ICAP plc (LON:IAP), a major markets operator and provider of post trade risk mitigation and information services, earlier today posted an update on its performance for the quarter from April 1, 2015 to June 30, 2015 (the first quarter of the group’s fiscal year). Whereas revenues generated by the Electronic Markets segment staged a marked rise, the other segments failed to impress and saw revenues drop in annual terms.
Group revenue for the quarter decreased by 1% compared to the same period in 2014 on a constant currency basis (however, there was an increase of 2% on a reported basis).
Overall market conditions have been mixed; while FX volumes have displayed a substantial year-on-year recovery, the continuing uncertainties around Greece and the future of the Eurozone are cutting risk appetite and trading volume, whilst there is still no clear picture on the future direction and timing of any interest rate moves.
Electronic Markets
Revenue rose by 6% in constant currency terms (14% on a reported basis) during the first quarter compared to the equivalent period last year. On the BrokerTec platform average daily volume increased in US Treasuries by 7% to $172 billion, in US repo by 5% to $217 billion and decreased by 7% in European repo to €179 billion. BrokerTec benefitted from increased volatility in US Treasuries in May and June.
Average daily volume on EBS surged 34% to $98 billion for the first quarter as FX volatility recovered from historic lows. In particular there was strong structural growth in trading activity in both NDFs and CNH. EBS Direct, the disclosed, relationship-based liquidity service, continued to expand with over 250 new customers in the pipeline. Average daily volume for the quarter was $17 billion (Q1 2014/15 $8 billion). EBS Direct is expected to beta launch FX Outrights and Swaps in Q3, a significant part of the FX market in which EBS has never participated.
Post Trade Risk and Information
Revenues decreased 2% in constant currency terms (in line on a reported basis) during the first quarter compared to the same period last year. Underlying demand for Post Trade products which reduce various types of second order risk, such as operational and credit risk, as well as balance sheet risk was underscored by strong growth in TriOptima driven by both triResolve and triReduce. Interest in compression has recently increased in Asia.
The division’s performance is still held back by Reset as flat short-term yield curves kept restraining activity levels.
Global Broking
Revenue decreased by 3% on a constant currency basis (decreased 1% on a reported basis) during the first quarter compared to the same period last year. The ongoing structural and cyclical factors affecting the division persist despite a solid performance from the OTC European interest rate derivatives desk where ICAP has a market leading franchise.
Michael Spencer, Group Chief Executive Officer of ICAP said: “Against a backdrop of mixed market conditions we have started the year a leaner business, set for long-term growth and increased profitability. We’ve continued to focus on expanding our addressable market by developing new products and services which will cater for a wider customer base.
“Our post trade businesses are supported by accelerating demand for risk reduction services. We recently made a further investment in AcadiaSoft, Inc, a provider of electronic margining for over the counter derivatives of which we own 25%. The investment is alongside DTCC, Euroclear and 13 bank investors. This shows our continuing investment in high growth technology firms that have the potential to create value in financial markets. We will combine TriOptima’s expertise through its triResolve portfolio matching service with AcadiaSoft’s margin messaging platform, which will facilitate regulatory compliance and a reduction in operational costs and risks for industry participants.
“We’ve made progress on our strategic goals and I’m confident that our strong market position will ensure that we benefit from an increase in trading activity as macroeconomic conditions change in due course.”
To view the official announcement by ICAP, click here.