ICAP, alongside London-listed counterpart Tullett Prebon (TLPR), acts as market-maker between banks looking to trade securities. Such financial shares outperformed in the run up to the financial crisis as this activity became more frenzied.
But with the increase in global financial regulation of the banks, the interdealer brokers have fallen further behind the market as such trading activity, particularly in over-the-counter derivatives, has slowed.
That is the backdrop to ICAP’s decision to sell its traditional broking services to Tullett. Consolidation was almost inevitable as the businesses try to cut costs and eliminate competitors in a smaller market.
ICAP reports on Wednesday, whereafter we'll have more analysis on the deal and its consequences for both companies.
