(Reuters) - Inter-dealer broker TP ICAP (TCAPI.L) has achieved record-breaking volumes over the past fortnight’s stock market sell-off and intense activity in the hours after this weekend’s crash in oil prices.
The London-based company, a combination of brokers Tullett Prebon and ICAP, acts as a go-between for banks and big investment houses in daily trading and tends to benefit from market volatility.
Markets’ main gauges of volatility soared on Monday after the breakdown of talks over supply curbs by the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia drove a 30% drop in crude prices and triggered some of the biggest stock market losses since the 2008 financial crisis.
Huge volatility in oil and equities on factors including the global coronavirus outbreak, have led to very strong trading, TP-ICAP Chief Executive Nicolas Breteau told Reuters.
“We had reached record volumes, with clients hedging, rebalancing their portfolios ... a lot of intense activity,” he said.
Markets so far this year have been the most volatile since the sub-prime crisis, with Wall Street’s so-called fear gauge - the CBOE volatility index - reaching its highest since 2008.
The spread of the coronavirus outbreak in China to dozens of countries has shattered global growth prospects and Wall Street’s 11-year bull run. Monday’s slide in crude oil prices, meanwhile, was the biggest daily decline since the 1991 Gulf War.
Inter-dealer brokers’ returns depend on both the number and size of transactions, meaning that they benefit from market volatility, which tends to encourage increased trading.
The company posted full-year pretax profit of 93 million pounds on Tuesday, up from 2018’s 62 million pounds a year, buoyed by growth in its energy and commodities business.
It has now completed a three-year integration of the ICAP business after the merger of the two brokers in 2016, it said, generating 80 million pounds in savings.
Overall annual revenue grew 4% to 1.83 billion pounds.
Breteau said that TP ICAP is targeting low single-digit revenue growth for its global broking business and double-digit growth for oil and commodities in the current year.
“The overall macroeconomic backdrop remains uncertain, driven largely by COVID-19, global growth and ongoing Brexit negotiations,” he said.
“While this environment impacts our clients’ activity, the resulting volatility also creates market opportunities that gives us confidence for the future.”
Reporting by Muvija M and Chris Thomas in Bengaluru; Editing by Shailesh Kuber and David Goodman