Icap retains Washington lobbyists

The as-yet un-named lobbyists will focus on stressing to politicians that Icap does not enjoy an anti-competitive advantage in key areas of its business in the US, including over-the-counter swaps and government bonds. The lobbyists are also believed to be manoeuvring to ensure a swift passage of Icap’s planned $240 million takeover of electronic bond platform BrokerTec from a consortium of leading banks.

Icap has faced significant negative Washington lobbying from parties attempting to say the UK broker tried to stifle competition in the US markets by poaching staff from September 11-stricken Cantor Fitzgerald, and its apparent takeover attempt of small swaps trading platform Blackbird. Icap has strenuously denied such charges.

But the petitioning led to probes by the United States Department of Justice, two congressional committees, along with a request by the Securities and Exchanges Commission to look into Icap’s behaviour in the US. The UK broker claimed it has faced relentless scrutiny because its US rivals were applying political pressure it could not match in Washington. Icap’s head of US operations, Steve McDermott, told news agency Reuters in an interview on August 23: “We have no lobbyists, no contributions, no access to Washington.”

This has now changed. The lobbyists are expected to press the case that banks typically favour strong competition between two to three large brokers for mainstream derivatives and cash products. Such a situation, as appears to occur with interest rate swaps, ensures margins are reasonably tight and liquidity pools deep enough for banks to conduct sizeable transactions. If Icap’s lobbyists can convince US politicians that this is a satisfactory and efficient market situation, it should ensure the smooth passage of its purchase of BrokerTec from a consortium of major international banks.

Icap reached a deal with the management of Blackbird last week that resulted in it selling its 19% stake in the Charlotte, North Carolina firm to the company’s management. Under the terms of the deal, Blackbird executives signed an agreement not to negatively criticise Icap and end their negative lobbying efforts in Washington.

The UK broker unveiled yesterday that it plans to acquire privately owned Kentucky-based energy broker APB Energy (See - Icap signs letter of intent to buy out APB). APB brokers gas, electricity, weather and coal derivatives on its online platform, True Quote, and through traditional voice brokering.