BrokerTec confirms takeover talks

Bond trading platform BrokerTec has confirmed widespread industry rumours that it is the subject of takeover talks. BrokerTec issued a statement on Friday stating it received approaches from several parties about "possible strategic combinations”, and was in the early stages of talks with an unspecified number of potential partners.

"We wanted to dispel the rumours that we’re losing money and the shareholders are looking to sell the company," said Garry Jones, chief executive and president of BrokerTec Europe. Jones added that the firm has not been seeking a partner to take it over and is more intent on expanding its own business.

BrokerTec would not name the other parties involved in the takeover talks, but London-based inter-dealer broker Icap is widely rumoured to be the prime contender to buy Jersey City-based BrokerTec.

Icap declined to confirm or deny the reports.

An analyst close to one of the firms said the deal would make sense for Icap, as the fixed-income markets are becoming more open to electronic trading. "It would be cheaper than building its own system and then having to build up liquidity," the analyst added.

Icap is cash-rich, having last year raised more than £32 million from the sale of its shareholdings in the London Stock Exchange, Liffe and Deutsche Borse, and has more than £155 million in total cash reserves - enough, the analyst believes, to buy BrokerTec outright.

It is unclear what changes Icap would make if it were to take over the bond broker. Icap operates a proprietary trading system, the ETC (Electronic Trading Community) platform for securities, developed by Icap predecessor Garban.

BrokerTec uses a system based on OM’s Click technology, which it may be unwilling to relinquish. Jones added that BrokerTec is always looking to improve its platform, but has no plans to replace it.

It is also unclear what would happen to the 14 US and European banks that are BrokerTec shareholders. But big-name bank shareholders are unlikely to deter Icap. In December last year it merged the joint venture it has with Tradition Financial Services, TFS-Icap, with online FX options broking platform Volbroker, after which Volbroker’s bank shareholders ceded control to TFS-Icap.