Tullett blames defecting brokers for revenue drop

City A.M. Reporter
Inter-dealer broker Tullett Prebon blamed broker defections in North America following a "raid" by US rival BGC Partners for lower 2010 results.

Tullett posted 2010 profit before tax of £139.7m, down 11 per cent from a year earlier and below a Thomson Reuters poll consensus of 12 analysts of £142m.

Revenue was down 4.1 per cent to £908.5m from £947.7m in 2009.

"The net effect of the broker defections in North America, following the raid by BGC in the second half of 2009, reduced revenue by five per cent," Tullett said in a statement.

Tullett Prebon said it is "seeking substantial damages from BGC", adding the damages trial has been fixed for four weeks starting later this month.

Tullett also said that a separate case has been brought in the US and action is being pursued against former employees in Hong Kong and Singapore.

A British high court judge found in March last year that BGC had unlawfully induced 10 Tullett brokers to breach their employment contracts and join BGC.

Tullett Prebon is one of the world's largest brokers in the over-the-counter market where it brings together buyers and sellers – typically investment bank dealers or hedge funds - of financial products such as swaps, bonds and currency.

The British broker competes fiercely with rivals such as Icap, BGC and GFI Group but the OTC markets, valued at about $600 trillion dollars in a report last month by Morgan Stanley and consultant Oliver Wyman, is set for a drastic shake-up.

Global regulators are keen to pass sweeping rule changes, perhaps as early as this year, that will force large swathes of the OTC market to use exchanges, regulated trading platforms or clearing house, in a bid to make these opaque markets more transparent.

"We believe that the introduction of the various regulatory proposals affecting the OTC markets will be positive for our business as the proposals formalise the role of the intermediary in those markets," said Tullett chief executive Terry Smith.