Tp Icap Group Plc · LSE:TCAP
Tp Icap — Investor Day (November 2017)
85 slides from Tp Icap's investor day presentation, Nov 30, 2017
Slide 1: TP ICAP Capital Markets Update
TP ICAP Capital Markets Update 30 November 2017
Slide 2: Agenda
Agenda Time Activity Presenter 9.15AM Introduction John Phizackerley Finance Robin Stewart Integration and Corporate Services Iain Plunkett Global Broking Nico Breteau and David Perkins MiFID and Brexit Frits Vogels Customer/CRM John Abularrage 10.45AM Break 11.00AM Customer Panel Frits to moderate
Slide 3: Finance
Finance Robin Stewart, Interim CFO TP ICAP Capital Markets Update 3
Slide 4: Finance
Finance • Regulatory capital • Cash resources • Dividend policy • Legal entity restructuring Capital Markets Update 4
Slide 5: Regulatory capital
Regulatory capital • We are regulated under EU regulation (CRD IV) • On completion of the ICAP acquisition the Group was granted a waiver from consolidated supervision under CRD IV until 30 December 2026 • The waiver was granted as we currently have a technical deficit under CRD IV • The deficit ari
Slide 6: Regulatory capital – waiver
Regulatory capital – waiver • The Group will eliminate the capital deficit through retention of earnings • Other conditions of the waiver include: — net debt to EBITDA not to exceed 2.5:1 — EBIT / Interest payable of at least 4:1 — net debt not to exceed £500m — net debt not to exceed two times equi
Slide 7: Cash resources
Cash resources • Cash held for working capital, regulatory, H1 2017 cash and financial assets liquidity and corporate purposes £42m • Capital requirements of the regulated legal £74m entities are generally met by net tangible assets held in cash • During 2017 and 2018 cash will be constrained by the
Slide 8: Dividend policy
Dividend policy • We reiterate our guidance of a full year dividend of 16.85p during the integration with an ambition to grow the dividend over time • We will review the policy in 2019 as we near completion of the integration programme Capital Markets Update 8
Slide 9: Legal entity restructuring
Legal entity restructuring • Over 200 legal entities in the combined TP ICAP Group • Process is under way to reduce this by more than half, which will facilitate synergy savings in many integration work streams • There are some additional benefits from doing this: — streamline liquidity management i
Slide 10: Summary
Summary • Managing resources in order to deliver value for shareholders • Strong cash position • Capital compliant with CRD IV by 2026 • Full year dividend of 16.85p during the integration, which will be reviewed in 2019 Capital Markets Update 10
Slide 11: Integration and Corporate Services
Integration and Corporate Services Iain Plunkett, Chief Operating Officer Capital Markets Update 11
Slide 12: Introduction – my background
Introduction – my background • Joined in May 2017 • Previous senior CIO, CTO, COO roles across the industry Technology • Most recently Group COO for Aberdeen Asset Business transformation Management and change Innovation Regulation Strategy • Global Markets, Asset Management, Wealth, Corporate, Reta
Slide 13: Two aspects to our business model
Two aspects to our business model ‘Brand family’ business model “Differentiate… Customer… Product… Drive for Revenue… revenue Agile” ‘Shared services’ business model Drive for efficiency & scale at marginal cost IT “Efficiency… Operations Process… Sourcing & Real Estate Location… HR, Finance Margin…
Slide 14: View on trends and themes
View on trends and themes Capital ‘All to all’ APIs plus screens Partnerships ecosystem & markets “connectedness” Hybrid & Joint Ventures FinTech execution Cost and Talent Transition to Data, big complexity of global data & regulation Platforms & operating analytics venues models Rapid customer-led
Slide 15: Our integration journey
Our integration journey Corporate services transformation (Year 2-3) • Move from ‘workable’ processes to ‘optimised’ processes • Reduce redundancy within IT • Move to Global from Regional • Deliver efficiencies from HR, Legal, Risk, Compliance and Finance, Focus on business integration (Year 1) incl
Slide 16: Levers to reduce costs and increase efficiency
Levers to reduce costs and increase efficiency Information Technology Increase IT productivity through ‘Agile & DevOps’ Decommission legacy applications Increase productivity Reduce cost Infrastructure rationalisation, including Public Cloud Adopt a ‘service’ based architecture Simplified architectu
Slide 17: Example: Making IT 'Agile'– ICAP Fusion
Example: Making IT ‘Agile’– ICAP Fusion Adopting modern technology methodology • ICAP invested heavily in a platform called Fusion. This aimed at repositioning ICAP IT for the modern world and the new competition including FinTech • Whilst the project overran within ICAP and was never embedded, we p
Slide 18: Summary
Summary • Made good progress in first year of integration • Next 2 years of integration involve complex change: we are committed to the benefits • Hybrid broking using innovative IT, Data & Analytics, is very ‘sticky’ • We have real sources of differentiation and broad opportunities to diversify • B
Slide 19: Global Broking
Global Broking Nicolas Breteau, CEO, TP ICAP Global Broking and David Perkins, Global Head of Electronic Markets
Slide 20: Our Vision
Our Vision Global Broking aspires to be the largest and most respected professional intermediary in wholesale financial markets, leveraging the expertise of brokers alongside e-solutions Capital Markets Update 20
Slide 21: Operating globally though two brands
Operating globally though two brands Americas 778 brokers Between Tullett Prebon EMEA and ICAP, we won a 905 brokers total of 23 categories. APAC 569 brokers H1-17 eMarkets £670m revenue Post Trade 72% of TP ICAP revenue Corporate Functions Capital Markets Update 21
Slide 22: Covering all asset classes
Covering all asset classes Rates FX and Money Markets Emerging Markets Equities Credit • Interest rate derivatives • Spot FX • All asset classes in smaller • Equity derivatives • Corporate bonds • Interest rate options • Forward FX centres/non G11. Primarily • Cash equities • Credit derivatives rate
Slide 23: Innovation Execution Methodology
Innovation Execution Methodology Increasing Electronification Voice Chat Indication of Workup Central Limit Session Based Auxiliary/ Request for RFQ/RFS Crossing “Execution“ Interest Order Books (Auction/ Continuou Quote Solutions Volume s Match Matching) Data Capture V Digital Assistant / Machine L
Slide 24: What is Hybrid execution?
What is Hybrid execution? Voice Hybrid Venues Electronic Venues ? Order Capture Order Capture Price/Volume Distribution Price/Volume Distribution VALUE OF HYBRID VOICE Trade Capture • Discretion • Size Discovery Trade Enrichment • Market “Colour” • Multi-legged/ cross asset execution • Regulated Ven
Slide 25: Hybrid execution
Hybrid execution Capital Markets Update 25
Slide 26: Strategic enablers
Strategic enablers Global Broking aspires to be the largest and most respected professional intermediary in wholesale financial markets, leveraging the expertise of brokers alongside e-solutions. 1. Increase the quality of earnings a. Add brokers & services in focus asset classes, and customer segme
Slide 27: Adding brokers and services
Adding brokers and services Rates FX & Money Markets Emerging Markets Equities Credit • Interest rate • Spot FX • All asset classes in • Equity derivatives • Corporate bonds ICAP US derivatives • Forward FX smaller centres/non • Cash equities • Credit derivatives Inflation • Interest rate options G1
Slide 28: Increasing electronification of client workflow
Increasing electronification of client workflow Pre-Trade Venues Trading Protocols Electronic Post Trade Order capture and price dissemination Regulated markets • Central limit order • Affirmation book • Confirmation • Graphical user • MTFs • Volume matching interfaces (front-ends) • Settlement • OT
Slide 29: Talent management, performance and development
Talent management, performance and development Brokers are our most important asset, we: So that our brokers are: • Incentivise and retain top producers • Productive • Manage out underperformers • Engaged • Embed technology in the broker workflow • Tech savvy • Appropriately rewarded • Recruit and d
Slide 30: Conduct and culture
Conduct and culture Clear values Regular assessment advocated by senior and reporting HIRE: Honesty, management Integrity, Respect, Excellence Education and training programme for staff Capital Markets Update 30
Slide 31: Institutionalising client relationships
Institutionalising client relationships We have put in place a structured way to understand our customers and competitive landscape, to engage with customers and track opportunities. 2017 facts: • 24,000 client contacts • 2,000 client visits • 600 visits to top 10 clients • More than 100 visits by s
Slide 32: Conclusion
Conclusion Global Broking aspires to be the largest and most respected professional intermediary in wholesale financial markets, leveraging the expertise of brokers alongside e-solutions. • We are well placed to take advantage of the opportunities presented by regulation • We partner with our client
Slide 33: MiFID and Brexit
MiFID and Brexit Frits Vogels, CEO TP ICAP EMEA Capital Markets Update 33
Slide 34: TP ICAP and MIFID II
TP ICAP and MIFID II • Largest piece of regulation of Financial Services in many years • Requirement to be compliant by 3 January 2018 • Designed to provide greater transparency, enhanced investor protection and better-functioning markets • Focus is very much on non-equities • Covers most of our ass
Slide 35: Trading venues and asset classes
Trading venues and asset classes • We expect to operate the following trading venues (MTFs and OTFs) from 3 January 2018 Legal Entity iSwap Euro ICAP WCLK ICAP Securities ICAP Energy ICAP Global Tullett Prebon Tullett Prebon PVM Futures Ltd. Ltd. Ltd. Ltd. Derivatives Europe Securities Ltd. MTF iSwa
Slide 36: TP ICAP and MIFID II
TP ICAP and MIFID II • We expect to be compliant by 3 January 2018 • Compliance is a competitive differentiator for us • MiFID II’s complexity creates barriers to entry for new entrants • Each venue will publish its “rate card” • MiFID II’s required changes to market structure allows cross asset-cla
Slide 37: BREXIT
BREXIT Capital Markets Update 37
Slide 38: Summary
Summary • We will be compliant with MIFID II by 3 January 2018 — competitive differentiator for us • Opportunity to monetise MIFID II reporting data • BREXIT planning is on track Capital Markets Update 38
Slide 39: Customer Relationship Management
Customer Relationship Management John Abularrage, CEO TP ICAP Americas Capital Markets Update 39
Slide 40: CRM mission statement
CRM mission statement The purpose of the CRM discipline is to use strong client relationships and valuable market input to grow revenues, while guiding the commercial decision and strategy of the group. Capital Markets Update 40
Slide 41: CRM strategy
CRM strategy • Central, easily searchable database Number of Relationships by Client Sector, Total: 24,249 • Excellent feedback mechanism for the 184 294 400 business 780 752 758 • Helped with build out of Institutional 1,235 Services Strategy 1,298 • Invaluable insight into client response to MiFID
Slide 42: Market participants survey
Market participants survey • Independent survey covering Emerging Markets, Power & Gas, US Corporate Bonds and US Treasuries • Worldwide, with strong US participation • Included banks, asset managers and hedge funds Capital Markets Update 42
Slide 43: How survey participants currently execute
How survey participants currently execute 80% 70% 60% 50% 40% 30% 20% 10% 0% Emerging markets Power & gas US corporate bonds US treasuries Ref: TABB Group. Power of Voice Outreach Results, June 2017. Voice Hybrid Electronic Capital Markets Update 43
Slide 44: Round-lot trades – which methodology provides better liquidity?
Round-lot trades – which methodology provides better liquidity? 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Emerging Markets US Corporate Bonds US Treasuries US$ Repo Ref: TABB Group. Power of Voice Outreach Results, June 2017. Voice Electronic Capital Markets Update 44
Slide 45: Odd-lot trades – which methodology provides better liquidity?
Odd-lot trades – which methodology provides better liquidity? 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Emerging Markets Power & Gas US Corporate Bonds US Treasuries US$ Repo Ref: TABB Group. Power of Voice Outreach Results, June 2017. Voice Electronic Same N/A Capital Markets Update 45
Slide 46: Block trades – which methodology provides better liquidity?
Block trades – which methodology provides better liquidity? 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Emerging Markets Power & Gas US Corporate Bonds US Treasuries US$ Repo Ref: TABB Group. Power of Voice Outreach Results, June 2017. Voice Electronic Capital Markets Update 46
Slide 47: During benign conditions, which trading methodology provides better execution?
During benign conditions, which trading methodology provides better execution? 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Emerging Markets Power & Gas US Corporate Bonds US Treasuries US$ Repo Ref: TABB Group. Power of Voice Outreach Results, June 2017. Electronic Voice Capital Markets Update 47
Slide 48: During stress events, which trading methodology provides better execution?
During stress events, which trading methodology provides better execution? 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Emerging Markets Power & Gas US Corporate Bonds US Treasuries US$ Repo Ref: TABB Group. Power of Voice Outreach Results, June 2017. Electronic Voice Same Capital Markets Update 48
Slide 49: How important is it to know your counterparty?
On a scale of 1-5 (5 being highest), how important is it to know your counterparty? 60% 50% 40% 30% 20% 10% 0% Emerging Markets Power & Gas US Corporate Bonds US Treasuries US$ Repo Ref: TABB Group. Power of Voice Outreach Results, June 2017. One Two Three Four Five Capital Markets Update 49
Slide 50: Pre-trade discovery – is voice or electronic trading more valuable?
Pre-trade discovery – is voice or electronic trading more valuable? 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Emerging Markets Power & Gas US Corporate Bonds US Treasuries US$ Repo Ref: TABB Group. Power of Voice Outreach Results, June 2017. Voice Electronic Same Capital Markets Update 50
Slide 51: Biggest value of executing a trade via voice-based trading
What do you perceive is the biggest value of executing a trade via voice-based trading? Power & Gas US Corporate Bonds US Treasuries 8% 17% 8% 8% 17% 25% 8% 33% 17% 75% 17% 17% 33% 17% Information Liquidity Protection Trust Information Pricing Liquidity Information Size Protection Last look Pricing
Slide 52: Biggest advantage of executing electronically
What is the biggest advantage of executing electronically? Emerging Markets Power & Gas US Corporate Bonds 8% 8% 8% 8% 25% 8% 17% 33% 17% 17% 75% 25% 17% 17% 17% Processing Speed Validation Efficiency Clearing Ease Efficiency Anonymity Sourcing None Distribution Liquidity Distribution Immediacy None
Slide 53: Instruments that should migrate to electronic execution
Are there particular instruments that should migrate to electronic execution? Emerging Markets Power & Gas US Corporate Bonds 8% 8% 8% 33% 33% 58% 58% 25% 67% Odd Lots <$2MM Short-end Basis N/A Odd Lots <$2MM Short-end New Issue US Treasuries 42% 58% Odd Lots OTR Ref: TABB Group. Power of Voice Outr
Slide 54: Instruments that should stay voice-based
Are there particular instruments that should stay voice-based? Emerging Markets Power & Gas US Corporate Bonds 8% 17% 17% 8% 33% 33% 17% 17% 58% 25% 33% 17% 17% Round lots Esoteric No Options Spreads Long-dates Esoteric No Round lots Corporates Long Bonds Long Bonds Blocks US Treasuries 8% 8% 50% 33
Slide 55: Summary
Summary • CRM is a competitive advantage we are exploiting • Increasing our collaboration with customers • Reaffirms our confidence in the longevity and essential nature of our business Capital Markets Update 55
Slide 56: TP ICAP Capital Markets Day
TP ICAP Capital Markets Day 30 November 2017
Slide 57: Panel Discussion
Panel Discussion Capital Markets Update 57
Slide 58: Institutional Services
Institutional Services Sam Ruiz, CEO Institutional Services Capital Markets Update 58
Slide 59: Introduction
Introduction Institutional Services is a key component of the TP ICAP brand, and future strategy. An agency, advisory, sales and execution service, sourcing and accessing multiple liquidity sources across multiple products to a new, expanding and sophisticated client base. Capital Markets Update 59
Slide 60: Evolution of the agency broker
Evolution of the agency broker Increased costs Liquidity Role of the Regulations Profitability for the sell side transformation agency broker • MIFID II • Efficient balance sheet • Focus liquidity & • Basel III • Risk weighted assets allocation • Fragmentation disperse risk • AIFMD • Regulatory • Ti
Slide 61: Client needs and value propositions
Client needs and value propositions Build business case and Evaluate buy-side opportunity Develop list of building blocks implementation plan Market landscape Where to compete? • High level roadmap • Identify revenue pools by Client • High-level steady-state products, clients, and asset segments ope
Slide 62: Fee pool estimates
Fee pool estimates EMEA & Americas revenues by client EMEA & Americas CMIB revenues by Total AUM by Geography ($b) segment (GBP billion) revenue type (GBP billion) $58, 3% $176, 8% 100% (109) 100% (109) Hedge Funds US 29% 60% Commissions 30% $516, 22% Europe of total revenue Bid/ask Asia Total asset
Slide 63: Organic strategy
Organic strategy Medium term: 18-36 months Long term: 3 years + A mix of ‘dealer to dealer’ and ‘all-to-all’ Short-term: 12-18 months markets: More asset classes become ‘all to all’: • Expand hedge fund coverage to larger • Serve hedge funds, traditional asset Mostly ‘dealer to dealer’ markets: fund
Slide 64: COEX partners
COEX partners • Hybrid voice broker in listed futures and options (fixed income, equity index, FX and commodities) • Offers execution services to hedge funds, asset managers and proprietary traders; and political insight, FX & macro strategy recommendations and proprietary quantitative tools through
Slide 65: Summary
Summary • Key opportunity to service the buy side • Attractive fee pool • Buyside is looking for anonymity, no conflict of interest and a solid credit rating • Target is to build a high touch, multi asset class, agency sales and execution brokerage • Will build both organically and through acquisiti
Slide 66: Global Energy & Commodities Update
Global Energy & Commodities Update Presented by Andrew Polydor, CEO TP ICAP Energy and Commodities Capital Markets Update 66
Slide 67: At a glance
At a glance Oil Gas Power Renewables Ferrous metals Base metals Precious metals Soft commodities Coal Freight • Broad range of energy and commodity products • Natural hedge across our portfolio • Products covered are both global and domestic Capital Markets Update 67
Slide 68: Locations and product offerings
Locations and product offerings • US Natural Gas * • Fuel Oil • US Power - Western • Naphtha Interconnect • LPG • Gasoline • Crude • Middle Distillates • Gasoline Bergen • Oil options • Gasoil • Ethanol Amsterdam • Singapore Distillates London * • US Power – Eastern Frankfurt • Precious Metals Inter
Slide 69: Broad client distribution
Broad client distribution Leading the way in diversifying the client base – 87% of current revenue from non banking clients. Bank Hedge Fund Asset Manager Government / Local Authority Corporation Insurance Company Trading Company Capital Markets Update 69
Slide 70: Our trading spectrum
Our client interaction spectrum Our trading spectrum Client Client interaction interaction Capital Markets Update 70
Slide 71: Case study – European gas and power
Case study – European gas and power European Gas and Power is a mature market which is traded on the Trayport platform. Clients have a range of execution options. Clients still have a strong preference for voice execution. They getter better execution via a broker because: • Screens are good for pri
Slide 72: Market Update – Retaining revenue in a difficult market
Market Update – Retaining revenue in a difficult market Bloomberg Commodity Index 5yr Price Chart Bloomberg Commodity Index 5yr Volatility Chart • Commodity markets have generally entered a period of low volatility and range bound prices, with a lack of macro events to encourage activity • Oil marke
Slide 73: Market Update – Future trends
Market Update – Future trends Global GDP Growth 2020-2040 World Total Energy Consumption 2020-2040 250,000 250 200,000 200 150,000 150 Quad Btu 100,000 100 $bn 50,000 50 0 0 2020 2025 2030 2035 2040 2020 2025 2030 2035 2040 OECD Non-OECD Total Liquids Natural Gas Coal Nuclear Other Source: EIA Energ
Slide 74: Initiatives
Initiatives Market Share Growth – Filling the gaps: • US • China Developing Technology: • iCapture • Nova • Artificial Intelligence People: • 350 brokers in new office in Victoria • Build out Houston Capital Markets Update 74
Slide 75: Summary
Summary • Award winning commodities business – number 1 in the market • Diverse client base and execution methods • Currently tough market conditions but we continue to outperform our competitors • Strong opportunities to grow the business Capital Markets Update 75
Slide 76: Data & Analytics
Data & Analytics Eric Sinclair, CEO TP ICAP Information Services Capital Markets Update 76
Slide 77: Background – Eric Sinclair
Background – Eric Sinclair • Vice President, Reuters ⎼ OTC and exchange markets, risk management and trading platforms • Executive Vice President, Global Sales, Spectra Securities Software ⎼ Built global sales team and global client base • President, TMX Market Insights, TMX Group (Toronto Stock Exc
Slide 78: TP ICAP – Assets to Leverage
TP ICAP – Assets to Leverage • Largest global IDB brand with accomplished Executive Team • Highly valuable proprietary OTC data • Global, neutral market position • Well positioned to provide client solutions to meet regulatory requirements Capital Markets Update 78
Slide 79: New opportunities – Indicative data
New opportunities – Indicative data TP ICAP data Indicative Pre-trade Post-trade Third-party data data TP ICAP CLOUD Proprietary +/or 3rd Party DATA LAKE analytics e.g. • Best execution ANALYTICS • FRTB • Correlation data • Liquidity metrics Customer • Margin optimisation segmented Customer A Custom
Slide 80: New opportunities – Regulation
New opportunities – Regulation TP ICAP data Indicative Pre-trade Post-trade Third-party data data TP ICAP CLOUD Proprietary +/or 3rd Party DATA LAKE analytics e.g. • Best execution ANALYTICS • FRTB • Correlation data • Liquidity metrics Customer • Margin optimisation segmented Customer A Customer B
Slide 81: New opportunities – The Cloud
New opportunities – The Cloud TP ICAP data Indicative Pre-trade Post-trade Third-party data data TP ICAP CLOUD Proprietary +/or 3rd Party DATA LAKE analytics e.g. • Finding Alpha ANALYTICS • FRTB • Correlation data • Liquidity metrics Customer • Margin optimisation segmented Customer A Customer B Cu
Slide 82: Summary
Summary TP ICAP Data & Analytics will accelerate profitable growth • Best global source of high value OTC data • Opportunities to leverage global brand and neutral market position • Broaden offering beyond proprietary data • Enhance Group margin with growing recurring revenues Capital Markets Update
Slide 83: Closing Remarks
Closing Remarks John Phizackerley, CEO TP ICAP Capital Markets Update 83
Slide 84: Summary
Summary • TP ICAP has a host of exciting growth opportunities • Experienced management team well set to take the business forward • Integration on track and progressing well • Technology is at the heart of everything we do • Focused on delivering value to shareholders Capital Markets Update 84
Slide 85: Thank you
Thank you Capital Markets Update 85