13th Jul 2016 09:58
LONDON (Alliance News) - Interdealer broker ICAP PLC on Wednesday said it has made a good start to 2016 and is "cautiously confident" on its outlook despite the Brexit vote, which actually gave its EBS currency platform spike in volumes the day after the vote.
ICAP said it handled over USD200.0 billion of foreign exchange trading on June 24, the day after the UK voted to leave the European Union, a decision which sparked a sharp fall in the value of sterling. This compares to an average of USD97.7 billion in daily volumes for June, according to an update ICAP had provided last week.
Michael Spencer, ICAP's chief executive, said Wednesday the result of the referendum had been a "tremendous shock" to global financial markets but said ICAP's platforms had demonstrated their resilience in the aftermath, delivering "deep and reliable liquidity throughout a period of extreme volatility".
Speaking ahead of the company's annual general meeting Wednesday, Spencer said that, prior to the UK referendum result, "we were looking towards a long and slow journey on the road to more normal market conditions" following the decision by the US Federal Reserve to hike interest rates back in December.
"This journey looks more uncertain now, although the subsequent decline in sterling in the FX markets does provide us with a significant windfall benefit," he added.
ICAP said group revenue in the first quarter to the end of June grew 7.0% year-on-year and by 2.0% in constant currencies. The firm said overall market conditions in the quarter were "mixed", saying the "malaise in global financial markets, low interest rates and bank deleveraging persists". The group noted trading activity had spiked following the Brexit result.
ICAP said it remains on track complete the merger of its hybrid voice broking and information business with mid-cap interdealer broker rival Tullett Prebon PLC later this year. After that completes, ICAP will change its name to NEX Group PLC and will focus on three divisions: electronic markets, post-trade services, and its Euclid early-stage financial technology incubator.
Within the electronic markets business in the first quarter, revenue grew 3.0% year-on-year.
In the quarter, average daily volumes on its BrokerTec platform for US Treasuries declined 17% year-on-year, with US Repo volumes down 7.0% and European repo volumes down 2.0%. Average daily volumes on the EBS currency platform in the half fell 15% year-on-year.
Revenue rose despite the volume declines thanks to a positive change in the company's revenue mix towards higher-margin products, and the impact of the volume-based tiered tariff structure ICAP has put in place.
Average daily volumes for the EBS Direct relationship-based liquidity service continued to expand over the course of the first quarter, with steady growth in demand for forwards and swaps. BrokerTec Direct, the firm's US Treasury market-focused relationship-based liquidity service, also continues to onboard new customers, ICAP said.
In ICAP's post-trade risk and information unit, revenue grew 12% year-on-year in the quarter, helped by continued strong demand for risk mitigation products, particularly in the firm's TriOptima unit.
ICAP shares were up 0.1% to 452.80 pence on Wednesday.
By Sam Unsted; [email protected]; @SamUAtAlliance
Copyright 2016 Alliance News Limited. All Rights Reserved.
Related Shares:
IAP.LTLPR.L