ICAP reports solid results amid increased volatility

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 Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term market Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders Read this Term 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."

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.