Icap predicts 'global exchanges' as it posts record profits

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Michael Spencer, the chief executive of the world's largest inter-dealer broker Icap, predicted growing competition would lead to the creation of global "super exchanges" and hoped yesterday his company would be among the consolidators. The comments came after Icap posted record first-half profits and forecast further strong growth in electronic broking.

Icap, which acts as a middleman between buyers and sellers of bonds, shares, currencies and derivatives, does not compete directly with stock and futures exchanges at present, but that is starting to change. "The orbits are coming together," Mr Spencer said. Further consolidation was inevitable over the next few years, he said. "We want to be the shark, not the big fat tuna."

Icap has been looking for acquisitions to expand its fast-growing electronic broking business to take its slice of the combined voice and electronic broking market to 35 per cent from about 29 per cent. But the company refused to stump up enough for MTS, the Milan-based electronic bond market, which was acquired by Euronext and Borsa Italiana in the summer. "There are a lot of niche players in the electronic space and it's inevitable they are going to be acquired by bigger operations," Mr Spencer said.

Icap beat City expectations with 18 per cent growth in pre-tax profits to £98.2m in the six months to 30 September and said it expected annual profits to meet forecasts. Revenues climbed 12 per cent to £444m, with electronic trading growing at more than twice the pace of voice broking. Mr Spencer said electronic broking, a relatively small part of the overall business, was "economically relevant" and hoped it would become the "umbilical cord" of the electronic broking market over the next decade.

Analysts noted approvingly that Icap, which trades more than $1 trillion (£583bn) in daily volumes, was making progress in taking electronic broking out of its US Treasuries and repo heartland.

Mr Spencer took a swipe at Icap's rival Collins Stewart Tullett, which is in talks with private-equity groups that could see it being taken private and move to the US. He said: "They are going to leverage the business up to the eyeballs with a view to refloating it on the New York Stock Exchange in a year's time. We are much more focused on what we consider the important issues in terms of building our business rather than financial engineering."

Jim Pettigrew, Icap's finance director, is to quit after seven years in the job, leaving next year.