* Succession planning is "well-advanced" -company statement
* Nomura banker frontrunner to replace Smith -report
* Tullett shares rise almost 5 percent (Adds Tullett statement, background on likely replacement)
LONDON, June 3 **Corro on 07766367917/email if any questions Terry Smith, the chief executive of Tullett Prebon and a prominent figure in London's financial circles, could leave the interdealer broker as early as the end of June, a source familiar with situation told Reuters on Tuesday.
Smith, who has led Tullett since 2006, is stepping away from the London-based brokerage to focus on Fundsmith, the asset management firm he founded in 2010, the source added.
Tullett, whose staff match buyers and sellers of currencies, bonds and other tradeable instruments, confirmed late on Tuesday that the firm was engaged in a succession planning process.
In a statement prompted by media speculation, Tullett said the search for Smith's replacement was "well-advanced". The company's board has agreed that Smith will step down once a successor has been appointed, it added.
"Further announcements will be made when appropriate," Tullett said.
The Financial Times newspaper earlier said former Nomura and Lehman Brothers executive John Phizackerley was the frontrunner to fill the role.
Smith did not immediately respond to requests for comment and Phizackerley could not immediately be reached.
Shares in Tullett closed up almost 5 percent at 304 pence, against a slightly lower FTSE 250 index of small- and mid-cap companies.
Analysts said the share price rise stemmed from hope that without Smith, known for his outspoken nature and fierce rivalry, particularly with Michael Spencer, the head of interdealer broker ICAP, Tullett may attract a bidder.
Interdealer brokers have been hit hard in recent years, as new regulations led their traditional investment bank clients to cut back on risky trading activities.
They have also faced sweeping reforms to their own industry, as regulators push more derivatives trading onto electronic platforms in a bid to make the market more open and safer.
Their troubles have been deepened by the static interest rate environment, which has dampened volatility and led to a drop in revenue from products like interest rate swaps.
Tullett said last month that revenue in the first four months of the year were down 12 percent and it would cut jobs to save around 20 million pounds a year.
With less business to go round, analysts have said it makes sense for two or two of the three interdealer brokers below market leader ICAP - Tullett, U.S.-based GFI and Swiss firm Tradition - to merge.
A tie-up with BGC Partners, the fifth major interdealer broker, is unlikely because of a history of legal disputes between the two.
Smith, aged 61 and raised in London's east end, has worked in financial services for 40 years, first at Barclays and later as an analyst at UBS Philips & Drew.
He was fired from his role at UBS after he wrote a book, "Accounting for Growth", that looked into the accounting practices of companies, including some of the Swiss bank's clients. He joined Collins Stewart, part of the firm that would eventually become Tullett Prebon, in 1996.
Fundsmith, which is owned and controlled by its partners, had over 2 billion pounds ($3.4 billion) in assets under management in its Fundsmith Equity Fund as of May 30. It launched an Emerging Equities Trust last month.
Potential successor Phizackerley left Nomura in 2013. The investment banking veteran was chief executive of Europe, Middle East and Africa at the Japanese bank.
($1=0.5968 British pounds) (Reporting by Clare Hutchison; Editing by Greg Mahlich and William Hardy)