Interdealer broker, Icap has applied to the UK Financial
Service Authority (FSA) in an attempt to gain Regulated
Investment Exchange status, which in turn will allow the
company to list products and operate as an exchange. If given
the thumbs up by the regulator, Icap could look to list
emissions, energy and FX contracts.
Speaking at the announcement of his companys half yearly
results, Michael Spencer, Icaps chief executive said it
could take several months to get the green light from FSA. He
said that if it was given the go-ahead there was no intention
to change any of Icap's over-the-counter products, but he
wanted the option to launch new products, either OTC or on an
Speaking to FO Week, one industry insider outlined the
implications of Icap receiving regulatory approval from FSA.
Regulated Investment Exchange status will allow Icap to
formally use the title, exchange. However he warned that
for Icap to gain regulatory approval it would have to fulfil
strict criteria. You need freedom of access to members
and you need an independent working platform, you need
mechanisms in place for listing contracts that are traded on
that exchange, and so Icap must prove they meet these
conditions, he said.
Icap have so-far refused to comment on potential products that
could be listed but one market source has told FO Week
that emissions, energy and foreign exchange contracts are those
being touted by the inter-dealer broker.
I know that [Spencer] has spoken about energy and
emissions. Icap does a lot of OTC emissions business and they
do a huge amount of OTC foreign exchange trading, said
the market source. He pointed to Icaps recent acquisition
of EBS, the electronic currency trading platform, as providing
a significant potential in the FX market. EBS is
absolutely ripe for turning into an exchange because it has
potential to be a very interesting and successful market,
the source stressed. He concluded that Icaps recent
purchase of Traiana, a provider of automated post-trade
processing services as evidence of the inter-deal brokers
intentions. I do not believe it is an accident that Icap
acquired Trainana and I think Icap would quite like clearing
functionality, he said.
However, the source said speculation on who might act as a
clearer was difficult when he expected the landscape of UK
clearing to change dramatically over the next year.
Icaps plans to secure official exchange status comes 14
months after it confirmed exploratory talks about a tie-up with
the London Stock Exchange (LSE) had ended.
The failure of Spencer to win control of the LSE was followed
by a breakdown of negotiations of Spencer with MTS, which Borsa
Italiana secured from Liffe in June.
Describing the application as very clever, the
market source said that these unsuccessful attempts may have
driven Spencer to apply for Regulated Market status.
[Spencer] has been very keen to get involved in and have
some sort of exchange functionality, said the source.
Right now Icap is an interdealer broker with a platform
and obtaining this status would enable Icap to broaden the
scope of its activities, he added.
It remains to be seen whether any more firms apply for
Regulated Investment Exchange status but a spokesperson for
Icap said he does not expect many to follow Icaps lead.
I do not think that Mifid will lead to a whole host of
people doing this, not many interdealer brokers have the same
distribution as us. Ours can only really be rivaled by
Globex, he said.
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