TP ICAP Enters the Crypto Business to Trade Bitcoin Derivatives

(Bloomberg) -- Facing a slowdown in its core brokerage business, TP ICAP Plc has joined the handful of traditional finance firms opening the door to Bitcoin.

The ICAP unit of the world’s biggest interdealer broker is now acting as an intermediary between customers wanting to buy or sell Bitcoin futures. The firm’s new venture, which is run from London by Simon Forster and Duncan Trenholme, expects to add non-deliverable forwards tied to the largest cryptocurrency and then plans to open desks in Asia and the U.S.

TP ICAP’s embrace of the nascent crypto asset universe, following financial institutions such as Fidelity Investments and Intercontinental Exchange Inc., contrasts with most of its clients. Big money managers and investment banks have so far steered clear of the largely unregulated assets -- which are recovering from a yearlong plunge dubbed the crypto winter -- deterred by concerns about money laundering, cyber security and market manipulation.

“Every institution is on an educational journey,” Trenholme, co-head of digital asset markets, said in an interview in London. “Many are exploring how tokens can legitimately be traded or stored and I’d expect more projects to hit the market over the next year or two.”

Interdealer brokers have traditionally relied on handling trades for banks, but their volumes shrunk in the aftermath of the financial crisis. A profit warning last year wiped 36% from TP ICAP’s market value in a day. It’s regained about 10% since then to 1.6 billion pounds ($2 billion).

Clients who want to access digital assets via the firm have to go through its identity and anti-money laundering checks, said Frits Vogels, chief executive officer of Europe, the Middle East and Africa at TP ICAP. That explains why the company is starting with a cash-settled futures contract that trades on a regulated public market managed by the CME Group Inc., rather than venturing directly into the underlying cryptocurrency market.

The CME is the only available regulated platform since Cboe Global Markets Inc. is settling its final Bitcoin futures contract this week after 18 months of trading.

ICAP is also exploring a wide array of digital assets, from other cryptocurrencies to tokenized assets -- virtual representations of real world assets from property to stocks. It does not rule out trading in the underlying market in the future.

“We want to be close to what’s happening within this nascent asset class because we believe it’s important to invest in the early stages of a growing market,’’ said Forster. “TP ICAP also understands that this technology could disrupt or impact other asset classes where we currently operate, so we feel it’s important to be informed.”

To contact the reporter on this story: Alastair Marsh in London at amarsh25@bloomberg.net

To contact the editors responsible for this story: James Hertling at jhertling@bloomberg.net, Keith Campbell

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