The dominant firm in interdealer broking, TP ICAP’s challenge is to cement its global leadership position while facing competition from its traditional rivals and emerging electronic challengers.
The strategy it has pursued of aggregation of liquidity, electrification of delivery, and diversification of revenues was given a fillip in 2019, as chief executive Nicolas Breteau announced the completion of the integration process that followed Tullett’s 2016 acquisition of ICAP’s broking businesses.
“We continue to make large investments in technology to drive our business,” says John Abularrage, global head of broking at TP ICAP in New York. “Our aim? Simple: offer every protocol to clients so that TP ICAP is the place where they want to transact, however they want to transact.
“That means significant investment in technology, and it means providing all the trading protocols so they can access the wholesale liquidity market in the way that they do best.”
In a sign of things to come from TP ICAP, the firm started rolling out a new FX options platform in 2019. FXOhub, which supports more than 250 currency pairs, offers access to an order book screen for products such as straddles, risk reversals and butterflies, as well a request-for-quote screen showing interest and liquidity, and gives clients the option of connecting via an API.
“It provides the full suite of execution protocols,” says Abularrage. “It has been very successful for us already and it’s a template for what we can do in other businesses.”
The firm says that the platform offers a more intuitive feel than its competitors through an easy way to view strategies for each currency pair, and traders can each fully customise their set-up and submit orders using numerous methods.
It’s another step towards the firm’s multi-year plan to create a “macro hub” to offer liquidity for all its brands and products with a common look and feel, making access easier and more streamlined.
“We are just very focused on what our clients need and the protocols with which they execute and how we can make sure we are transitioning businesses from voice to hybrid to fully electronic solutions to make sure that we are competing against a new set of competitors in addition to our traditional ones,” says Abularrage.
While he still sees room to grow market share in its leading asset classes, he says that growth is also coming from its electronic corporate bond business and it is continuing to invest in its equities franchise and its emerging market business in the Americas, where it has offices in Brazil, Chile, Colombia and Mexico.
Away from broking, the firm is also putting an emphasis on its data and analytics business, which is high margin, fast growing and provides earnings diversification. It can take data from its leading broking position and package it to clients, including banks, non-banks, hedge funds, asset managers and its channel partners.
Revenues in this segment were up 15% in 2019 to £135m, with the firm expecting growth to continue because of regulatory requirements in areas such as pre-trade and post-trade reporting, the impact of cost pressures on both buy-side and sell-side clients and the rise of index products.
The Covid-19 crisis has played to the firm’s strengths, says Abularrage. “What we have seen in the pandemic certainly is that clients have shifted further to those that already had large market share and we are a beneficiary of that,” he says. “We believe that both from our electronic offering and our relationships we have done a very good job by our clients, making sure that they are sourcing the appropriate liquidity during the crisis.
“That has been appreciated by them and if anything that has strengthened my business here in the Americas.”