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(i) The names of the merger parties:
Tullett Prebon plc (“TP”) and ICAP plc (“ICAP”).
(ii) A description of the transaction:
This notification relates to the proposed acquisition of ICAP’s global wholesale broking business (“IGBB”) by TP (“Proposed Transaction”).
(iii) A description of the business activities of the merger parties worldwide and in Singapore:
TP and IGBB operate as wholesale intermediaries, principally in the provision of broking services to institutions trading financial and commodity instruments in the world’s major wholesale over the counter and exchange based markets. Each also has an associated data sales business, which provides pre-indicative pricing information which is informed by the trading activities of the broking businesses. TP and IGBB operate in Europe, the Middle East, Africa, North and South America and Asia Pacific.
(iv) A description of the overlapping goods or services, including brand names:
TP’s and IGBB’s Singapore based wholesale intermediary broking activities overlap with regard to the following asset classes and products: Treasury (Forward FX, Cash Deposits), Interest Rate Derivatives (Interest Rate Swaps) and Energy and Commodities (Oil). Both parties also have associated data sales businesses, which provide pre-indicative pricing information which is informed by the trading activities of the broking businesses.
All TP trading desks in Singapore operate under the TP brand name, with the exception of some Energy and Commodities products which trade under the PVM or Aspen brand names. All IGBB trading desks in Singapore operate under the ICAP brand name.
(v) A description of substitute goods or services:
Electronic trading platforms, exchanges, single dealer platforms and direct trading are substitutes for voice / hybrid broking.
(vi) The applicant’s views on:
a. the definition of the relevant market(s);
b. the way in which competition functions in this market;
c. barriers to entry and countervailing buyer power; and
d. the competitive effects of the merger (non-coordinated, coordinated and/or vertical effects, as relevant).
The Applicants submit that the relevant market consists of:
- national markets for all trading channels for the Treasury, IRDs and Energy and Commodities asset classes; and
- an APAC wide, if not global, market for data sales.
There will not be a substantial lessening of competition post-the Proposed Transaction for the following reasons:
- Competition from other wholesale intermediaries and trading channels: TP and IGBB compete against a wide range of trading methods and market participants including providers of traditional voice/hybrid broking services and electronic platforms. In this respect, the proposed transaction will not increase the ability and incentive for remaining wholesale voice hybrid broking firms to engage in any form of price coordination.
- Customers’ have significant countervailing buyer power: wholesale intermediary customers are sophisticated, have a wide range of choice, control liquidity, aggressively negotiate broking fees, and can easily switch to another provider noting that very few, if any customers use one wholesale intermediary exclusively.
- Barriers to entry and expansion are low: wholesale intermediaries, including brokers, have been able to enter the wholesale intermediary space and quickly reach sustainable scale with the support of market participants. Existing players can make significant inroads into new asset classes as TP’s and IGBB’s major customers generally have activities across multiple asset classes, and would be well placed to sponsor the expansion of a particular intermediary if they felt it were necessary.
- Falling volumes and falling commission rates: voice/hybrid broking is characterised by falling trading volumes and consistent downwards pricing pressure, from which the merged entity will not be able to deviate.
- In relation to broking data services, the proposed transaction will not provide TP with any material market power. TP will continue to be constrained from attempting to increase prices or restrict access to the broking data that is generated from its broking activities, particularly due to the global scope of competition from other wholesale intermediaries, data aggregators, trading channels and market participants such as dealer banks and settling and clearing houses.
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