ICAP thrives on volatility, so the continued double-digit volume growth in many of its trading divisions in the past quarter wasn’t a surprise.
But both the market and the comparative period last year were tough to beat, so its four per cent revenue fall didn’t alarm investors either.
Where Michael Spencer’s interdealer broker really continues to reassure is the clarity of its growth strategy – a calculated play on the direction of regulators’ thoughts.
Icap has ploughed investment into its digital wizardry over the past two years, betting that electronic trading would boom as regulators seek to move services from over-the-counter voice-brokered to electronic platforms.
Its voice broking services are still growing, but Icap can see the future – and it’s iPad-shaped.
That punt, while expensive in the short term, is paying off now. Electronic broking volumes were up 10 per cent, as fixed income and European repo volumes jumped 14 and 15 per cent respectively. Its newly-launched electronic Euro IRS platform is already handling almost a third of all Icap’s euro IRS trades. Its electronic trading arm is bigger than all its major competitors.
Icap’s statement also revealed that its hefty investment into post-trade services, which make the business less risky and capital-intensive, is now delivering. Revenues from this division are now back on track, it said, after past underperformance.
Its statement included one last nod to a bright outlook: it expects an uptick in trading as central banks disagree on how to manage their inflation rates. With policy disharmony looking a certainty in future, we see Icap’s revenue figure as a blip in a bigger, digital, growth story.