Icap eyes futures after adding PLUS Markets
LONDON, June 21 |
LONDON, June 21 (Reuters) - ICAP plans to challenge exchanges NYSE Euronext and Deutsche Boerse by moving into futures trading after it finally completes its controversial purchase of PLUS Stock Exchange on Thursday.
The broker and PLUS Markets Group must complete the deal, which will net PLUS shareholders about 640,000 pounds ($1 million), on Thursday to avoid British watchdog the Financial Services Authority cancelling its exchange license.
The deal, which goes ahead despite opposition from some shareholders, is important to the world's largest inter-dealer broker because it wants to use the PLUS exchange as a platform to expand its futures and options trading business.
"ICAP is well positioned to leverage PLUS' exchange status to offer new products and solutions for its customers including, in time, listed derivatives," the broker said in a statement last month.
ICAP has not previously owned an exchange license so the deal marks a departure for the broker, which has focused historically on currency, bonds and complex derivatives.
The broker is keen to move into European listed futures and options trading to challenge incumbent venues NYSE Euronext, which operates the London-based Liffe market, and Deutsche Boerse which runs Frankfurt's Eurex.
These two exchanges have more than 90 percent of the trading activity in some European listed futures products, the main reason why the proposed $7.4 billion merger between the firms was blocked by European competition authorities in February.
The European Commission plan regulatory reforms in the coming years to break these exchanges' stranglehold on futures trading in the region and make that market more competitive, a move that should pave the way for new entrants like ICAP.
"It is not clear at this stage how the proposed regulation on derivatives will play out so ICAP have taken the opportunity to pick up a regulated exchange on the cheap, mindful that it could become strategically important as the changes take effect," said Richard Perrott, an analyst at Berenberg Bank.
The completion of the PLUS deal on Thursday draws a line under a tense month in which some shareholders publicly opposed the sale, arguing the plan offered hefty rewards for PLUS senior managers, who backed the trade, but little for investors.
The shareholder coup ultimately failed on Monday however when 63.8 percent of investors voted in favour of selling the loss-making stock market to ICAP, clearing the path to Thursday's completion of the deal.
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