November 20, 2017 / 8:23 AM / a month ago

UPDATE 2-Britain's NEX says first-half profit falls, picks Amsterdam as EU hub

* Trading profit falls to 63 mln pounds in first half

* CEO flags historically low levels of volatility

* Previous year buoyed by political surprises (Adds CEO, CFO comments, details, updates shares)

By Noor Zainab Hussain

Nov 20 (Reuters) - NEX Group reported lower first-half profit and said market conditions remained challenging due to a lack of volume and volatility in fixed income, currencies and commodities.

The firm, which provides electronic trading platforms for banks, asset managers, hedge funds and companies, also said it had picked Amsterdam as its European Union hub after Britain leaves the bloc.

Profit for the six months to Sept. 30 fell to 63 million pounds ($83 million) from 75 million pounds, it said.

NEX’s shares fell 4 percent to 573 pence by 0941 GMT and were among the biggest fallers on FTSE 250 index.

NEX, which is to establish a new trade reporting unit in Sweden, said it had picked Amsterdam as its European Union base in the event of a so-called “hard Brexit,” a term that tends to refer to Britain quitting the single market and customs union.

“After much consultation, we’ve decided to establish an operation in Amsterdam to operate fixed income and repo trading venue which will allow us to continue to serve EU customers in the event of a hard Brexit,” Chief Executive Officer Michael Spencer told reporters on a call.

Known as ICAP until the sale of its voice broking business to TP ICAP last year, NEX raised its cost savings target for the next three years by 15 million pounds to 40 million pounds.

NEX Regulatory Reporting saw strong client growth with the upcoming implementation of MiFID II, which was partly offset by low euro interest rate volatility that hit the risk mitigation product. Revenue at NEX Markets was helped by a jump in trading in emerging markets currency pairs and a China foreign exchange.

The company, which matches buyers and sellers of bonds, swaps and currencies, benefited from market volatility last year after political surprises, such as U.S. President Donald Trump’s victory and Britain’s decision to leave the European Union. But that volatility was short-lived.

“Now and then when you get a spike upwards, we seem to return to a historically low volatility number,” Spencer said.

Spencer said NEX would considering moving BrokerTec, a dealer-to-dealer electronic trading platform for the fixed income markets, to Amsterdam depending on the outcome of Brexit negotiations. The firm had also looked at Dublin and Frankfurt.

He said the Dutch regulator “seemed very comfortable and familiar” with details of the business NEX planned to transfer.

Chief Financial Officer Samantha Wren said the decision followed an examination of issues such as employment laws, cost of employment, tax rates and regulatory regimes.

The other firms located there were “non-bank financial services and the Dutch authorities experience in dealing with those businesses is what helps them stand out for us.”

($1 = 0.7564 pounds)

Reporting by Noor Zainab Hussain in Bengaluru; Editing by Louise Heavens and Edmund Blair

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