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May 15 (Reuters) - The world’s largest interdealer broker TP ICAP Plc on Wednesday reported a drop in first-quarter revenue, as reduced investor risk appetite led to lower volatility in equity and rate markets, hurting its largest division.
TP ICAP and other brokers have been suffering for several years from generally lower volatility on financial markets as investors reined in risk-taking and stock markets racked up almost a decade of constant gains.
The CBOE Volatility Index, stock market’s main gauge of volatility and investors’ risk appetite, has fallen nearly 29% so far this year.
“The uncertainty created by Brexit, the softening of the Fed’s interest rate stance, and the potential for more QE (Quantitative Easing) in the Eurozone has impacted our traditional banking customers’ first-quarter performance, weighing on market volatility and volumes,” Chief Executive Officer Nicolas Breteau said.
More trades from volatility on financial markets for different products help firms like TP ICAP, which facilitate large financial institutions such as investment banks and individuals or businesses to trade in securities.
Revenue from the company’s broking division fell 6% to 333 million pounds ($429.8 million). The unit accounted for more than 70% of TP ICAP’s total revenue in 2018.
The company, which brings together buyers and sellers in financial, energy and commodities markets, said its revenue fell 2% at constant exchange rates to 469 million pounds in the three months ended March.
TP ICAP, which has picked Paris as its European Union hub post Brexit, in March said it was putting extra broking staff into its European offices outside London to help clients deal with any disruptions. ($1 = 0.7748 pounds) (Reporting by Pushkala Aripaka in Bengaluru; Editing by Bernard Orr and Gopakumar Warrier)
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