Tullett blames poaching for 11 per cent fall in profits

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The Independent Online

Tullett Prebon's chief executive Terry Smith yesterday accused rival interdealer brokers of immature warfare and lack of financial discipline as he blamed a raid on his staff by its US rival BGC Partners for a fall in profits.

Tullett's pre-tax 2010 profit slid by 11 per cent to £139.7m and revenues fell by 4 per cent. Most of the revenue fall was down to business lost to BGC's swoops for Tullett brokers in London and the US in 2010, the company said.

The British broker said it was pursuing legal action against BCG and former employees in the US, Hong Kong and Singapore and that its damages trial against BGC was scheduled to start in London later this month and to run for four weeks. "If we give people a contract, we expect them to honour that contract," Mr Smith said. "We can't just walk away from it."

Mr Smith added it would make sense for the interdealer industry to hold a summit to call an end to their regular battles with each other. But he stoked the fires by criticising the way his rivals manage their businesses.

"The problem, and we might be the exception, is that the companies are run by people who have known each other for years and who don't like each other very much," he said. "Three of them have spent the last 20 years poaching each other's staff. In due course there will be a generational change of management and people will take over who have none of that baggage."

GFI, Icap and BCG are run by controlling shareholders as fiefdoms and low margins at Tradition, BGC and GFI do not maximise benefits for outside shareholders, Mr Smith claimed. He added that Tullett's revenues were up by 3 per cent in the first two months of 2011 from a year earlier and that he expected market volatility to show surges that will boost trading for the business.

"In each of the last four years, sitting here in March trying to predict the outcome, we'd have missed one or two bursts of volatility that made a big difference," he explained.

He said massive public debts built up during the financial crisis, unrest in the Middle East and rising commodity prices were all potential flashpoints for markets later this year.

Tullett Prebon is one of the biggest brokers in the over-the-counter (OTC) market that brings together banks and hedge funds who buy and sell financial products such as swaps, bonds and currencies.

The $600 trillion (£370 trillion) market is in for a big shake-up from tougher rules that will force large parts of the OTC market to use exchanges, regulated trading platforms or clearing houses to make opaque derivative markets more transparent.

Mr Smith said he thought Tullett would gain from the changes because banks would prefer to put their trades through his company's systems than through the big exchanges

He added that only two or three interdealer brokers had the governance, cash reserves and audit records required to qualify for this business.

Tullett's shares fell 5p, or 1.2 per cent, to 421p yesterday.