3rd Sep 2015 10:56
LONDON (Alliance News) - ICAP PLC on Thursday reported a jump in volumes on its EBS currency trading platform and in US Treasuries in August, with the increases linked to the pick-up in market volatility when China devalued the yuan and investors looked for a "safe haven" trade.
The FTSE 250 interdealer broker, which has been expanding into the provision of post-trade risk-mitigation and information services, said that average daily volume on a single count basis amounted to USD100.3 billion on EBS in August, up 17% year-on-year and up 22% on July.
The People's Bank of China shocked investors in the second week of August when it devalued the yuan against the dollar over the course of three days, a move that some worried could lead to global round of competitive devaluations. Emerging market currencies tumbled on the news.
ICAP said the central bank's actions, and the associated volatility, drove up volumes in both major and emerging markets currency pairs. The company said it recorded "record" volumes in offshore renminbi, or CNH, and Asian non-deliverable forward contracts.
When stock market plunges in Asia extended to Europe and the US on Monday, August 24, ICAP said its EBS platform saw "heavy trading" across all major, in particular the euro and the Japanese yen, and emerging market currency pairs. That resulted in EBS's highest volume day since the Swiss National Bank surprisingly ended its policy of pegging the franc to the euro at the beginning of 2015. "The uptick in volatility continued through to the end of August," ICAP said.
ICAP also saw stronger US Treasury volumes, which were up 25% year-on-year and 13% on July at USD182.7 billion, amid changing expectations for the timing of an interest rate hike by the US Federal Reserve.
"After the publishing of a relatively strong [US] July employment number at the beginning of August and an upwards revision of May and June figures by 14,000 jobs, the prospects of a rate increase in September were very strong. The market was set up for an increase, but a continued drop in commodity prices, a flight to quality due to concerns about emerging markets, and ultimately the Chinese 2% devaluation of the yuan drove [US Treasuries] significantly higher and caused market volume to increase substantially," an ICAP spokesperson said.
"With these developments, there was a significant 'safe haven' trade and an overall sense that the chances of a rate hike had diminished. Volatility prevailed for the balance of the month and [fixed income electronic trading platform] BrokerTec posted the fifth busiest day on record on Monday 24 August as the world's equity markets experience a dramatic decline," the spokesperson said.
There were mixed figures for US Repo volumes, which amounted to USD204.0 billion in August, down 9% year-on-year but up 3% on July.
European Repo volumes were down 3% at EUR175.7 billion year-on-year, and flat on July.
ICAP shares were up 1.6% at 457.60 pence on Thursday close to midday in London.
By Samuel Agini; [email protected]; @samuelagini
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