000

-

-

(1,000)

-

-

-

-

-

Group reorganisation (1,000) (1,491)

-

2,491

-

-

-

-

-

Transfer of reserves

-

-

-

7,530

- (7,530)---

Acquisition of MI

-

-

-

(17,596)-

Profit for the year

-

-

-

-

-

6,703

6,703

531

7,234

Other comprehensive
income

-

-

31

-

-

-

31

4

35

Total comprehensive
income for the year

-

-

31

-

-

6,703

6,734

535

7,269

Issue of share option

-

-

-

-

392

-

392

-

392

Equity-settled sharebased paymenttransactions

29

314

-

-

(260)

-

83

-

83

Total distributions
to owners

29

314

-

-

132

-

475

-

475

Balance at 31
December 2018

1,000

-

111

(8,575)

132

6,703

(629)

3,473

2,844

- (17,596)(4,863) (22,459)

Dividend paid in the year was £nil (2018: nil). The accompanying notes are an integral part of thesefinancial statements.
*Refer to Note 4 for details.
Consolidated statement of financial position

27

LMAX Group | 2019 Annual Report and Consolidated Financial Statements

Consolidated statement of cash flows
2018

2018

£’000

£’000

Operating profit

15,347

9,574

Adjustments for:--

Depreciation

1,720

941

Amortisation

3,090

2,728

-

(236)

Increase in trade and other receivables(10,772)(16,341)

Increase in inventories(14,775)(10,352)

Increase in trade and other payables

40,82845,535

Tax paid(1,455)(686)

Net cash from operating activities

33,98331,163Acquisition of property, plant and equipment(5,149)(1,911)

Acquisition of intangibles and capitalised expenses(4,247)(3,492)-236(9,396)(5,167)-20,000

Repayment of borrowings(3,000)(2,250)Finance expense(1,152)(1,134)151

515

Acquisition of minority interest(3,166)(22,376)

Net cash used in financing activities(7,167)(5,245)

Net increase in cash and cash equivalents

17,42020,751

Cash and cash equivalents at beginning of year

50,65929,760Effect of exchange rate fluctuations on cash held

55

148

68,13450,659For the year ended 31 December 2019

Cash flows from operating activities

Gain on sale of employee shares

Cash flows from investing activities

Financial income
Net cash used in investing activities
Cash flows from financing activities
Borrowings

Issue of shares

Cash and cash equivalents at end of year

The accompanying notes are an integral part of these financial statements.

28

Consolidated statement of changes in equity

Year ended 31 December 2019 | Registered number 125453

Notes to consolidated financial statements
1. Accounting policies
The financial statements have been prepared and approved by the Directors in accordance with
International Financial Reporting Standards (IFRS) and International Financial Reporting Standards
Interpretations Committee (IFRS IC) Interpretations as adopted by the European Union (EU)(together “adopted IFRS”).
The following accounting policies have been applied consistently in dealing with items which areconsidered material in relation to the financial statements.
Going concern
The Directors have considered all available information about the future events when considering
the Group’s going concern. The Directors have reviewed profit and cash flow forecasts for atleast 12 months following the date of the signing of these financial statements. These forecasts
take into account future expected revenues, costs, liquidity and statutory capital requirements ofthe subsidiaries. The directors anticipate no significant impact of the novel strain of coronavirus(COVID-19) on the business, however as the situation is still unclear and remains rapidly evolving
an estimate of the future effect cannot be made at the point in time.
The Directors believe the Group has sufficient financial resources together with an increasing
and more diversified number of customers and suppliers across different geographic areas. As
a consequence, the Directors believe that the Group is well placed to manage its business risks
successfully and has a reasonable expectation that the company has adequate resources tocontinue in operational existence for the foreseeable future. Thus the Group continues to adopt
the Impairment for expected credit losses — note 7.1› Estimation of current tax payable and current tax expense — note 3› Estimated useful economic life of intangible asset —note 5› Valuation of cryptocurrencies — note 13.6
Basis of consolidation
The consolidated financial statements include the financial statements of the Company and its
subsidiary undertakings made up to 31 December 2019. The accounting policies of the Company
and its subsidiaries are consistent with each other aside from the basis of preparation.
All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Subsidiaries with reporting currencies different to British Pound are converted using the following
rates:› Assets and liabilities are translated using the rate of exchange at the balance sheet date
› Items of income and expense are translated at an average rate for the accounting period
Gains or losses recognised from translation are included in the Statement of Other
Comprehensive Income and is included in the foreign currency translation reserve.
Notes to consolidated financial statements

29

LMAX Group | 2019 Annual Report and Consolidated Financial Statements

Notes to consolidated financial statements
Intangible assets, amortisation, research and development
Intangible assets include software licences, developed software and intellectual property rights.
Acquired software licences are capitalised on the basis of the costs incurred to acquire and bringit into use. The costs are amortised over their estimated useful economic life or the life of thesoftware licence contract which is three to five years. Intellectual property acquired is amortisedover the three year straight line basis.
The group has conducted sensitivity analysis around the estimated useful economic life of theintangible assets and assuming no significant change in nature and usage of the asset, if thecurrent useful economic life was reduced or increased by 1 year, then the amortisation expense
would increase by £1.5m or reduce by £1.3m respectively.
The Group undertakes continuous development of its MTF exchange and mobile application
software. The development activity involves planning and designing for the production of
new and substantially improved features for the MTF exchange. Labour and expenses directly
attributable to new and improved features are capitalised as an intangible asset, to the extent:› it is technically and commercially feasible and there is an intention to complete and ability touse or sell the asset.

› it can be reliability demonstrated that the software will generate future economic benefits.
› there are adequate technical, financial and other resources to complete the development andto put it in use.

› the expenditure attributable to the development of the intangible asset can be reliably
measured.
Other development expenditure and research activities are expensed as incurred. The capitalised
cost of developed software is amortised over a three year period.
Property, plant and equipment and depreciation
Assets are stated at historical cost less accumulated depreciation. Depreciation is provided towrite off the cost less the estimated residual value of assets by equal instalments over theirestimated useful economic lives as follows:› Leasehold: Shorter of the term of the lease or the useful economic life of the asset› Right to Use Office Building: Straight line based on term of lease› Computer equipment and software: 3-5 years straight line
› Fixtures and fittings: 5 years straight line

30

Notes to consolidated financial statements

Year ended 31 December 2019 | Registered number 125453

Notes to consolidated financial statements
Impairment of intangible and tangible assets
The carrying amounts of the Group’s assets are reviewed for impairment when events or changes
in circumstances indicate that the carrying amount of the asset may not be recoverable. If
any such indication exists, the asset’s recoverable amount is estimated. In the event that therecoverable amount is below the carrying amount, an impairment loss is recognised.
Assets may be part of an income generating unit, which is the smallest identifiable group of assetsthat generates income that is largely independent of the income streams from other assets orgroups of assets. In respect of income-generating units, impairment losses are allocated first to
reduce the carrying amount of any goodwill allocated to income-generating units, then to any
capitalised intangible asset and finally to the carrying amount of the tangible assets in the unit ona pro rata or more appropriate basis.
The recoverable amount of an asset is the greater of their net realisable value and value in use. In
assessing value in use, the expected future cash flows are discounted to their present value using
a pre-tax discount rate that reflects current market assessments of the rate of return expected onan equally risky investment.
Trade and other receivables
Trade and other receivables are measured initially at fair value and subsequently carried atamortised cost using effective interest rate method.
In accordance with IFRS 9, the amortised cost is further adjusted for impairment based on
calculating the expected credit losses (ECL) on trade receivables through the use of a provision
matrix ,where a fixed provision rate applies depending on the number of days that a tradereceivable is outstanding.
Trade and other payables
Trade payable represents balances with counterparties and clients where the combination of
cash held on account and the valuation of their trading position results in an amount payable by
the Group and such balances are recognised at fair value through statement of comprehensive
income. The client liability in relation to being a custodian of client’s crypto assets on the crypto
trading platform is also valued at fair value and thus any the gain and loss is recorded in thestatement of comprehensive income as per the guidance under IFRS9.
The other trade and other payables with counterparties are recognised initially at fair value.
Subsequent to initial recognition, they are measured at amortised cost using the effective interest
method.

Notes to consolidated financial statements

31

LMAX Group | 2019 Annual Report and Consolidated Financial Statements

Notes to consolidated financial statements
Inventory - Cryptocurrencies
Inventory represents cryptocurrencies controlled by the Group.
The Group operates a Cryptocurrency Exchange which provides a trading venue for its clients totrade, hence the Group controls the crypto assets held on its clients’ trading account.
In the absence of guidance on how cryptocurrency assets should be recognised and disclosed inaccordance with IFRS as adopted by the EU, the Group has recognised the cryptocurrencies asinventory as the economic nature is deemed to be in line with certain commodities under IAS 2.3(b).
Cryptocurrencies are measured at cost and subsequently at fair value less cost to sell. The fairvalue movement in cryptocurrencies held as inventories is reflected in the income statement. The
corresponding liability for Cryptocurrencies is included in trade and other payables.
Cash and cash equivalents
Cash comprises cash in hand and deposits repayable on demand. The Group holds money onbehalf of clients in accordance with the client money rules of the UK Financial Conduct Authority
and other regulatory bodies. Such monies are classified as either ‘transfer of title funds’ or‘segregated client funds’ in accordance with the relevant regulatory requirements.
Segregated client funds comprise individual client funds held in segregated client money accounts
which hold statutory trust status, restricting the Group’s ability to control the monies. Thesemonies are not recognised on the balance sheet. The return received on managing segregatedclient funds is included in Finance income.
Title transfer funds are held by the Group under a Title Transfer Collateral Arrangement, by whicha client agrees that full ownership of such monies is unconditionally transferred to the Group.
Title transfers funds are included in cash and cash equivalents and Collateral receivables. The
corresponding liability for title of transfer funds is included in trade and other payables.
Acquisition of shares from minority interest
The Company acquired 4.5% of the remaining shares in LMAX Broker Limited and LMAX Limited
from a client. As per guidance under IAS 27, this has been accounted for as a transaction with theshareholders of the Group whereby any excess of consideration paid over the net assets acquired isadjusted to the equity of the controlling shareholders.
Derivatives
The group enters into derivative contracts purely for both hedging and trading purposes, majorityof such derivatives are executed over the counter and valued using a combination of external
prices and internal valuation techniques. Financial assets and liabilities are recognised when thecompany becomes a contractual party to these instruments. In accordance with “IFRS 9 Financial
Instruments” these financial assets and liabilities are measured at Fair Value though Profit andloss (FVTPL). Any transactional cost directly attributable to the acquisition of these financial
instruments are also recognised in the profit and loss statement. The valuation techniques andinputs depend on the type of derivative and the nature of the underlying instrument. The principal
technique used in fair valuation of these derivatives is mark to market valuation based on therelevant closing prices derived from the LMAX trading platform.
32

Notes to consolidated financial statements

Year ended 31 December 2019 | Registered number 125453

Notes to consolidated financial statements
Revenue
Revenue is measured as the consideration received from customers for trading commissions,funding revenue and service fee revenue. Commissions are recognised post trade execution andbilled on contractual basis, funding revenue is recognised on the close of trading day and is basedon the customer’s open positions and service fee revenues are recognised once charged to thecustomers’ accounts.
The proprietary trading revenue is recognised on the close of trading day, represents realised andunrealised Profit and loss made on proprietary trading positions.
Interest income comprises of interest receivable on funds held in bank accounts. Finance income
is recognised as it accrues, using the effective interest method.
Cost of sales
Commission and any transaction clearing fees paid relating to the customer trades is recorded
within the cost of sales. Cost relating to introducing broker fees is recorded in the same period as
the underlying trading commission and funding revenue.
Employee and other short-term benefits
The Group operates a defined contribution pension plan under which the fixed contributions
are paid to a third party pension provider and there is no legal or constructive obligation to pay
further amounts. Contributions are recognised as an expense in the periods during which services
are rendered by employees.
Short-term employee benefit obligations (i.e. leave pay) are measured on an undiscounted basis
and are expensed as the related service is provided.
Foreign currencies
The financial statements are presented in British Pounds which is the Group’s functional currency.
Transactions in foreign currencies are recorded using the rate of exchange ruling at transaction
date. Monetary assets and liabilities denominated in foreign currencies are translated using the rateof exchange ruling at the balance sheet date. Foreign currency gains and losses are reported on a
net basis and are included in the Consolidated Statement of Comprehensive Income.

Notes to consolidated financial statements

33

LMAX Group | 2019 Annual Report and Consolidated Financial Statements

Notes to consolidated financial statements
LeasesOn 01 January 2019, the company adopted IFRS 16 ‘Leases’. IFRS 16 replaces IAS17 ‘Leases’ andeliminates the classification of leases as either operating leases or finance leases and provides
a single lease accounting model to recognise the Right to Use assets and lease liabilities for all
applicable leases.
The Group has adopted IFRS16 on a modified retrospective basis and as such there shall be norestatement of comparatives within the financial statement.
The Group has adopted practical expedients of exempting leases with a short life (less than 12
months) or low value leases (less than US $5,000). As a result, the key leases to which the full
requirement of IFRS 16 have been applied are – Lease of the Office Building & some computerequipment. Until last year the computer equipment was held under finance lease and thus
based on retrospective modified transition approach under IFRS 16, the company shall continue
to disclose the lease liability and Right to use asset at their respective previous carrying value(refer note 6). The lease liability on office building represents the present value of future lease
payments for the full term, irrespective of any tenant break clause. The lease liability is presented
under Trade and Other payables. The key judgement used in the lease liability calculation is the
choice of discount rate which is reflection of the contractual interest rate applicable in case of
non-payment or delayed payment of lease rentals, where such rate is unavailable group uses
the incremental borrowing rate. For Right to use asset calculation, the company has elected thetransitional option to set “Right to Use asset” equal to the related lease liability adjusted by theamounts accrued in respect of rent-free period.
Financial income per Statement of Comprehensive Income
Financing expenses comprise interest charges from financial institutions, suppliers and financeleases. Finance charges are recognised using the effective interest method. There were no
borrowing costs that are directly attributable to the acquisition, construction or production ofan asset. Finance expenses also includes financing charge on leases disclosed in accordance withIFRS16.

34

Notes to consolidated financial statements

Year ended 31 December 2019 | Registered number 125453

Notes to consolidated financial statements
TaxationTax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in
the income statement except to the extent that it relates to items recognised directly in othercomprehensive income, in which case it is recognised in the Statement of Other Comprehensive
Income.
Current tax is the expected tax payable or receivable on the taxable profits or losses for the year,
using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment totax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for taxation purposes. The
following temporary differences are not provided for: the initial recognition of goodwill; the initialrecognition of assets or liabilities that affect neither accounting nor taxable profit other than in abusiness combination, and differences relating to investments in subsidiaries to the extent thatthey will probably not reverse in the foreseeable future. The amount of deferred tax provided isbased on the expected manner of realisation or settlement of the carrying amount of assets andliabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits
will be available against which the temporary difference can be utilised.
Related party transactions
The Group has procedures to identify and monitor related party transactions. The Group, where
possible, endeavours to transact with all related parties on an arm’s length basis. The disclosuresof identified related party transactions are included in note 11.

Notes to consolidated financial statements

35

LMAX Group | 2019 Annual Report and Consolidated Financial Statements

Notes to consolidated financial statements
2. Profit before tax
2.1. Revenue breakdown
2019

2018

£'000

£’000

Commissions

23,22818,356

Funding revenue

18,773

16,567

Others

6,589

2,616

Total Revenue

48,59037,539Other revenue includes Trading revenue of £3.5m, Service revenue worth £1.6m and Interest
revenue of £1.5m.

2.2. Cost of sales is stated after charging:
2019

2018

£'000

£’000

Clearing and trading fees

1,612

1,541

Introducing broker fees

1,604

1,933

Expected credit loss

146

372

Other variable costs

964

464

Total cost of sales

4,326

4,310

2019

2018

£'000

£’000

15,30012,990

1,337

1,283

289

190

- of which capitalised as development software(3,502)(3,117)

Depreciation of tangible assets

1,720

941

Amortisation of intangible assets

3,090

2,728

-

824

409

877

(1,312)

1,197

(122)

(1,590)

Other costs

11,708

7,332

Total administrative expenses

28,91723,6552.3. Administrative expenses are stated after charging:
Note

Total salary expenses

2.4

Social security expenses
Other Pension costs

Other operating lease rentals – buildings
Legal and Professional
Foreign exchange losses
Research & development tax grant

36

2.5

Notes to consolidated financial statements

Year ended 31 December 2019 | Registered number 125453

Notes to consolidated financial statements
2.4. The average monthly number of persons employed by the Group (including directors)
analysed by category is as follows:
2019

2018

No.

No.

Corporate and administration

33

28

Product development

4343

Operations

30

23

Sales and marketing

30

29

Total

136

123

2019

2018

£’000

£’000

959

657

Between one and five years

1,243

1,798

More than five years

2,597

2,172

Total

4,799

4,627

2.5. Lease commitments for leased properties payable are as follows:

Less than one year

The figures for the year represent lease commitments for future periods held under trade andother payables as lease liability for the year accounted in accordance with IFRS16 “Leases”. The
above comparatives present minimum future operating lease commitments for FY2018.
2.5(a) Reconciliation of future operating lease commitments 2018 Vs Lease Liability per
IFRS16:£’000
Undiscounted Operating lease commitments as stated in 2018

4,627

Less: VAT exclusion from lease liability(675)

Less: Adjustment for discounting at 3.75%(640)

Less: Short term leases exempted under IFRS 16(100)

Add: Leases held as finance leases in 2018

1,037

Lease liability as at 1st Jan 2019

4,249

New Office building leases commitments during the year

1,180

Finance lease interest accrued during the year

161

Repayment of lease rentals during the year

(791)

Carrying value of lease liability as at 31st Dec 2019

4,799

Notes to consolidated financial statements

37

LMAX Group | 2019 Annual Report and Consolidated Financial Statements

Notes to consolidated financial statements
2.6. The highest paid director received total emoluments for the year of £1.25m (2018:£1.45m) as a director of Group.
2019

2018

£’000

£’000

1,581

1,450

2019

2018

£’000

£’000

- the audit of the Company’s annual financial statements

150

60

- of financial statements of subsidiaries' pursuant to legislation

175

114

- assurance services for subsidiaries

60

66

Total

385

240

Total directors’ emoluments included in salary expenses

2.7. Remuneration paid to the auditors is as follows:

Fees payable to the Company's auditors for the audit:

38

Notes to consolidated financial statements

Year ended 31 December 2019 | Registered number 125453

Notes to consolidated financial statements
3. Taxation
Note

2019

2018

Current tax:

£'000

£’000

UK corporation tax charge on profits for the year

1,070

1,588

503

(393)

1,573

1,195

206

244

Adjustment in respect of prior year period
Total current tax
Deferred tax:
Deferred tax - origination and reversal of timing differences

(60)

3

Total deferred tax

3.1

146

247

Tax per income statement

3.2

1,719

1,442

Prior year adjustments

3.1. The deferred tax charge for the year has been recognised on all timing differences between
the carrying value treatment of assets and liabilities and the associated tax allowances.
Deferred tax was recorded using the rate substantively enacted rate at the balance sheet dateof 17%. The deferred tax charge has been a result of:Deferred tax (assets)/liabilities:

2019

2018

£’000

£’000

Provision at the start of the period

220

(27)

Charge to the profit and loss account

146

247

Total deferred tax charge

366

220

3.2. The deferred tax assets and liabilities are based in the UK jurisdiction. The current tax
charge for the year is lower than the standard corporation tax in the UK of 19% (2018: 19%).
The differences are explained below:
Factors Affecting Total Tax Charge on the Current Period

2019

2018

£’000

£’000

The charge for the year can be reconciled to the profit per the income statement as follows:
Profit for the year - continuing activities

14,195

8,676

At standard rate of corporation tax in the UK of 19.00%(2018: 19%)

2,697

1,648

Non-taxable income(1,124)-

Enhanced R&D Expenditure(1,100)-

Expenses not deductible for tax purposes

825

38

Prior year adjustment

443

(206)

Deferred tax - changes in taxes

(22)

(38)

1,719

1,442

Effects of:

Tax charge for the year

Notes to consolidated financial statements

39

LMAX Group | 2019 Annual Report and Consolidated Financial Statements

Notes to consolidated financial statements
4. Capital Re-organisation
On 03 January 2018, the brokerage business of LMAX Limited was demerged into a newly
incorporated and regulated entity called LMAX Broker Limited. As part of the capital reduction
demerger in 2018, the share premium and reserves of LMAX Limited were converted toDistributable reserves, permitted under section 641(1)(a) Companies Act 2006. Pursuant to thecapital reduction LMAX Limited transferred the brokerage business to LMAX Broker Limited in
exchange for the issue of shares by LMAX Broker Limited to the ultimate shareholders, and as
a result £12m of LMAX Limited’s reserves were transferred as issue of capital in LMAX Broker
Limited.
On 01 February 2018, LMAX Exchange Group Limited (“LEG”) acquired the 63.65% of the sharesin the LMAX Group from Hamsard 3297 Limited (former holding company) at market value.
LEG also obtained third party funding to acquire 31.35% minority shareholding of the LMAX
Group from The Sporting Exchange Limited (part of the Betfair Group), making LEG 95% majority
shareholder of the LMAX Group as at year end 31 December 2018.
Further on 01 July 2019, LEG also acquired 4.5% shareholding of the LMAX Limited and
LMAX Broker Limited from minority shareholder, Directa S.I.M.p.A thereby making LEG 99.5%
majority shareholder of the LMAX Group. As a result of this transaction £3.2m of net assets
were transferred from minority interest to the Group’s reserve as shown within the Statement ofchanges in Equity and the difference between the total consideration and net assets acquired has
been recognised in the demerger reserve.

40

Notes to consolidated financial statements

Year ended 31 December 2019 | Registered number 125453

Notes to consolidated financial statements
5. Intangible assets
Intellectual
property

Purchased
SoftwareDeveloped
SoftwareTotal Intangible
Assets

£’000

£’000

£’000

Cost
Balance at 1 January 2018-

181

12,664

12,845Additions

-

375

3,117

3,492

Balance at 31 December 2018-

556

15,781

16,337

Balance at 1 January 2018

-

(100)

(9,013)(9,113)

Amortisation for the year

-

(95)

(2,633)(2,728)

Balance at 31 December 2018

-

(195)

(11,646)(11,841)-556

15,781

16,337

Additions

360

385

3,502

4,247

Balance at 31 December 2019

360

941

19,283

20,584

Balance at 1 January 2019

-

(195)

(11,646)(11,841)

Amortisation for the year

(50)

(270)

(2,770)(3,090)

Balance at 31 December 2019

(50)

(465)

(14,416)(14,931)

at 31 December 2018

-

361

4,135

4,496

at 31 December 2019

310

476

4,867

5,653

Accumulated amortisation

Cost
Balance at 1 January 2019

Accumulated amortisation

Carrying value

Notes to consolidated financial statements

41

LMAX Group | 2019 Annual Report and Consolidated Financial Statements

Notes to consolidated financial statements
6. Property, plant and equipment

Cost

Right touse office
Leaseholdbuilding improvements£’000

Fixtures, Total property,
plant, andfurniture
Computerequipment
equipment and fittings
£’000
£’000
£’000

Balance at 1 January 2018

-

424

8,307

149

8,880

Additions

-

-

1,855

57

1,912

(4,474)-(4,474)

Disposals
-

424

5,688

206

6,318

Balance at 1 January 2018

-

(406)

(6,979)(124)(7,509)Depreciation for the year

-

(17)

(906)

(18)

(941)

Disposals

-

-

4,474

-

4,474

Balance at 31 December 2018

-

(423)

(3,411)(142)(3,976)

-

424

5,688

206

6,318

Additions

4,247

258

592

52

5,149

Disposals

(305)

-

(78)

-

(383)

Balance at 31 December 2019

3,942

682

6,202

258

11,084

Balance at 1 January 2019

-

(423)

(3,411)(142)(3,976)

Depreciation for the year

(492)

(4)

(1,190)(34)(1,720)

Disposals

305

-

78

-

383

Balance at 31 December 2019

(187)

(427)

(4,523)(176)(5,313)at 31 December 2018

-

1

2,277

64

2,342

at 31 December 2019

3,755

255

1,679

82

5,771

Balance at 31 December 2018

Accumulated depreciation

Cost
Balance at 1 January 2019

Accumulated depreciation

Carrying value

The computer equipment above for £1.7m includes right to use assets worth £770k.

42

Notes to consolidated financial statements

Year ended 31 December 2019 | Registered number 125453

Notes to consolidated financial statements
7. Trade and other receivables

2019

2018

£’000

£’000

Trade debtors

7.1

1,108

856

Other debtors

7.2

2,431

1,564

Collateral requirement for trade clearing

7.3

49,15840,127

Derivative contracts

7.4

555

-

Prepayments and accrued income

1,015

948

Total

54,26743,495318-

53,94943,49554,26743,495Classification:
Non-current
Current
Total

7.1 The aging of trade receivables at the yearend date is as follows:
31 December 2019

Current

1-30 Days 31-60 Days 61-90 Days 90 Days past
past duepast duepast due due or more

Total

Expected loss rate

0.3%

1.6%

3.6%

6.6%

10.6%

Gross Carrying amount trade receivables (£’000)

620

181

86

55

166

1,108

2

3

3

4

18

30

1-30 Days 31-60 Days 61-90 Days 90 Days past
past duepast duepast due due or more

Total

Loss allowance

31 December 2018

Current

Expected loss rate

0.3%

1.6%

3.6%

6.6%

10.6%

Gross Carrying amount trade receivables (£’000)

818

(13)

19

12

20

856

2

-

1

1

2

6

Loss allowance

The loss allowance as at 31 December 2019 and 1 January 2019 (on adoption of IFRS 9) was
determined as above for both trade receivables. For details of movement in allowance for
impairment in refer to note 14.1 for details.
7.2. Other debtors have no fixed terms of repayment, are interest free and have no security
provided.
7.3. Collateral comprise of balances held with the prime brokers at the year end.
7.4. The derivative contract asset disclosed above includes £169k forward contacts held as
instruments for hedging the currency exposure and £386k held under trading activity performedby Group subsidiary, LMAX Bullion Limited.

Notes to consolidated financial statements

43

LMAX Group | 2019 Annual Report and Consolidated Financial Statements

Notes to consolidated financial statements
8. Inventories

Fair value less cost to sell of Cryptocurrencies held by the Group

2019

2018

£’000

£’000

25,127

10,352

Total cryptocurrencies balance held by the Group includes £17.7m (2018: £7.6m) held on behalfof clients of LMAX Digital Broker Limited.

9. Cash and cash equivalents

Cash and cash equivalents

2019

2018

£’000

£’000

68,13450,659Cash and cash equivalents comprise of bank balances held by the Group on a short-term basiswith original maturity of three months or less. The carrying amount of these assets approximates
their fair value.
The Group holds client funds in segregated client trust bank accounts. The Group does notrecognise these bank accounts or the related client liability on the balance sheet. At the end of
the year, total funds held in these accounts was £65.5m (2018: £83.6m).
Below is an analysis of the change in net funds as per management:

Opening balance at 1 January 2019
Net cash movement
Balance at 31 December 2019

Cash and cash
equivalents

Collateral*

Transfer of
title funds

Net funds

£’000

£’000

£’000

£’000

50,65950,479(82,931)

18,207

17,47523,806(36,562)

4,719

68,13474,285(119,493)

22,926*Collateral balance includes the balances held with the prime brokers and inventories.

44

Notes to consolidated financial statements

Year ended 31 December 2019 | Registered number 125453

Notes to consolidated financial statements
10. Trade and other payables
Note

2019

2018

£’000

£’000

Transfer of title funds

10.1

119,493

82,931

Loan

10.2

14,75017,750Accruals and deferred income

10.4

5,677

5,583

Lease liability

10.3

4,799

1,037

Trade creditors

588

642

Taxation and social security

566

314

353

-

-

23

146,226

108,280

Non-current

10,91815,390Current

135,308

92,890146,226

108,280

Other payables
Derivative contracts
Total

10.5

Classification:

Total

10.1. Title transfer funds are held by the Group under a Title Transfer Collateral Arrangement, bywhich a client agrees that full ownership of such monies is unconditionally transferred to the Group.
These funds would be immediately transferable back to the client on request. No interest is payable
to the client for these funds.
10.2. The loan includes a revolving credit of £5m and a term debt of £9.75m (2018: £12.75m).
The remaining term of the debt is 2 years.
10.3. As a result of adoption of IFRS 16 the group has recognised lease liability against the rightto use assets for office building. These include transition of leases previously held as operatinglease and any new leases acquired by the group. The discount rate used to determine thefinancing charges is based on the interest rate for non-repayment implicit in the lease contract.
From prior year the Group also holds some computer equipment which have been provided
under financing arrangements. The terms of the financing arrangements previously recorded as
financing leases with the corresponding asset capitalised in property, plant and equipment havebeen reclassed as lease liability having no change in calculation in accordance with the modified
transition approach under IFRS16. The financing arrangements have terms of three years, arerepayable on a quarterly basis and have effective interest rates of 0.8% to 4.8%.
10.4. The accruals and deferred income above include deferred income representing contract
liability accounted under IFRS 15, “Revenue from Contracts with Customers” worth £29k (2018:
Nil). The contract liability has arisen post acquisition of business of Mobile Trading Partners
LLP on account of services due to customers for development and support of mobile trading
applications.
Notes to consolidated financial statements

45

LMAX Group | 2019 Annual Report and Consolidated Financial Statements

Notes to consolidated financial statements
10.5. The other payable represents deferred consideration payable to non-controllingshareholders worth £233k on account of acquisition of minority holding of 4.5% and £120k
payable to Mobile Trading Partners LLP as a result of business acquisition.

11. Related party transactions
Internal controls are in place to ensure that any related party transactions including directors or
their connected persons are carried out on an arm’s length basis and are properly recorded.
Identified related parties
Identified related parties include:› Directors of the company.
› Directors of subsidiaries. These directors received no fees from their directorships, but were
paid salaries for services rendered to the subsidiaries in accordance with their employment
contracts.

› Supplier, Mobile Trading Partners LLP, of which David Mercer is a member.
› Client Directa S.I.M.p.A, due to their 5% shareholding in LMAX Limited and LMAX Broker
Limited during the year.

› Group companies including: subsidiaries listed in note 2 to the Company financial statements.
2019

2018

Key management personal compensation

£’000

£’000

Short-term employee benefits

1,570

1,450

Post- employment benefits

11

-

1,581

1,450

1,041

114

-

461

Total
BalancesAmounts due from shareholders of LMAX Exchange Group Limited
Transactions
Mobile Trading Partners LLP mobile application development

46

Notes to consolidated financial statements

Year ended 31 December 2019 | Registered number 125453

Notes to consolidated financial statements
12. Business Acquisitions and reorganisation
On 01 July 2019 following the Cyprus Securities and Exchange Commission’s (“CySec”) approval
LMAX Broker Limited became 100% owner of a regulated Cypriot entity, LMAX Broker Europe
Limited (previously known as CB Capital Limited). CB Capital Limited was acquired for £1.0m in
exchange of net assets worth £0.7m, therefore Goodwill of £0.3m has arisen as a result of thisacquisition. Further on 27 September 2019 LMAX Exchange Group Limited acquired 1,244,750
shares of LMAX Broker Europe Limited from LMAX Broker Limited at net book value thereby
becoming 100% shareholder of the Cypriot entity.
On 01 July 2019, LMAX Exchange Group Limited purchased 4.5% minority shareholding
previously held by Directa S.I.M.p.A and associates, making it 99.5% shareholder of LMAX
Limited, LMAX Broker Limited and its subsidiaries.
On 20 March 2019 LMAX Exchange Group Limited invested £1m as share capital in LMAX Digital
Group Limited and acquired further 999,920 shares.
Thereafter LMAX Digital Group Limited invested £1m (US$ 1.325m) in its wholly owned
subsidiary LMAX Digital Broker Limited against issue of 999,000 shares.
On 01 August 2019, one of the group’s subsidiary LMAX Limited acquired the business of Mobile
Trading Partners LLP thereby acquiring intellectual property with regards to mobile application
development activity worth £360k. This purchase consideration was settled partly in cash andpartly against share options.
15 January 2019, LMAX Hong Kong Limited notified the Hong Kong Securities and Futures
Commission (“SFC”) of its intention to deregulate in advance of winding down the entity. The
approval to deregulate was subsequently approved in 2019 and the entity is no longer trading.

13. Post balance sheet event
Though the spread of novel coronavirus (COVID-19) has caused significant global disruptions
to the world economy, the company anticipates no downturn to the business taking into
consideration the company performance and robust Q1 2020 results, but the ambiguity ofcurrent situation may result in some disruption to the operations and financial conditions.
This is a non-adjusting post balance sheet event and an estimate of the future effect cannot bemade at the point in time as the situation is rapidly evolving.
On 07 April 2020 the Group donated £250,000 to the Kensington + Chelsea Foundation’s
COVID-19 Crisis Response Appeal to help support the vulnerable people and community during
these unprecedented times. The donation has supported Chelsea and Westminster Hospital byfunding 60 tablets and stands, to enable COVID-19 patients to keep in touch with their loved
ones while in intensive care, together with funding meals for 265 NHS workers at St. Charles
Hospital in North Kensington.

Notes to consolidated financial statements

47

LMAX Group | 2019 Annual Report and Consolidated Financial Statements

Notes to consolidated financial statements
14. Financial instruments
14.1 Credit risk
As a provider of leveraged financial instruments, clients are only required to deposit sufficientmargin on their accounts to enable them to trade on the platform, whilst still being fully exposedto the position in the market. As a result, losses can exceed funds on account when there aresudden and unexpected price movements exposing the Group to the risk of potential expectedcredit loss where customers are unable to fund their losses.
This risk is managed by setting appropriate margin levels and position limits per currency pair.
Risks specifically around pegged instruments and emerging market currencies are monitored
and have margin rates increased where it is deemed necessary. Clients’ positions are actively
monitored and are requested to adjust their positions when positions sizes expose the Groupto too much risk. Clients are encouraged to hold a diversified portfolio thereby further reducing
risk. Risk management procedures & policies and technology are designed to limit financial
repercussions from such events.
The Group is also exposed to credit risk for financial assets included in trade and otherreceivables and cash and cash equivalents. The maximum exposure to credit risk is represented
by the carrying amount of each financial asset in the statement of financial position. The Group’s
cash and collateral is held across four separate financial institutions with Moody’s credit ratings
indicating they are low credit risk.
The movement in the allowance for impairment in respect of trade receivables during the year
was as follows:
2019

2018

£’000

£’000

Balance as at 01 January

346

1,192

Provision recognised during the year

86

1,325

Provision released during the year-

(1,192)

Amounts written off(81)(1,144)

Other movements *

-

165

351

346

Balance as on 31 December*Other movements in prior year include foreign exchange movement on the provision provided during the year.

48

Notes to consolidated financial statements

Year ended 31 December 2019 | Registered number 125453

Notes to consolidated financial statements
14.2 Liquidity risk
The company’s policy is to regularly monitor its liquidity requirements to ensure that it maintains
sufficient reserves of cash and adequate committed lines of funding from major financial
institutions and/or from other group companies to meet its liquidity requirements in the short andlonger term.
Less than 6months£’000

6-12months£’000

Between 1
and 2 years£’000

Between 2
and 5 years
£’000

Total
contractual
cash flows£’000

Carrying
amountliabilities£’000

Trade payables

588

-

-

-

588

588

Taxation and social
security

566

-

-

-

566

566

Transfer of title
funds

119,493---

119,493

119,493

Leases liabilities

695

581

1,665

3,485

6,426

4,799

1,875

2,250

10,625-

14,75014,750

Other payable

353

-

-

-

353

353

Accruals anddeferred income

5,677

-

-

-

5,677

5,677

129,247

2,831

12,2903,485

147,853

146,226

Trade payables

642

-

-

-

642

642

Taxation and social
security

314

-

-

-

314

314

Transfer of title
funds
Finance leases
liabilities

82,931---

82,931

82,931

198

198

397

244

1,037

1,037

Loan

1,500

1,500

3,000

11,75017,75017,750Accruals anddeferred income

5,583

-

-

-

5,583

5,583

Total nonderivatives

91,168

1,698

3,397

11,994

108,257

108,257

Derivative
contracts

23

-

-

-

23

23

Total

23

-

-

-

23

23

At 31 December
2019
Non-derivatives

Loan

Total
At 31 December
2018
Non-derivatives

Notes to consolidated financial statements

49

LMAX Group | 2019 Annual Report and Consolidated Financial Statements

Notes to consolidated financial statements
14.3 Interest rate risk
The Group has an interest-bearing borrowing of £14.75m. This includes a revolving credit facility of£5m and term debt of £9.75m. The weighted average rate of interest is 6%. The remaining term of
the debt is 2 years from the reporting period end date.
Sensitivity Analysis
The group is exposed to interest rate risk on all interest rate sensitive instruments which includes
financial assets and liabilities. The interest rate risk sensitive Group’s financial assets and liabilities
at the end of each year were as follows:
Financial Assets:

2019

2018

£’000

£’000

Cash and cash equivalents

68,13450,659Collateral balances held at Prime Brokers

49,15840,127

Borrowings(14,750)(17,750)

Total

102,542

73,036

Financial Liabilities:

Interest rate sensitivity analysis has been performed on the floating rate financial instruments byconsidering a 25 basis points (0.25%) interest rate decrease on the financial assets and a 25 basis
points increase on the financial liabilities held at the period end date. The impact expressed below
has been calculated considering no change in the value of assets and liabilities over the next 12months.
Cash and cash
equivalents

Client collateralbalances

Borrowings

£’000

£’000

£’000

Impact 2019

(170)

(123)

(37)

Impact 2018

(127)

(100)

(44)

As shown in the table above, in the adverse circumstance of interest rate decrease on the cash
holdings and an increase in the interest rate on interest bearing borrowings the group would havethe net outflow of £330k (2018: £271k).

50

Notes to consolidated financial statements

Year ended 31 December 2019 | Registered number 125453

Notes to consolidated financial statements
14.4 Price Risk
As at the end of the reporting year one of the Group’s subsidiary, LMAX Bullion Limited held
some open metal, indices and commodities contracts under its proprietary trading businessvalued at fair value through the income statement. The Group is thus exposed to the risk that thefair value of these financial instruments will fluctuate due to the changes in market prices of theunderlying instrument. For 2018 the price risk sensitivity was determined to be not material. For
the reported year the below figures represents the sensitivity analysis based on a 10% decreasein prices of these open contracts:
2019
Notional value
Long/(short)

Estimated (loss)/gain had theprices weakened by 10%

£’000

£’000

Gold

15,767(1,577)

Silver(241)

24

Platinum

454

(45)

Indices

6,961

(696)

Derivative Contracts

Notes to consolidated financial statements

51

LMAX Group | 2019 Annual Report and Consolidated Financial Statements

Notes to consolidated financial statements
14.5 Foreign currency risk
The financial assets and liabilities of the Group are held predominantly in British Pounds, US
Dollars, Euros, Japanese Yen, Australian Dollars and Hong Kong Dollars. Cash and collateralbalances are actively monitored and converted so as to maintain as best as possible a net neural
position in all non-British Pound currencies. Where this cannot be achieved forward exchange
contracts are entered into to limit foreign currency risk. The currency exposures of financial assets
and liabilities are as follows.
TOTAL
£’000

GBP
£’000

USD
£’000

EUR
£’000

JPY
£’000

AUD
£’000

SGD
£’000

HKD
£’000

Other
£’000

Cash and cash
equivalents

68,134

3,115

48,180

5,830

6,775

1,675

109

754

1,696

Cryptocurrencies
held25,127-25,127

-

-

-

-

--

Collateralrequirement for
trade clearing

49,1589,205

27,877

12,076

-

-

-

-

-

Trade debtors

1,108

-

1,063

45

-

-

-

-

-

Transfer of title
funds(119,493)(4,153) (93,940) (15,503)(2,956)(2,385)

(14)

6

(548)

Trade creditors

(588)

(336)

(188)

(41)

(21)

10

2

(4)

(10)

Net exposure

23,446

7,831

8,119

2,407

3,798

(700)

97

756

1,138

Derivatives

555

Net Exposure

24,001

2,407

3,798

(700)

97

756

1,138

555
7,831

8,674

The currency exposures of financial assets and liabilities as at 31st December 2018 wereas follows.
TOTAL
£’000

GBP
£’000

USD
£’000

EUR
£’000

JPY
£’000

AUD
£’000

SGD
£’000

HKD
£’000

Other
£’000

Cash and cash
equivalents

50,6596,876

30,930

2,488

4,930

2,984

285

507

1,659

Cryptocurrencies
held

10,352-

10,352

-

-

-

-

--

40,1274,600

30,882

4,645

-

-

-

-

-

856

27

842

(13)

-

-

-

-

-

(5,530) (63,109) (11,783)(492)(1,977)

-

(1)

(39)

Collateralrequirement for
trade clearing
Trade debtors
Transfer of title
funds(82,931)

Trade creditors

(642)

(473)

(152)

(8)

(23)

10

19

(6)

(9)

Net exposure

18,421

5,500

9,745

(4,671)

4,415

1,017

304

500

1,611

52

Notes to consolidated financial statements

Year ended 31 December 2019 | Registered number 125453

Notes to consolidated financial statements
14.5 Foreign currency risk (continued)
Sensitivity Analysis

Impact on post tax profit
2019

2018

£'000

£'000

USD value appreciates 5%

413

464

USD value depreciates 5%

(457)

(513)

EUR value appreciates 5%

115

(223)

EUR value depreciates 5%

(127)

245

JPY value appreciates 5%

181

210

JPY value depreciates 5%

(200)

(233)

As shown in the table above, the group is primarily exposed to changes in USD EUR and JPY
against GBP. The sensitivity of profit or loss to changes in the currencies arises mainly from cash
and cash equivalents.
14.6 Fair value
At the end of the reporting year the Group is exposed to fair value risk on financial instruments
and inventory. The carrying value of financial instruments carried at amortised cost are notmaterially different from their fair value as at 31 December 2019 and therefore the Group’s fairvalue risk is assessed on inventory and financial liabilities corresponding to this inventory held atfair value through Statement of Comprehensive Income. The Group’s financial instruments held atfair value and inventory held at fair value less cost to sell are shown below based on the fair value
hierarchy levels 1 to 3 on the degree to which fair value is observable.

Level 1

Level 2

Level 3

Total

£'000

£'000

£'000

£'000

-Inventories 14.6a (i)-25,127-25,127-Derivative Contracts

-

555

-

555

-

(17,694)-(17,694)

-

7,988

-

7,988

Level 1

Level 2

Level 3

Total

£'000

£'000

£'000

£'000

-

10,352-

10,352

At 31 December 2019
AssetsLiabilities-Trade payable 14.6a(ii)Total
At 31 December 2018-

Assets-Inventories
Liabilities- Trade payable
Total
Notes to consolidated financial statements(7,590)-2,762(7,590)
-

2,762
53

LMAX Group | 2019 Annual Report and Consolidated Financial Statements

Notes to consolidated financial statements
The Inventories; as also presented in Note 8 relates to the unsecured crypto assets held by theGroup’s subsidiary LMAX Digital Broker Limited. These crypto assets include £17.7m (2018:£7.6m) held on behalf of clients, £7.3m (2018: £1.7m) under economically hedged positions against
crypto CFDs and £0.1m (2018: £1.1m) on account of proprietary trading.
The trade payable as presented in Note 10 includes £35.2m (2018: £16.2m) due to LMAX Digital
Broker Limited’s clients; of which trade payable of £17.6m (2018: £7.6m) presented above relates
to clients’ crypto assets holdings valued at fair value. The remaining £17.5m (2018: £8.6m)
balance relates to margin held on clients’ trading accounts denominated in fiat currencies and istherefore held at amortised cost.
The balances are stated at fair value with any movement posted through the income statement.
The fair value is determined based on the end of day exit prices which are derived from the endof day executed trades on the LMAX Trading platform, an active platform where transactions
take place with sufficient frequency and volume. A high number of the transactions on theplatform are limit orders placed by market makers, thus quoted prices reflect only executed
trades and are considered to be the exit prices. Fair value is derived based on observable market
data; however, these are adjusted where relevant to reflect a sufficient level of activity andvolume in the calculation of the closing price. These balances are accordingly classified as Level 2
financial instruments under IFRS, however as these adjustments are not significant to the entire
measurement, they are not classified as level 3 in the fair value hierarchy.
14.6a(i) shows the value of cryptocurrency assets held by the Group which have been fair valued
through the income statement.
14.6a(ii) shows the total client liabilities due to clients of LMAX Digital Broker Limited relating to
the cryptocurrency inventory stated in 14.6a(i).
The Group’s exposure to the risk of fair value changes on the financial instruments held under
economically hedged positions is evaluated as not material. The Group’s exposure to the risk offair value changes on the financial instruments held under proprietary trading is measured in lightof the recent market performance and thus a sensitivity analysis of 20% increase (2018: 10%
decrease) in the prices of crypto assets held and open crypto CFD positions is presented below:
Sensitivity analysis on Proprietary trading:Year ended 31st Dec 2019 (£'000)

Year ended 31st Dec 2018 (£'000)

151

(26)

Impact:14.7 Capital management
The Group’s primary objective when managing capital is to safeguard the Group’s ability tocontinue as a going concern. In addition, the Group is required to maintain regulatory capital at
subsidiary level which depends on the jurisdiction in which it is incorporated and operates. In
each case the approach is to hold an appropriate surplus over the local minimum.

54

Notes to consolidated financial statements

Year ended 31 December 2019 | Registered number 125453

Notes to consolidated financial statements
The highest capital requirements arise from the two UK regulated entities where minimum capitalis determined in accordance with the Financial Conduct Authority through the requirements of
CRD IV, as well as the newly created entity in Gibraltar which was regulated as a full Distributed
Ledger Technology (“DLT”) licence from the GFSC to operate the Cryptocurrency Exchange in
April 2019 and the CySec regulated entity acquired in July 2019 (see note 12 for details).
The Group’s capital structure is regularly reviewed and managed with due regard to overall capitalrequirements and the requirements of each subsidiary. Adjustments are made to the capital
structure in light of changes in conditions affecting each subsidiary, to the extent that these do
not conflict with any of the directors’ fiduciary duties.

15. Developments in reporting standards and implementations
Standards and interpretations affecting the reported results or the financial position
The following standards and interpretations have applied for the first time to the financial
reporting years commencing on or after 1 January 2019:
IFRS 16 – Leases
IFRS 16 will replace IAS 17 Leases and is effective for years commencing on or after 1 January
2019. The standard has not yet been endorsed by the EU and the group does not plan to adopt
this standard early. Adoption of the standard is not expected to have a significant impact.
IFRS 16 eliminates the classification of leases as either operating leases or finance leases. The
group will be required to recognise all leases with a term of more than 12 months as a right-ofuse lease asset on its balance sheet; the Group will also recognise a financial liability representing
its obligation to make future lease payments. For details refer accounting policy on leases undernote 1.

16. Registered address and country of domicile
LMAX Exchange Group Limited is a private company limited by shares, incorporated anddomiciled in Jersey.
Registered Office:Principle Place of Business:

LMAX Exchange Group Limited
50 La Colomberie,
St Helier,Jersey,JE2 4QBC/O LMAX Limited
Yellow Building
1A Nicholas Road
LondonW11 4AN

Notes to consolidated financial statements

55

LMAX Group | 2019 Annual Report and Consolidated Financial Statements

Company statement of comprehensive income
2019

2018

£'000

£'000

Administrative expenses

(605)

(108)

Operating loss

(605)

(108)

9,000

44,491

Financial expenses(1,001)(1,104)

Profit before tax

7,394

42,279

-

-

7,394

42,279

-

-

7,394

42,279For the year ended 31 December 2019

Financial income

Note

2

Taxation
Profit for the year
Other comprehensive (expense)/income
Profit and total comprehensive income for the year

The results shown above are derived wholly from continuing operations.
The notes on pages 60-65 form an integral part of these financial statements.

56

Company statement of comprehensive income

Year ended 31 December 2019 | Registered number 125453

Company statement of financial position
As at 31 December 2019

Note

2019

2018

£'000

£'000

Non-current assets
Investments

3

76,45767,019Property, plant and equipment

4

3,842

-

Trade and other receivables

5

264

-

Trade and other receivables

5

1,433

114

Cash and cash equivalents

6

496

20

82,492

67,153

7(10,625)(14,750)

7(21,194)(9,124)

Total liabilities(31,819)(23,874)

Net assets

50,673

43,279

1,000

1,000

Retained earnings

49,67342,279Equity attributable to equity holders of the parent

50,673

43,279Current assets

Total assets

Non-current liabilities
Trade and other payables

Current liabilities
Trade and other payables

EquityShare capital8

Non-controlling interest
Total equity

50,673

43,279The notes on pages 60-65 form an integral part of these financial statements.
These financial statements on pages 56 to 65 were approved by the Board on 04 November 2020and signed on behalf of the Board by:David Mercer, Director
04 November 2020

Company statement of financial position

57

LMAX Group | 2019 Annual Report and Consolidated Financial Statements

Company statement of changes in equity
Share
capitalRetainedearnings

Total parent
equityTotalequity

£'000

£'000

£'000

£'000

1,000

42,27943,27943,279Profit for the year

-

7,394

7,394

7,394

Total comprehensive income for the year

-

7,394

7,394

7,394

Balance at 31 December 2019

1,000

49,67350,67350,673For the year ended 31 December 2018

SharecapitalRetainedearnings

Total parent
equityTotalequity

£'000

£'000

£'000

£'000

Balance at 1 January 2018

-

-

-

-

Profit for the year-

42,27942,27942,279Total comprehensive income
for the year-

42,27942,27942,279Issue of shares

1,000

-

1,000

1,000

Total distributions to owners

1,000

-

1,000

1,000

Balance at 31 December 2018

1,000

42,27943,27943,279For the year ended 31 December 2019

Balance at 1 January 2019

Profits for the year include dividend received from entity’s subsidiary, LMAX Broker Limited for£9m (2018: nil).

58

Company statement of changes in equity

Year ended 31 December 2019 | Registered number 125453

ompan statement of cash o s
For the year ended 31 December 2019

2019

2018

Cash flows from operating activities

£'000

£'000

Operating loss

(605)

(108)

Depreciation

45-

Non Cash Finance expense

(14)

-

Increase in trade and other receivables(1,583)(114)

Increase in trade and other payables

7,945

23,874

Net cash generated from operating activities

5,788

23,652Acquisition of property, plant and equipment(3,887)-

Investment in subsidiaries(9,438)(67,019)-

44,491(13,325)(22,528)-

1,000

Cash flows from investing activities

Financial income
Net cash used in investing activities
Cash flows from financing activities
Issued shares
Dividend received

9,000

Finance expense(987)(2,104)

Net cash used in financing activities

8,013(1,104)

Net increase in cash and cash equivalents

476

20

Cash and cash equivalents at beginning of year

20-

Cash and cash equivalents at end of year

496

20

The notes on pages 60-65 form an integral part of these financial statements.

Company statement of cash flows

59

LMAX Group | 2019 Annual Report and Consolidated Financial Statements

Company notes to the financial statements
1. Accounting policies
The financial statements have been prepared and approved by the Directors in accordancewith International Financial Reporting Standards (IFRS) and International Financial Reporting
Committee (IFRIC) Interpretations as adopted by the European Union (EU) (together “adopted
IFRS”).
The accounting policies are consistent with the Group accounting policies set out on pages 29 to
35. Accounting policies specific to the company are as follows.
Investment in subsidiaries
Investments in subsidiaries have been accounted for at cost.

2. Financial income
Financial income reflects dividend paid by LMAX Broker Limited during the year, hence thefinancial income has been eliminated on consolidation.

3. Investments in subsidiaries
Investments

2019

2018

£’000

£’000

76,45767,019During the year the 4.5% shareholding (26,958 shares) held by Directa S.I.M.p.A (“minority
holder”) in LMAX Limited was acquired by the Company. Additionally, the Company purchased
1 newly issued share for face value £1 at a premium of £3,999,999 thereby making a capital
injection in LMAX Limited of £4m. As at the year end the Company holds 596,082 (2018:569,123) of 599,078 shares in LMAX Limited representing 99.5% shareholding.
As a part of the above minority holder buy-back, the company also acquired 4.5% shareholding(26,958 shares) in LMAX Broker Limited. As at the year end, the Company holds 596,081 (2018:569,123) of 599,077 shares in LMAX Broker Limited representing 99.5% shareholding.
On 1 July 2019 following the Cyprus Securities and Exchange Commission’s (“CySec”) approval
LMAX Broker Limited became 100% owner of a regulated Cypriot entity by acquiring 1,244,750
shares in LMAX Broker Europe Limited (previously known as CB Capital Limited). On 27 Sept2019 LMAX Broker Europe Limited was transferred to the company at cost by LMAX Broker
Limited. Furthermore, in Oct 2019 a capital contribution was made by the company for £225,915(EUR 250k) thereby creating a non-refundable capital contribution reserve in LMAX Broker
Europe Limited to ensure sufficient regulatory capital in the subsidiary.
On 20 March 2019, the company invested £1m as share capital in LMAX Digital Group Limited andacquired further 999,920 shares.
LMAX Digital Group Limited invested £1m (US$ 1.325m) in its wholly owned subsidiary LMAX
Digital Broker Limited against issue of 999,000 shares (face value £1) thereby increasing its
shareholding to 1,000,000 shares.
LMAX Limited, LMAX Broker Limited and LMAX Digital Group Limited have subsidiaries which
are also subsidiaries of the company.
60

Company notes to the financial statements

Year ended 31 December 2019 | Registered number 125453

Company notes to the financial statements
On 15 January 2019, LMAX Hong Kong Limited notified the Hong Kong Securities and Futures
Commission (“SFC”) of its intention to deregulate as the entity was dormant and in Oct 2019it reduced its share capital by 29m shares (£ 2.9m) as it was no longer required for regulatory
purposes, thereby remaining shares held stand at 3m (2018: 32m).
LMAX Digital Exchange Limited, subsidiary of LMAX Digital Group Limited ceased trading from08 May 2019 and was wound down hence the shareholding stands at Nil for the year end (2018:
10,000 shares).
Additionally, the company acquired the shareholding of 50,000 shares in the dormant entity,
LMAX Markets Inc from its immediate subsidiary, LMAX Pte Limited thereby becoming a direct
holding company of LMAX Market Inc.
All the Group’s subsidiaries for the year ended 31 December 2019 are shown below. The
ordinary shares held % shown is the effective shareholding which the company holds in theunderlying subsidiary.

Subsidiary

Country ofIncorporation

Principal
activity

Ordinary shares
held No.

Ordinary shares
held %

LMAX Limited

EnglandFinancial exchange
platform

596,083

99.5

LMAX Broker
LimitedEngland

FX brokerage

596,082

99.5

LMAX Bullion
LimitedHong Kong

Bullion broker

1,000

100

LMAX Hong
Kong Limited

Hong Kong

Dormant

3,000,000

99.5

LMAX Japan
Co. Limited

Japan

Sales presence

1

100

LMAX New
Zealand Limited

New Zealand

Softwaredevelopment

1,000

100

LMAX PTE.
LimitedSingapore

Sales presence

1

100

LMAX USA
Incorporated

Delaware, USA

Development of US
market

1,000

100

LMAX Digital
Group Limited

JerseyHolding company

1,000,000

100

LMAX Digital
Exchange Limited

JerseyDormant--

LMAX Digital
Broker Limited

Gibraltar

Digital currency
exchange broker

1,000,000

100

LMAX
Markets Inc

Cayman Islands

Dormant

50,000100

LMAX Broker
Europe Limited

CyprusFX Brokerage

1,244750

100

Company notes to the financial statements

61

LMAX Group | 2019 Annual Report and Consolidated Financial Statements

Company notes to the financial statements
All the Group’s subsidiaries are shown below as at year ended 31 December 2018. The ordinary
shares held % shown is the effective shareholding which the company holds in the underlying
subsidiary.

Subsidiary

Country ofIncorporation

Principal
activity

Ordinary shares
held No.

Ordinary shares
held %

LMAX Limited

EnglandFinancial exchange
platform

569,123

95

LMAX Broker
LimitedEngland

FX brokerage

569,123

95

LMAX Bullion
LimitedHong Kong

Bullion broker

1,000

100

LMAX Hong
Kong Limited

Hong Kong

Foreign exchange
broker

32,000,000

95

LMAX Japan
Co. Limited

Japan

Sales presence

1

100

LMAX New
Zealand Limited

New Zealand

Softwaredevelopment

1,000

100

LMAX PTE.
LimitedSingapore

Sales presence

1

100

LMAX USA
Incorporated

Delaware, USA

Development of US
market

1,000

100

LMAX Digital
Group Limited

JerseyHolding company

80

100

LMAX Digital
Exchange Limited

JerseyDigital currency
exchange platform

10,000100

LMAX Digital
Broker Limited

Gibraltar

Digital currency
exchange broker

1,000

100

LMAX Markets Inc

Cayman Islands

Dormant

50,000100

62Company notes to the financial statements

Year ended 31 December 2019 | Registered number 125453

Company notes to the financial statements
4. Property, plant and equipment

RTU Lease

Leaseholdimprovements

Total property,
plant and equipment

£’000

£'000

£'000

Additions

3,629

258

3,887

Disposals---Write Offs

-

-

-

3,629

258

3,887

(41)

(4)

(45)

Disposals---Write Offs

-

-

-

(41)

(4)

(45)

3,588

254

3,842

2019

2018

£’000

£’000

1,041

114

Other debtors

30-

Prepayments

45-

Deposits

264

Inter-group receivables

317

-

1,697

114

264

-

1,433

114

1,697

114

Cost

Balance at 1 January 2019

Balance at 31 December 2019

Accumulated depreciation
Balance at 1 January 2019
Depreciation for the year

Balance at 31 December 2019

Carrying value
at 31 December 2019

5. Trade and other receivables
Amounts due from shareholders

Total

Classification:
Non-current
Current
Total

Company notes to the financial statements

63

LMAX Group | 2019 Annual Report and Consolidated Financial Statements

Company notes to the financial statements
6. Cash and cash equivalents
Cash and cash equivalents

2019

2018

£’000

£’000

496

20

2019

2018

£’000

£'000

Cash and cash equivalents comprise of bank balances held by the Company.

7. Trade and other payables

Note

Loan

7.1

14,75017,750

Lease Liability

7.2

3,957

-

Taxation and social security

222-

Trade creditors

40

-

233

-

2,130

361

10,487

5,763

31,81923,874Non-current

10,625

14,750Current

21,194

9,124

31,81923,874

Other Payable

7.3

Accruals and deferred income
Inter-group payables
Total

7.4

Classification:

Total

7.1. The loan includes a revolving credit of £5m and a term debt of £9.75m (2018: £12.75m). The
remaining term of the debt is 2 years.
7.2. The lease liability represents the present value of future payments against the right to use
office building.
7.3. The other payable represents deferred consideration payable to Client Directa S.I.M.p.A on
account of acquisition of minority holding of 4.5% in LMAX Limited and LMAX Broker Limited.
7.4. The inter-group payable is due to the Group’s subsidiaries and has no fixed terms of
repayment, is interest free and no security has been provided.

64

Company notes to the financial statements

Year ended 31 December 2019 | Registered number 125453

Company notes to the financial statements
8. Share capital

2019

2018

£’000

£’000

1,000

1,000

Allotted and called up and fully paid
100,000,000 (2018: 100,000,000) Ordinary shares of £0.01 each

100% ordinary shares are held by management team and directors.

9. Related parties
Related parties of the company are the same as those of the Group.
There were no intercompany transactions affecting profit or loss. Balances with related parties of
the company are as follows:
Note

2019

2018

£’000

£'000

Amounts due from shareholders

1,041

114

Amounts due to Affinity Trust

(774)

(2)

(9,396)(5,761)

Amounts due to Group companies

9.1

Related party balances have no fixed terms of repayments, are interest free and have no security
provided.

9.1 Amounts due to Group companies

2019

2018

£’000

£'000

- LMAX Exchange Limited

(540)

(466)

- LMAX Broker Limited(9,135)(5,295)-LMAX Digital Group Limited

272--LMAX Broker Europe Limited

43--LMAX Japan K.K

2-LMAX Markets Inc.

(38)

-

(9,396)(5,761)

BalancesAmounts due to group companies:

Total

Company notes to the financial statements

65

LMAX Exchange Group Limited - company registration number 125453
Annual report and consolidated ﬁnancial statements - for the year ended 31 December 2019www.LMAX.com/annualreport
LMAX Exchange Group is the holding company of LMAX Limited, LMAX Broker Limited and LMAX
Digital Broker Limited
LMAX Exchange is a trading name of LMAX Limited, which operates a multilateral trading facility,
authorised and regulated by the Financial Conduct Authority (ﬁrm reference number 509778) and is acompany registered in England and Wales (number 6505809)
LMAX Global is a trading name of LMAX Broker Limited which is authorised and regulated by the
Financial Conduct Authority (ﬁrm reference number 783200) and is a company registered in England andWales (number 10819525)
LMAX Digital is a trading name of LMAX Digital Broker Limited, authorised and regulated by the Gibraltar
Financial Services Commission (license number FSC1342B) and is a company registered in Gibraltar(number 117528)
LMAX Exchange Group, Yellow Building, 1A Nicholas Road, London W11 4AN
www.LMAX.com | info@lmax.com | +44 20 3192 2555

© 2020 LMAX Exchange Group Ltd