LSE and Icap set for derivatives expansion

The London Stock Exchange and Icap are pinning their hopes for growth on the rapidly changing derivatives industry as both reported steady growth in their core markets. The UK-based groups are planning to move into derivatives trading and clearing to diversify their businesses and profit from regulatory changes to the $600 trillion over-the-counter markets, though their core lines are performing well.
The number of new LSE listings for the 11 months to the end of February was up 90 percent on the previous year, the LSE said in a trading update on Thursday, while the LSE's UK share trading business was up 2 percent to a daily average of 4.7 billion pounds ($7.6 billion).
"We are finishing the year on a strong note with good trading in recent weeks," said Chief Executive Xavier Rolet, the architect of the LSE's $3.1 billion bid for Canadian exchange TMX Group, which is still in the works. Icap, the world's largest inter-dealer broker (IDB), also reported growth in its core markets.
Electronic trading of bonds in January and February was up 26 percent to a daily average of $663 billion and repo trading rose 24 percent to $503 billion, while electronic foreign exchange trading was off 6 percent to $146 billion. Their fundamentals may be solid but both the LSE and Icap are looking to expand aggressively into derivatives trading and clearing over the next year.
The LSE's fledgling clearing business has been expanding, with volume growth in derivatives at 12 percent outperforming equities, where volumes were 1 percent stronger. The LSE gave no news on its planned takeover of Canada's TMX, saying it continued to seek shareholder and regulatory approvals. It is also forging ahead with the launch of a pan-European derivatives trading platform, taking it into competition with Deutsche Boerse and NYSE Euronext. Icap cited the launch of a new service aimed at foreign exchange derivatives traders as a sign of progress. The offering, through its subsidiary Traiana, has already attracted the support of Citigroup.