Icap boss Michael Spencer plays down fears over regulatory backlash

Michael Spencer, boss of money broker Icap, today played down concern that the company could be hit by the global regulatory backlash following the banking crisis. Speaking after Icap reported a slump in annual profits, Spencer said: "There is always a risk that trading could be affected if the cost of doing business rises too steeply … But the opportunities outweigh the risks and we continue to benefit from the greater scale and broader diversity than our competitors. "By our estimates, overall industry revenue declined in 2009/2010. But our share of the market has grown from 22% to 24%; our strategy remains to increase this to 35%." Icap has been moving into new arenas such as electronic oil swap trading and interest rate swaps as regulators prepare to move derivatives trading to formal exchanges in a bid to increase pricing transparency. Spencer, who is treasurer of the Tory party but is standing down from that post in the autumn, says that the year has started well as trading flourishes when there is volatility in the markets as there has been in recent months in the wake of the unfolding crisis in the eurozone. But he hit out at the German ban on short-selling saying such curbs are "usually ineffective, with activity simply migrating to other jurisdictions". He predicted that the ban would create more business for Icap, as traders scrambled to take positions elsewhere. Last year was a difficult one for Icap with its figures for the year to last March dented by £50m of exceptional charges linked to closing its cash equities division and a fine from the US Securities and Exchange Commission following allegations that it used false trades to encourage trading by clients. Overall trading volumes were also down as the market stabilised in the second half of 2009, limiting trading opportunities. Post tax profits crashed 37% to £116m, but the numbers were in line with City expectations after the company issued a profits warning when it said its cash equities business had faltered. It added that new operations in Brazil and shipping were taking longer than expected to become profitable. Investors have sold shares in Icap amid concern that the US could curb the ability of banks to make profits from using their own money to trade. But Spencer said Icap generated only around 5% of its business from banks' proprietary trading. The Icap boss attracted controversy following the group's profits warning because it came only weeks after he sold a tranche of shares. If he had sold shares after the profits alert, he would have received £15m less. Spencer faced calls from the Liberal Democrats to resign as Tory treasurer. He vigorously denied any impropriety.