NEW YORK/LONDON (Reuters) - ICAP IAP.L is cutting up to 100 staff in London and New York, people familiar with the matter told Reuters, as the world’s largest derivatives broker aims to drive down costs by 50 million pounds ($77.5 million) this year.
The cuts could affect up to 70 people in the firm’s London office, sources said. But another source with knowledge of the matter said only 60 jobs would be cut in London.
The broker, which draws revenue from matching buyers and sellers of bonds, currency and swaps, is cutting 27 jobs from its flagship U.S. office, someone with knowledge of the matter said. Another source said the New York cuts were closer to 30.
A source with knowledge of the matter said the cuts would affect so-called voice brokers in London, brokers that deal with clients over the phone, and electronic traders in New York.
“They are targeting those desks that are hemorrhaging cash, such as credit derivatives,” said one source close to the firm.
ICAP declined to comment on the job cuts.
The financial industry, from investment banks to inter-dealer broker, is struggling to maintain revenues at a time when trading volumes have dwindled and deal-making has dropped off in highly volatile and uncertain markets.
Goldman Sachs Group Inc (GS.N) trimmed staff in its U.S. operations on Thursday amid a slowdown in capital markets activity, three people familiar with the matter said. The investment bank cut several dozen jobs, the sources said.
“All the inter-dealer brokers have suffered as voice broker compensation ratios have crept up as trading volumes have declined,” said Richard Perrott, an analyst at Berenberg Bank.
“The IDBs have continued to expand since 2008 but revenue per broker is down 20 percent since then - it was inevitable there would be some retrenchment,” he said.
Inter-dealer brokers (IDBs) like ICAP and rival Tullett Prebon TLPR.L want to reduce their costs to counter the impact of slow trading activity as banks and hedge funds pull back from the market in response to the financial crisis.
Tullett said last month it had cut 140 jobs this year, mostly among its brokers, to counter tough market conditions that left revenues flat for the early part of 2012.
Michael Spencer, chief executive of ICAP, said last month that cutting costs was a priority for the firm. He pledged to reduce overhead by 50 million pounds annually until 2014.
But he stressed in May that while the firm would be cutting from less profitable parts of the business, it planned to hire other staff to capitalize on growth opportunities, such as financial futures.
“I’d be surprised if there were fewer people on aggregate working at ICAP in a year,” Spencer said on a call last month.
A source said on Friday that ICAP had started a new risk arbitrage desk in New York with about eight people, including three or four traders. Risk arbitrage seeks to exploit differences in pricing in events likes mergers and acquisitions.
ICAP employees more than 5,100 people globally, according to its website. The firm says its transaction volume is in excess of $1.4 trillion a day.
($1=0.6449 British pounds)
Additional reporting by FX analyst Neal Kimberley; Editing by Mike Nesbit and John Wallace