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ICAP CEO Says Some Brokerage-Market Parts Show ‘Drought’

ICAP Plc Chief Executive Officer Michael Spencer
ICAP Plc Chief Executive Officer Michael Spencer said, “In global broking, conditions are still very difficult.” Photographer: Chris Ratcliffe/Bloomberg

ICAP Plc Chief Executive Officer Michael Spencer said parts of the brokerage market will continue to grapple with the worst “drought” in at least 30 years.

“We’re moving into a world where the level of volumes are pretty dire and are likely to remain thus,” Spencer, 59, told analysts on a conference call from London today, commenting on the interbank market for trading by telephone. “It’s as bad a drought as I’ve experienced in my entire career.”

The world’s largest broker of transactions between banks has been cutting costs and eliminating jobs to counter a slump in trading as lenders around the globe scaled back their fixed-income, currencies and commodities operations. Spencer, who founded ICAP in 1986, had his 2014 bonus cut by 75 percent after the firm was fined 55 million pounds ($94 million) in a probe by British and U.S. regulators into Libor rigging.

The shares closed at 356.20 pence in London, little changed on the day. They have dropped 21 percent this year, while the shares of Tullett Prebon Plc, the London-based broker run by Terry Smith, declined 34 percent.

ICAP said today first-quarter revenue dropped 19 percent from April to mid-July. At the global broking division, which houses trading desks that handle orders by telephone, revenue fell by 25 percent from a year earlier.

Spencer said the company will continue to eliminate jobs at the unit, which has about 2,000 employees. The company’s cost-cutting program remains “on track” to meet a target of at least 60 million pounds in 2014, according to the statement.

“There are no positive spots at all,” Spencer said. “I find it difficult to make any realistic forecasts of when things will improve. All we can do is slim our business down to be a fitter, slimmer machine.”

While voice broking isn’t about to “become extinct,” the industry is “well in need of consolidation,” Spencer said.

“We’ve got five global broking firms -- in my opinion two or three would suffice,” he said. Consolidation “will be good for the entire industry.”

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