IAP.L Regulatory News (IAP)

Press Release

ICAP plc Trading Statement

London, 30 September 2010 - ICAP plc (IAP.L), the world's premier interdealer broker, announces the following trading update ahead of the close period following its financial half year ended 30 September 2010. ICAP expects to announce its results for the half-year ended 30 September 2010 on 17 November 2010.

Group revenue in the six months ended 30 September 2010 is expected to increase by approximately 9% compared with revenue from continuing operations in the same period the previous year. Increased interest costs resulting from the previously disclosed refinancing of ICAP's debt facilities reduced earnings growth.

Commenting on the first half and the outlook for the rest of the year, Michael Spencer, Chief Executive of ICAP, said "Overall this six month period has seen active trading in many financial markets compared with the same period the previous year. In particular, these conditions produced active high frequency markets which benefited electronic broking and post trade processing. Our interest rate derivatives, commodities and emerging markets businesses also performed particularly well.

On 6 September 2010 we successfully launched the first electronic market for trading Euro interest rate swaps with market maker support. The platform is open to market making banks that have access to a clearing house and combines ICAP's established voice liquidity with a sophisticated electronic platform to create a single improved liquidity pool in a wide range of Euro IRS instruments out to 30 years' maturity. Trading volumes have exceeded our expectations with a nominal value of over €45 billion (bn) matched to date through the electronic order book, accounting for 16% of ICAP's Euro IRS trades of this type. So far, 21 banks have traded through the electronic order book. This is a prime example of how we work closely with our customers, aligning our interests and expanding their use of ICAP's developing market infrastructure.

If the pattern of business we have seen during the first six months continues for the rest of financial year, then the current range of analysts' forecasts for ICAP's profit1 is reasonable. This assumes that exchange rates remain around today's levels for the remainder of the financial year."

Financial markets reform

The Basel III capital and liquidity reform package and the European market infrastructure regulations that focus on OTC derivatives, CCP's and trade repositories have recently been published. The proposed changes aim to strengthen financial regulation, supervision and market infrastructure. Following this, we now have a clearer view of the potential impact on the operations of banks and their customers.  In addition to reducing counterparty risk through the extension of central clearing of eligible derivatives, regulators also want to lower operational and systemic risk through greater automation and increased transparency of trading execution. The European Commission has begun a review of the Markets in Financial Instruments Directive (MiFID) which aims to bring OTC derivatives fully under MiFID. In the United States, the regulators are consulting on the detailed rules that will cover swap execution facilities following the Dodd Frank legislation.

As a leading provider of OTC market infrastructure, ICAP is in a very strong position to work with market participants and lead new initiatives to address regulatory concerns, the most recent example of which is ICAP's electronic interest rate swap platform. The platform is regulated as a multilateral trading facility (MTF) by the FSA under MIFID. It provides full audit ability and transparency for regulators.

ICAP believes that there will be continuing demand for bilateral clearing for the many OTC derivatives that are not suitable for CCP clearing. Regulators are increasingly aware of the need to build resilience in these markets and ICAP is at the forefront of developing automated collateral management networks to streamline the process for both banks and their customers. This reduces cost, improves efficiency and mitigates risk.

Recent developments

This year we are focusing on growing our business organically. Over the first six month period as a whole, revenue was driven by robust performances in the volatile interest rate and foreign exchange markets and continuing strength in our commodities and emerging markets businesses. Following a good start to the year, credit markets have been quieter but a considerable issuance backlog has developed that may boost corporate bond activity in the second half. The equity derivatives businesses have been adversely affected by low cash volumes and reduced risk appetite.

A competitor has sought to hire a number of ICAP staff employed in the money markets business in Singapore. On 22 September 2010, the High Court of the Republic of Singapore issued an order on one of ICAP's competitors restraining them from recruiting or seeking to employ any of our employees in violation of their respective contracts of employment, until this matter is settled legally. We welcome the decision and look forward to a positive resolution of this matter. Although the situation is somewhat uncertain its potential impact is not currently regarded as likely to be material for the purposes of ICAP's results. As this is an active legal matter, we are not able to provide further detail on this dispute.

In Brazil we have made good progress increasing our market share and revenue and are continuing to expand the number of markets in which we operate.

ICAP's electronic markets business has shown a much stronger performance with higher revenue and increased profit. In the five months to the end of August total average daily volumes on the EBS and BrokerTec platforms reached US$749.9bn, an increase of 28% year on year. In fixed income products total average daily volumes on the BrokerTec platform were $594.7bn, an increase of 30% on the previous year. European repo volumes reached $253.3bn, up 28% year on year. US Treasury electronic broking volumes increased 36% year on year to $139.2bn, and US repo volumes were up 30% year on year to $202.3 bn. For the same period to the end of August, average daily volumes on EBS increased 19% year-on-year to $155.2bn.

As highlighted in the recent investor seminars covering our Post Trade Risk and Information businesses, Traiana has continued to expand its offering to both the buy and sell side, has added its first customers outside foreign exchange, in equities and futures, and has launched in equity derivatives. The Harmony network is now processing between US$400 and US$500 billion of foreign exchange transactions daily. TriOptima's portfolio reconciliation service, TriResolve, continued to grow. The TriReduce service saw slower revenue as dealers focused on sending trades to clearing houses ahead of trade compression. Rematch has made a good start in emerging markets credit derivatives but the low level of volatility in short term interest rates slowed Reset volumes. Reset has successfully launched a new service in inflation swaps.

In line with the strategic focus above, ICAP is in the process of evaluating its remaining non-core agency investments. In the event that the carrying values of the investments are not supported ICAP would recognise a net exceptional post tax charge of up to £12m.

Notes

1. The current forecasts for ICAP plc pre-tax profits referred to in this announcement are based on forecasts of profit before tax, amortisation and impairment of intangibles arising on consolidation and exceptional items provided by 11 equity analysts. The range of those forecasts for the year to March 2011 is from £333 million to £357 million. This compares with the results for the year to March 2010 when ICAP plc's comparable profit was £333 million. The source of these forecasts is Bloomberg, Reuters and the analysts.

2. This document contains forward-looking statements with respect to the financial condition, results and business of ICAP plc. By their nature, forward looking statements involve risk and uncertainty and there may be subsequent variations to estimates. ICAP plc's actual future results may differ materially from the results expressed or implied in these forward-looking statements.

3. ICAP reports all of its broking and post trade volumes on a single count basis.

Conference calls

A conference call for analysts and investors will be held at 10:00 BST on Thursday 30 September 2010 to discuss this statement. For dial in details please contact Maitland on +44 (0) 20 7379 5151.

A conference call for press will be held at 11:00 BST on Thursday 30 September 2010 to discuss this statement. For dial in details please contact Maitland on +44 (0) 20 7379 5151.

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