Tullett Prebon will formally separate the 1,500 voice brokers it is buying from ICAP on January 1, setting what were once two long-time rivals in the over-the-counter markets on radically different paths.
Last Thursday Tullett received approval for the deal from German regulators, the final significant hurdle of more than 30 regulatory permissions it needed, according to three people familiar with the process.
The sign-off was important as ICAP has earmarked Frankfurt, where it has a small office, as an alternative base in the event of a hardline UK departure from the EU, the people said.
The deal still has to receive sign-off from a handful of jurisdictions such as the Philippines and Brazil, but both managements regarded the German approval as a critical step. As a result they are now preparing for the transaction to close at the end of the year, the people said. Both companies declined to comment.
It will draw to a close two years of discussions about the acquisition, in which Tullett will buy the voice brokers and some associated data and trading assets of its rival in an all-share deal worth about £1.1bn. It will be renamed TP-ICAP and will mark the biggest bet of the 15-month tenure of Tullett chief executive John Phizackerley.
He is doubling down on a gamble that humans will still be a vital part of the over-the-counter markets, where deals have historically been negotiated by phone. That world in recent years has been upended by regulation, increasing use of technology and low interest rates, which have damped market volatility.
Tullett will become the world’s largest interdealer broker. Its near 3,000 brokers act as middlemen to move illiquid assets such as swaps and commodities.
It is also setting up a new technology centre in Belfast to save the company about £5m a year on technology costs and the figure is likely to double with the integration of the ICAP business. That total would add to the £60m savings Tullett has targeted from the ICAP deal.
Nevertheless ICAP shareholders, the largest of whom is founder and chief executive Michael Spencer, will take a majority stake in TP-ICAP.
UK and US antitrust authorities had concerns over conflicts of interest in the original plan for ICAP to take a near 20 per cent stake in the enlarged Tullett. The two companies also conceded to sell ICAP’s oil trading desk to INTL FCStone, a US broker, to safeguard competition in oil trading.
By contrast Mr Spencer is shedding the voice brokers that were the cornerstone of his business. ICAP will be renamed NEX Group — “a name that embodies agility, speed and forward thinking” its advertising says — and focus on electronic trading and market infrastructure.
NEX’s BrokerTec platform is the main venue for trading US Treasuries while renminbi trading has risen to become the third largest currency pair on its EBS venue.