* CEO Spencer says broker can contribute to benchmarks
* No update on ISDAfix investigation
* ICAP still has no cause to believe involved in forex
* Revenue in three months to Dec. 31 down 6 pct y-o-y
* Full-year profit expectations remain unchanged
By Clare Hutchison
LONDON, Feb 5 Brokerage ICAP Plc
believes it still has a role to play in setting financial
benchmarks, putting a positive spin on a regulatory shift that
aims to make these benchmarks less susceptible to rigging after
a series of market scandals.
The comments from the world's biggest interdealer broker, or
middleman between banks in stock, bond, currency and derivative
trades, come after it gave up its role in establishing ISDAfix,
a benchmark for interest rate swaps that is widely used in the
$630 trillion derivatives market and beyond.
ICAP, which lost its role in ISDAfix last month following a
U.S. and UK investigation into the process, was separately fined
$87 million by British and U.S. authorities over the
involvement of its brokers in manipulating Libor benchmark
Chief Executive Michael Spencer said ICAP could be involved
in reformed benchmarks, which are intended to be based on actual
traded prices rather than estimates from market participants.
"We've got some ideas that we think are very powerful,"
Spencer said on a conference call following a trading update,
adding ICAP will release those ideas publicly at a later date.
"We are the major interest rate derivative broker globally.
We handle a huge volume of transaction flow, so I think ICAP,
and indeed other brokers, can contribute towards fixes that are
based around real live transactions."
The former Conservative party treasurer said there had been
no further developments in the ISDAfix investigation.
He also said there was no reason to amend the company's
previous comments that there was no cause to believe any of its
staff were linked to alleged manipulation of foreign exchange
The scandal surrounding Libor, which measures rates at which
banks lend to each other, exposed widespread attempts to
manipulate survey-based benchmarks. Banks such as UBS,
Barclays and RBS have paid billions in fines
Separate probes into foreign exchange benchmarks are in
Until last month, ICAP collected banks' contributions for
U.S. dollar-denominated ISDAfix. But the International Swaps and
Derivatives Association (ISDA) handed ICAP's task to Thomson
Reuters, parent of Reuters news, which was already the
agent for all non-U.S. dollar ISDAfix rates, as part of a reform
of the benchmark.
Under the changes, ISDAfix will be based on actual
transactions rather than estimates from banks, making it less
vulnerable to manipulation, according to new standards from a
global group of securities regulators, the International
Organization of Securities Commissions (IOSCO).
ICAP, which makes money by matching buyers and sellers of
bonds, currencies and swaps, also reported a 6 percent drop in
third-quarter revenue versus the previous year.
The brokerage said reduced activity by investment banks and
"initially disruptive" new regulations around swaps trading had
dented the performance of its voice broking division, in which
traders negotiate deals by telephone and which accounts for more
than two thirds of its total revenue.
The challenging conditions continued into the new year and
could impact the final quarter, especially with more rules on
swaps trading set to come into force on Feb. 15, ICAP said.
In electronic broking, however, tapering of the U.S. Federal
Reserve's quantitative easing programme helped its BrokerTec
fixed income trading platform, while its post-trade operations
benefited from higher demand.
ICAP said its expectations for full-year profit remained
unchanged. In September it said profit before tax would be
marginally ahead of the 284 million pounds it made the prior
ICAP shares were up 0.6 percent to 314 pence at 1229 GMT,
against a slightly higher FTSE 250 index of mid-range