EBS Direct Volumes More Than Double YoY, 250 New Clients Pending

A trading statement by the parent company ICAP plc has revealed that the relatively new EBS service continues to grow

ICAP plc (LON:IAP) has just issued a trading update on the company’s results between the 1st of April and the 30th of June. While revenues in constant currencies decreased by 1 percent compared to a year ago, on a reported basis the numbers came in higher by 2 percent.

With mixed market conditions reflecting higher activity in FX, other markets have suffered from the uncertainty caused by the Greek crisis.

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The average daily volume (ADV) on EBS spiked higher by 34% to $98 billion per day throughout the quarter, which has been driven mainly by higher FX volatility. ICAP details that there is an increasing interest in trading NDFs and the Chinese yuan, which confirms one of the biggest trends in institutional foreign exchange – emerging market currencies are becoming ever more popular.

The EBS Direct service which the company launched in 2012 has continued to gain traction. Volumes traded through this particular disclosed, relationship-based liquidity service has more than doubled, marking ADV of $17 billion (compared to $8 billion a year ago).

The inter-dealer broker stated in its announcement that the EBS Direct service is expected to continue its rapid rate of growth with over 250 new customers in the pipeline. As previously announced, the service will gain additional products with the beta for trading FX Outrights and Swaps scheduled for the third quarter opening markets where the services of EBS have never been used.

The electronic markets division revenues increased by 6 percent on a constant currency basis and by 14 percent on a reported basis when compared to a year ago. With the average daily volume (ADV) on the company’s fixed income platform BrokerTec rising 7 percent in US Treasuries to $172 billion, 5 percent in US repo to $217 billion and dropping 7 percent in European repos to €179 billion.

The BrokerTec platform has registered increased trading activity as volatility in US Treasuries increased in both May and June.

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Post-Trade Risk Services

Looking at the post-trade risk and information services the trading revenues of ICAP decreased by 2 percent on a constant currency basis and remained flat on a reported basis when compared to last year. The company registered strong growth demand for the triResolve and triReduce within TriOptima.

An increasing demand from Asia has been demonstrated by 18 financial institutions which took part in the third JSCC triReduce compression cycle. The result was the elimination of ¥79 trillion ($641 billion) of Japanese yen interest rate swaps.

The performance of the post-trade business of ICAP plc (LON:IAP) is also being held back by Reset due to flat short-term yield curves which are restraining activity levels. On this note, any interest rate hikes by the Bank of England or the Fed would be a positive development for this segment. 

Global Broking Revenue

Within ICAP plc’s (LON:IAP) global broking division, the revenues decreased by 3 percent on a constant currency basis and by 1 percent on a reported basis when compared to a year ago. The company indicated that its steady performance on the OTC European interest rates derivatives has been offset by “structural and cyclical factors affecting the division.”

The CEO of ICAP, Michael Spencer, commented in the announcement, “Against a backdrop of mixed market conditions we have started the year a leaner business, set for long-term growth and increased profitability.” 

Elaborating on the firm’s post-trade business he added, “There’s an accelerating demand for risk reduction services. We recently made a further investment in AcadiaSoft, Inc, a provider of electronic margining for over the counter derivatives of which we own 25%. The investment is alongside DTCC, Euroclear and 13 bank investors.”

“This shows our continuing investment in high growth technology firms that have the potential to create value in financial markets. We will combine TriOptima’s expertise through its triResolve portfolio matching service with AcadiaSoft’s margin messaging platform, which will facilitate regulatory compliance and a reduction in operational costs and risks for industry participants,” he added.

Concluding his statement Mr Spencer said, “We’ve made progress on our strategic goals and I’m confident that our strong market position will ensure that we benefit from an increase in trading activity as macroeconomic conditions change in due course.”

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