ICAP Lands Deal for Mainland China’s Yuan-Trading Platform

  • Contract for yuan trading technnology is worth $65 million
  • ICAP plans to rename itself NEX Group after Tullett sale

ICAP Plc has landed a contract to provide technology for China’s official inter-bank trading platform, giving Michael Spencer’s company a new cash generator in one of the world’s fastest-growing economies.

The London-based company will supply fixed-income and currency market technology to China Foreign Exchange Trade System, or CFETS. The deal, which uses ICAP’s EBS BrokerTec systems, is worth $65 million over three years. ICAP will open an office and a development center in Shanghai.

The sale gives ICAP a bigger footprint in the world’s second-largest economy and revenue from selling its technology, a segment that has been a lucrative business for market operators such as Nasdaq Inc. It comes as Chief Executive Officer Spencer transforms the inter-dealer broker into a specialist in electronic markets and post-trade services.

“We think there is a lot of potential upside here in terms of further things we could do with CFETS, with the Chinese markets and when Chinese markets open up,” Gil Mandelzis, CEO of EBS BrokerTec, said in a phone interview.

ICAP is entering China at a time when its financial system is integrating with the world economy. The British firm already has a joint venture with CFETS for voice broking in Shanghai, a nine-year-old arrangement that ICAP will retain even after it sells the rest of its global broking business to Tullett Prebon Plc.

ICAP will rename itself NEX Group Plc after the 1.1 billion-pound ($1.6 billion) deal completes, probably in the third quarter.

CFETS was founded in 1994 and is a sub-institution of the People’s Bank of China, according to its website. It provides systems for foreign-exchange, bond and interest-rate derivatives trading. The technology deal is part of CFETS’s “next generation trading system” to upgrade its different markets.

Outside Japan, ICAP’s EBS currency business had few Asian operations four years ago, Mandelzis said. The company has sought to grow its market share of non-deliverable forwards in the region as well as its offshore renminbi business. Bloomberg LP, the parent of this news organization, operates a rival trading platform.

“That has been a very clear strategy for us over the past few years,” Mandelzis said. “The deal with CFETS also further cements our foothold in Asia and specifically in China.”

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