ICAP-Tullett Deal Said to Face Regulator Query on Licensing

  • The FCA is said to scrutinise ICAP’s licensing framework
  • The combined TP ICAP will be the world’s largest voice broker

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U.K. regulators are examining the licenses needed for the $1.5 billion tie-up between ICAP Plc and Tullett Prebon Plc, raising the possibility that the deal may be delayed beyond the firms’ end-of-year target, according to people with knowledge of the situation.

The Financial Conduct Authority is looking at the regulatory framework at what would become the world’s largest voice broker, said the people, who asked not to be identified because the discussions are private. Both companies have said they expect the deal to close before the end of the year.

The regulator’s focus is on ICAP’s licensing framework, one of the people said.

The tie-up won approval from the U.K.’s Competition and Markets Authority on Sept. 8, in what was seen as the last major hurdle to Tullett’s purchase of ICAP’s broking division.

“As previously stated, we aim to complete the transaction by the end of the year, subject to standard regulatory change-of-control consents,” said Bryony Scragg, a spokeswoman for ICAP. Representatives for Tullett and the FCA declined to comment.

Tullett’s purchase of the ICAP division would create the world’s largest broker of transactions between banks with more than 3,000 brokers split between the U.S., Europe and Asia. When the deal completes, Tullett will be rebranded as TP ICAP. The enlarged firm will use its scale to cut costs from its support and compliance functions, enabling it to compete more efficiently with its closest rivals: BGC Partners Inc. and Cie. Financiere Tradition SA.

ICAP, which is selling its name as part of the deal, becomes NEX Group Plc, a company focused on operating electronic markets and post-trade services.

The ICAP and Tullett brokers will continue to work separately after the deal concludes. In fact, the different teams will compete for business with each other, a decision that helped to ease concerns of competition regulators. The ICAP and Tullett brands will be used to differentiate the competing desks.

ICAP shares climbed 1.5 percent to close at 493.6 pence in London, extending an 11 percent rally since news of the deal emerged. Tullett shares fell 0.3 percent.

— With assistance by John Detrixhe

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