Barclays Capital - Global Financial Services Conference - New York September 2011
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Barclays Capital - Global Financial Services Conference New York September p 2011
These materials do not constitute an offer to sell or the solicitation of an offer to
purchase any security
security. These materials contain "forward-looking
forward-looking statements"
statements as
defined in the U.S. Private Securities Litigation Reform Act of 1995. These
statements are based on current Company expectations and are subject to risks
and uncertainties
uncertainties, which could cause actual results to differ materially
materially. Such risks
and uncertainties include, but are not limited to: fluctuations in interest rates and
foreign currency exchange rates; market acceptance of new trading technologies;
global and regional
g g economic conditions and legislative,
g , regulatory
g y and ppolitical
developments; and domestic and international competition in the Company's global
markets. Additional information regarding these and other factors is available in the
Company's
p y reports
p available on request
q from the Company.
p y
This document may not be distributed where to do so would be unlawful. This
document may not be distributed in the UK except to persons falling within article
19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order
2001.
2ICAP’s
ICAP s Strengths
ICAP group revenues by asset class
• Leading market position
£1,605m £1,741m
• Substantial expertise
Rates 39% 40%
• Global footprint
FX 18% 18%
• Diversified portfolio of Equities 10% 8%
products and services Emerging
9% 11%
markets
Credit 13% 11%
Commodities 11% 12%
2010 2011
3Strategic Imperatives
Operating
p g profit
p coming
g from non voice broking
g
• The main infrastructure provider to the businesses (2003 – 2011)
world’s wholesale OTC markets
60%
Post trade
• The global intermediary 50% Electronic
21%
40%
19%
• The leading post trade risk services
13% 17%
provider 30%
12%
20%
8% 7%
• Generate operating profit evenly 26%
29%
33%
24%
distributed between voice broking, 10%
9% 14% 15%
19%
electronic broking and post trade risk 3%
-
services
i 2003 2004 2005 2006 2007 2008 2009 2010 2011
• Deliver superior EPS growth
4Regulation is a big opportunity…
Theme Opportunity for ICAP
Basel rules • Increased focus on vanilla flow products suits ICAP business model
• Some SIFIs increase trading/risk appetite to provide shareholder returns
• New hybrid debt instruments needed for bank capital structure
Electronic
El t i • e-trading
t di iincreases ttransaction
ti numbers
b andd volumes
l
Trading • Chance to become the leading SEF/OTF operator for derivatives trading
• Prime broking of derivatives extends effective ICAP customer base
Post Trade • Trading volumes increase with more transparent prices
Transparency • New opportunities for tick data sales
Processing • Multi-lateral processing significantly more onerous than bilateral
• More high frequency, electronic order flow and smaller ticket sizes
Cl i
Clearing •• Optimisation
O ti i ti of
Optimisation off margin
i between
margin between
b t clearing
l i houses
clearing h
houses
• Portfolio compression and risk mitigation opportunities at clearing houses
• Stronger bilateral clearing infrastructure
Repositories
p • Trade repository
p y operators
p needed for all asset classes; add-on services
• Instrument type databases need to be developed
Risk • Mandatory regular reconciliation by banks with customers
Mitigation • Mandatory regular portfolio compression
• Multiple types of basis risk not yet addressed by ReSet
ReSet, ReMATCH
Governance • Regulators raising the governance bar for our competition
5Voice broking –
executing on growth opportunities
• ICAP’s strengths • Actions
– Depth of client relationships – Expansion in emerging markets
• grow market share
– Market
M k t share
h – Brazil
• Become largest independent broker
• Break-even
– Strong hybrid presence
– Growth in g
global commodities
• Develop new products e.g. bio-fuels and
– Highly motivated and skilled staff renewables
– Regulations
• Comply with new rules e
e.g.
g SEFs
Year to
Core Voice Mar 11 Change
£m vs. prior year
Revenue 1,183 2%
Operating profit 194 (7%)
6
Margin 16% (2ppt)Post trade risk and information
• ICAP’s portfolio • Actions
– Traiana
T i – D
Develop
l a series
i off H
Harmony b
based
d
• High velocity stp, netting, connectivity, services that leverage FX market
messaging functionality
– TriOptima – Promote the use of compression to
• Trade compression, reconciliation
reduce risk
– Information
– Introduce further new asset classes
• Data gathering, reselling
within Reset
– Reset and ReMatch
– Continue to build scalability in
• Portfolio risk management, basis reduction
ReMatch
Year to
Post trade risk & Mar 11 Change
Information Services £m vs. prior year
Revenue 184 30%
Operating profit 79 14%
Margin 43% (6ppt)
7Electronic broking
g
• ICAP’s strengths • Actions
– Leading the market across a range of – Remain the leading provider of global
asset classes and products electronic solutions for the OTC
market
– Customer base widely distributed
across markets, products and – Ensure ICAP is best positioned to take
geographies
g g p advantage
g of the regulatory
g y drive to
increase transparency in the OTC
– Growing product portfolio market
– Grow the business through product
and technological innovation
Year to
Electronic Broking Mar 11 Change
£m vs. prior year
Revenue 302 20%
Operating profit 123 23%
Margin 41% 1ppt
8Electronic Broking – what we do
• ICAP is the world’s leading provider of high-performance electronic
t di platforms
trading l tf tto the
th global
l b l OTC markets
k t
– Total August ADV: $904bn – up 28% year-on-year
– BrokerTec – fixed income
• Acquired by ICAP in May 2003
• US Treasuries, US and EU Repo, EGBs, US Credit
• 500+ customers, 50+ countries
• August 2011 ADV: $718bn, up 24% year-on-year
– EBS – spot
p FX, non-deliverable FX and p
precious metals
• Acquired by ICAP in June 2006
• Spot FX, Non-Deliverable Forwards and Non-Deliverable FX Swaps, Gold,
Silver,, Platinum,, Palladium
• 2800 customers, 50+ countries
• Aug 2011 ADV: $187bn, up 46% year-on-year
• 4 Aug 2011 volume: $407bn,
$407bn representing 253
253,000
000 deals
9Electronic p
product innovation
• Emerging Markets
– Russia
– CNH
– Other BRIC initiatives
• Brazil
• India
• Derivatives and Commodities
– Non-Deliverable FX Forwards
– Non-Deliverable FX Swaps
– US Credit Default Swaps
– Precious metals
– $ IRS
10Ruble
Ruble ADV and counterparty growth trends – Sept 2009 thru Aug 2011
11CNH
CNH ADV and counterparty growth trends: Sept 2010 thru Aug 2011
12MyTreasury – new business
• Start-up
Start up business established 2007
– ICAP owns 75% stake
– We intend to exercise the call option
to acquire remaining 25% in 2012
• Innovative new electronic trading
solution for corporate treasurers
– Initial focus on offshore MMF (money
market funds)
• Provides a platform for launching
new products
– Term deposits
– FX
• Experienced management team
• Progress to date:
– Beginning
g g to g
gain traction – 162
funds, £15 billion AUM
• Commitment to growing the market
over the long term
13Electronic interest rate swaps
Electronic orderbook volume (€bn)
• Successful launch of eIRS platform in
17% 16% 13% 20% 16% 26% 32%
September 2010 facilitates trading in euro
interest rate swaps (1 – 30 year)
85
• The platform brings increased
53 50 53
transparency and greater efficiency to the
44 46
36 world’s largest OTC derivatives market
S 10
Sep O t 10
Oct N 10
Nov D 10
Dec J 11
Jan F b 11
Feb M 11
Mar
•Volume of trades executed electronically through eIRS system by month since launch
• Unique pre-trade credit screening allows
with percentage of total trades on electronic order book
electronic execution against firm prices
Users of electronic order book
• 41 banks traded through the platform
• Over €510bn volume transacted via
electronic order book to 30 June 2011
39 41
35 35
30
26
22 • Over 6,800 trades transacted via electronic
order book to date – over 20% of our euro
Sep 10 Oct 10 Nov 10 Dec 10 Jan 11 Feb 11 Mar 11
swapp total
•Total number of banks that have traded through the electronic order book since launch
14eIRS - trade analysis
Trading composition
Basis 20%
2%
9% • eIRS
IRS platform
l tf facilitates
f ilit t strategy
t t ttrading
di –
Futures cross 10%
11%
components include curve spreads,
35%
butterflies, futures crosses and basis
Outrights 30%
• Technology enables instantaneous
Spreads 25%
43% calculation of multi leg trades too complex
Butterflies 15%
for human intevention – driving incremental
V i
Voice El t i
Electronic
•Breakdown of euro IRS trades performed by ICAP voice only compared to eIRS system
business
Impact of streaming prices • Almost 80% of eIRS trades are spread and
To interims butterflies vs. 40% by voice
Since launch
• Multiple banks streaming prices in up to 85
85% 86% 92%
different instruments
68%
59%
42%
• 92% of implied chain trades through the
All trades E/E trades Implied chain
eIRS system generated by streaming
trades
prices with firm credit
•Percentage
Percentage of trades through the eIRS system that include at least one side generated
from streaming prices
Electronic trading allows additional execution and leads to smaller trade
15
size compared to voice business aloneCompetitive landscape
Tullett
Asset Class ICAP BGC GFI Tradition DealerWeb Others
Prebon
Electronic Execution
Government Bonds MTS
Treasuries
Repos
Agencies
Thomson
Spot FX Reuters
Forward FX / FX Options
Credit
Energy
Swaps
Post-trade services
Netting services for FRAs
Netting for CDS
FX, equity derivs processing
16Summary
• Regulation
– ICAP is ready to seize the opportunities created
• Growth
G th
– Across all the businesses
– Electronic IRS
– New asset class in post-trade
• Prior investment a solid base for future development
17Investor Relations: Alex Dee +44 (0) 20 7050 7123 alex.dee@icap.com ICAP plc 2 Broadgate, London EC2M 7UR +44 (0) 20 7000 5000 www.icap.com
You can also read
