Tullett Prebon benefits from volatility after Brexit

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The UK-based interdealer broker reported revenues of £216 million in the three months ended September 30, up 15% from £188 million a year earlier. Tullett made about 60% of its revenue in dollars.

Had exchange rates remained constant third-quarter revenue would have risen by 4%, Tullett said in a November 4 trading statement.

Tullett CEO John Phizackerley said: “This has been a satisfactory quarter, with a number of products and regions showing gains.”

The firm said in its trading statement that it had seen benefits from volatility “associated with political uncertainty and speculation around the potential for further interest rate increases”.

There has been speculation about an interest rate rise in the US, while the upcoming presidential election is causing uncertainty in the markets, as are the questions about the future of the EU in the wake of the UK’s vote to withdraw from the bloc.

Interdealer brokers, which help match buyers and sellers of financial instruments in the wholesale markets, tend to benefit from bouts of volatility because they typically see higher levels of activity.

However, low interest rates and the need for investment banks to reduce their leverage since the financial crisis have by and large reduced volatility and caused pain to interdealer brokers.

This has prompted Tullett to diversify into energy and commodities. The division’s revenue for the nine months ended September 30 rose by 10% year-on-year at constant exchange rates. Information sales revenue was up 20% in the nine-month period.

This contributed to a 7% revenue rise to £647 million for the business as a whole during the nine month period.

“While some trading conditions remain challenging, our strategy of diversification and cost control is proving effective,” Phizackerley added.

Another result of tough times has been consolidation of the industry. Tullett is awaiting the closure of its acquisition of the voice broking operations of Icap. The deal, which was revealed in November 2015, requires approval from regulators including the UK’s Financial Conduct Authority. Tullett said it is working with Icap on the transaction.

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