TFS-Icap teams up with Volbroker

The deal will create a hybrid currency options platform that satisfies the needs of clients to have specialist brokers to conduct complex FX options transactions and cheaper electronic systems to handle more standardised flow business.

"TFS-Icap does more business and has more liquidity than any other broker in currency options. We are combining the best of both worlds," Volbroker chief executive Dirk Ward told RiskNews.

The move firmly squares up TFS-Icap/Volbroker with GFInet and Cantor Fitzgerald's eSpeed, and could potentially marginalise other brokers in the FX options business.

The combination is on a joint-ownership basis: TFS-Icap gains a few million dollars of technology from Volbroker in exchange for Volbroker and its main shareholders Citigroup, Deutsche Bank, Goldman Sachs, JP Morgan, Royal Bank of Scotland and UBS-Warburg, taking an unspecified percentage of TFS-Icap's future profits. At present TFS-Icap trades about 10 times more currency options than Volbroker. It is believed that no cash exchanged hands.

Although officials at the firms refused to provide more specific details on either shareholdings or profit-sharing agreements, TFS-Icap chief executive Mike Leibowitz will run the combined operation, and Volbroker's FX options technology will be moved into TFS-Icap's London offices. Ward, meanwhile, will pursue other opportunities within Volbroker.

Negotiations between the two firms have been ongoing for about a year. As reported by RiskNews on September 3, the firms were close to signing a deal early that month, but the events of September 11 delayed completion.

TFS-Icap was created by the merger of interdealer brokers Tradition Financial Services and Icap's over-the-counter currency options divisions in June last year. Volbroker went live with its electronic FX options business two months later that same year.