Icap in a tumble despite big leap in bond trading on Fed's move

Russell Lynch
Thursday 11 July 2013 01:29 BST
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A huge surge in bond trading after the United States Federal Reserve shook markets with plans to slow its money-printing programme failed to save broking giant Icap from a City sell-off yesterday.

Shares in the interdealer broker tumbled 15.1p, or 4 per cent, to 384.9p, wiping nearly £100m off the value of the company founded by Michael Spencer. Mr Spencer, who is chief executive and owns nearly 17 per cent of the business, took a £16m paper hit.

Comments by the Fed chairman, Ben Bernanke, that the US could slow its quantitative easing programme sparked a huge sell-off of US Treasury bonds, sending average daily volumes on Icap's BrokerTec online bond trading platform soaring 51 per cent over the quarter. But revenues failed to match the surge as clients trade more cheaply for dealing in bigger volumes.

Icap also suffered elsewhere as investment banks cut back on commodities trading. Overall revenues for the quarter were 2 per cent ahead of a year earlier after the "mixed performance", with expectations for the full year staying unchanged, a disappointment for many City analysts who had been primed for upgrades. Nese Guner, at Citigroup, said: "We had thought Q1's growth had a reasonable chance of exceeding our annual forecast."

Mr Spencer said Icap had seen "welcome increase in volatility in some asset classes, which has generated additional trading volumes". But he warned: "It remains far too early to say that we are seeing a sustained upturn." The firm also faces new regulatory demands in the US from October.

Icap is the biggest of the brokers, closely followed by Terry Smith's Tullett Prebon. The Swiss firm Tradition, New York and London-based BGC and GFI are also major players.

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