December 30, 2016 / 12:18 PM / 8 months ago

REFILE-ICAP completes broking sale to Tullett

(Clarifies shareholdings in para 5)

By Helen Bartholomew

LONDON, Dec 30 (IFR) - ICAP has completed the sale of its global hybrid broking operations and began trading as a more streamlined company called NEX Group on Friday. Tullett Prebon, which acquired the operations in an all-share deal worth £1.28bn, started trading as TP ICAP.

The deal saw Tullett issue 310m new shares to NEX Group shareholders in exchange for the broker's hybrid voice broking operations including iSwap, Fusion and the ICAP swap execution facility.

It creates one of the world's largest brokers by market value and puts Tullett on a firm footing to compete with global broking firm BGC Partners.

TP ICAP shares rose 3% to 425p on Friday morning following completion of the deal, giving it a market capitalisation of £2.35bn (US$2.89bn). BGC Partners, which acquired GFI in early 2015, was valued on Thursday at US$2.86bn.

Following completion of the deal, shareholders of NEX Group own 56% of TP ICAP's enlarged share capital.

For NEX Group, the deal is transformational in moving operations away from ICAP's traditional broking roots and towards financial technology.

"Today we complete our transformation as we officially launch NEX Group, a technology services company ready to capitalise on the enormous opportunities that technology affords to financial markets in the 21st century," said Michael Spencer, CEO of NEX Group.

From its roots as a four-person start-up 30 years ago, ICAP rose to become one of the leading global brokers. A widespread shift to electronic trading and a reduction in global broking activity, however, hit revenues in traditional businesses.

ICAP's global broking revenue fell 12% to £694m for the year ended March 2016, while electronic markets revenue was flat at £262m and post trade risk and information revenue was up 7% at £245m.

FOUR PILLARS

In its new guise, NEX Group aims to offer services underpinning the entire lifecycle of trades and has structured its operations along four key business lines.

NEX Markets will operate established electronic trading platforms under the EBS Brokertec brand for clients to access liquidity across fixed income and foreign exchange markets. Seth Johnson, former head of strategy at ICAP, has been appointed CEO of the markets business.

NEX Optimisation, headed by Jenny Knott, offers cloud-hosted services for clients to optimise resources and mitigate risk. The portfolio includes post-trade derivatives infrastructure provider, TriOptima, which has compressed more than US$890trn of over-the-counter derivatives notional through its triReduce service, and pre-trade credit checking business, Traiana.

NEX Opportunities incorporates the Euclid Opportunities business that invest in financial technology. The fund recently participated in a US$13m funding round for OpenGamma, which provides tools for derivatives participants to compare margin requirements across cleared and uncleared contracts. Other financial interests include AcadiaSoft, Digital Asset Holdings and Abide Financial.

ICAP's FCA-registered exchange, ISDX, will be rebranded as NEX Exchange, and will continue to compete with AIM for small and mid-cap UK listings. The exchange is currently home to Arsenal Holdings as well as brewing companies Adnams and Shepherd Neame and Kent-based winery Chapel Down.

NEX will continue to operate its FX options joint venture with Tradition following the transaction. VolCall, which was launched in 2013, provides hybrid trading across G10 options and will go head-to-head with Tullett's new service.

Tullett has teamed up with exchange technology group GMEX to develop a hybrid voice and electronic platform. The service integrates GMEX's request for quote technology with Tullett's existing central limit order book capabilities.

Shares of NEX Group traded up almost 2% in morning trading at 454p. (Reporting by Helen Bartholomew; Editing by Steve Slater)

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