If London-based interdealer broker ICAP can’t buy a regulated exchange (it was Liffe’s largest shareholder before the formation of Euronext.LIFFE and recently called off talks to buy the London Stock Exchange), they sure look ready to mutate into one, with Bloomberg reporting the impending launch of a new platform called AL Tex, which will enable the trading of OTC versions of futures currently listed on Euronext.Liffe and Eurex.
ICAP won’t confirm the report, but it certainly fits with CEO Michael Spencer’s stated goal of creating “the global exchange for ITC financial products and to build a global brand in wholesale financial services.”
They have quietly been buying up platforms for years, with forex platform EBS being folded into ICAP earlier this year. Adding futures functionality positions ICAP to benefit from the European Union’s Markets in Financial Instruments Directive (MiFID), which will contain a best-execution provision mandating brokerages deliver the absolute best execution available in the E.U. to their customers.
The exact definition of what constitutes “best execution” is still being hammered out, and the success of retail currency platforms means it is no longer a given that retail traders will still find best execution on regulated exchanges, despite the peace of mind that comes with a clearing house and a pre-existing liquidity pool for offsetting the trade.
Whatever ICAP is up to, you can bet the existing exchanges are watching closely.
