ICAP Seen Benefiting From Automation Push in Wake of FX Fines
Nov. 19 (Bloomberg) — ICAP Plc, the world’s largest broker of transactions between banks, may benefit from a global push toward automated trading in the wake of fines for currency manipulation, Chief Executive Officer Michael Spencer said.
Six banks agreed last week to pay $4.3 billion in the first wave of the global investigation into the rigging of key foreign-exchange benchmarks. Spencer, 59, told reporters on a call today that ICAP isn’t under investigation.
Computer-driven trading became more appealing after the 2008 financial crisis, when foreign-exchange deals sputtered. Electronic trading offers a cheaper and faster alternative to the voice brokers who traditionally worked the $5.3 trillion-a- day currency market.
The fines “if anything mean that electronic momentum in foreign exchange is likely to remain,” Spencer said. “ICAP operates a very big electronic platform for interest rates and foreign exchange. I’m very glad this settlement is now behind us.”
ICAP said today pretax profit fell 10 percent to 36 million pounds ($56 million) in the six months through September from a year earlier. Revenue dropped 15 percent to 620 million pounds, while operating expenses before acquisition and disposal costs fell 10 percent to 521 million pounds.
UBS AG, which was fined about $800 million by U.S., U.K. and Swiss authorities as part of the currency rigging probe, must automate at least 95 percent of its global foreign-exchange trading as part of its settlement.
‘Regulatory Push’
“The Swiss regulator was putting some pressure on UBS, already a very big technology player, to increase even further their electronic transaction in FX,” said Spencer. “If anything, the regulatory push here is for further electronification. For many years now, we have strategically positioned ourselves in that direction.”
ICAP said its electronic markets and post-trade risk and information divisions accounted for 83 percent of pretax profit, up from 69 percent at the end of March. Pretax profit before exceptional items and acquisition and disposal costs dropped 38 percent to 86 million pounds in the first half.
The company’s EBS electronic foreign-exchange trading business recorded a 16 percent drop in revenue to 56 million pounds from a year earlier. ICAP said EBS recorded its highest trading day in three years on Oct. 31, with traded spot volume of $250 billion, which wasn’t part of end-of-September results.
Spencer, who founded ICAP in 1986, had his 2014 bonus cut by 75 percent after the firm was fined 55 million pounds in a probe into Libor rigging. ICAP said it will continue to cooperate with authorities in Europe and the U.S. in probes into the setting of yen Libor as well as a U.S. investigation into the manipulation of dollar ISDAFix rates.
“On the forex settlement for the banks, we were not involved, for the avoidance of doubt,” Spencer said.
To contact the reporter on this story: Richard Partington in London at rpartington@bloomberg.net To contact the editors responsible for this story: Simone Meier at smeier@bloomberg.net Steve Bailey
