British interdealer broker ICAP Plc has begun staff cuts which could involve the departure of 100 brokers in its Global Broking business, market sources said on Monday.
In its full-year results announced in May, the company said the performance of Global Broking was being hit by structural and cyclical factors, highlighting a decline in investment banks’ fixed income, currencies and commodities (FICC) divisions.
ICAP’s global head of communications Serra Balls confirmed the company was seeking savings but declined to give any figures for staff reductions.
“Market conditions remain challenging and, as we have previously stated, we are looking to achieve £60m of cost savings across our business,” Balls said.
“As part of this we are reviewing our Global Broking business to ensure it is properly aligned to the new market structure and operates in the most efficient manner.”
Interdealer brokers, which match buyers and sellers of currencies, bonds and other tradable instruments, have been hit hard in recent years, as new regulations led their traditional investment bank clients to cut back on risky trading activities.
Many banks reported falling trading revenue at their investment banking divisions in the first quarter of 2014, with fixed income, commodities and currencies taking the brunt of the slump.
Interdealer brokers have also faced sweeping reforms to their own industry, as regulators push more derivatives trading onto electronic platforms in a bid to make the market more open and safer – eroding the need for traditional “voice” brokers of the sort being affected by ICAP’s cuts.
One broker said of voice broking: “It’s a dying industry, volumes are dying. Its being regulated out of existence … Everything is moving electronic.”
In recent years ICAP has been trying to reposition its business towards electronic broking and post-trade services, which now account for two-thirds of operating profit.
The Global Broking division is active in the wholesale markets in interest rate products, credit, commodities, foreign exchange, emerging markets and equity derivatives. It employs around 2,000 brokers.
Revenue at the division dropped by 8% £920m in the year to March 31. ICAP’s total revenue fell by 5% to just under £1.4bn.
($1 = 0.5876 British Pounds)