TP ICAP hits record trading volumes from market volatility

TP ICAP, the interdealer broker, has experienced a record volume of trading in the last week as rapidly shifting sentiment on global interest rates and the oil price crash roiled prices on its main markets.

The UK group’s 2,740 brokers act as negotiators, often by phone, between banks in global over-the-counter markets. They match buyers and sellers in swaps and derivatives in interest rates, oil and foreign exchange, and the company is the world’s largest energy broker.

As the company published its full-year results, Nicolas Breteau, chief executive, said trading in energy and commodities — which together account for a fifth of total revenues — had been “very buoyant all year”. 

That activity extended to all asset classes last week after the US Federal Reserve cut interest rates in response to the impact of the coronavirus. Stock and oil prices tumbled on Monday, before stabilising on Tuesday.

“We’ve had very large, historical, days over the last week. The floor was incredibly noisy yesterday,” he said, pointing out that in times of stress traders often reverted to dealing over the phone.

Illustrating the extent of the market gyrations on Monday, Intercontinental Exchange also reported a record day of trading in energy and commodities. Just over 13.2m contracts benchmarked to Brent crude oil changed hands, equivalent to 3.44bn barrels of oil. 

Shares in TP ICAP, which have fallen 13 per cent this year, rose almost 2 per cent on Tuesday. In spite of the gains, TP ICAP forecast only low single-digit revenue growth for its global broking business for the year, amid uncertainty over the outlook for the global economy.

“We’re somewhat surprised the message from the company is not more upbeat given the big recent moves in the yield curve, in the oil price, in corporate bond markets and elevated equities volatility,” said Vivek Raja, an analyst at Shore Capital.

Mr Breteau also said the integration of the ICAP business, bought for £1.3bn in 2016, had finally been completed. He made the project a priority last year after delays contributed to a heavy profits warning in 2018.

TP ICAP will focus this year on diversifying its business and upgrading systems to let its brokers negotiate more deals electronically.

For the year to December 31 group revenue rose 4 per cent to £1.8bn. Underlying pre-tax profits fell £15m to £230m, in part because of a rise in expenses. The management allowed its brokers to keep more of the money they earn — a controversial move that had caused friction with the employees who earn the bulk of the company’s turnover.