ICAP plc (LSE: IAP) is world’s largest inter-dealer money broker carrying out transactions for financial institutions. It is also our barometer for the Forex market volatility and volume.
ICAP yesterday admitted that its margins were being squeezed because of the need to pay up to keep hold of key moneymakers.
Pre-tax profit for the half year to 30 September fell to 139m from £148m despite revenue rising 6 per cent to £809m. The interim dividend has been increased by 9 per cent to 5.11p a share.
Michael Spencer, the chief executive, said the main reason for the fall was “investment in our businesses”, which amounted to about £38m. But he admitted that compensation had had to rise at a time when money brokers have been doing well from the volatility in world markets. “There has been some knock-on effect on compensation,” said Mr Spencer. “But it is cyclical and hopefully the cycle will swing back.”
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This reads to me that the volatility resulted in increased volumes as well as more competitive settlement prices ICAP had to deliver.
In any case, when ICAP is doing good, all the Forex industry is doing good too.
ICAP also seems to be embattled with the US SEC regulatory agency which issued it with a “Wells” notice, warning it that the SEC was planning enforcement action. Details are yet unknown but the report is that this is something that happened a few years ago.
We’ll keep tracking that.