Inter-dealer brokerage firm TP Icap is in “advanced discussions” with equities and fixed income trading technology provider Liquidnet for between $600-700 million. The firm says the deal will bring it a buy side client base as well as opportunities to build a dealer-to-client business line.
Although Liquidnet is mostly known for its equities dark trading model, TP Icap says it has a growing fixed income presence and an advanced data science capability within its investment analytics division. The firm also boasts a network of more than 1,000 asset management and hedge fund clients who collectively manage over $33 trillion in equity and fixed income assets.
The broker also says that Liquidnet has already proven its ability to leverage its network and relationships to enter new market segments. Since 2015, when it launched its fixed income offering, it has built a network of more than 500 active asset management clients, the firm adds. “TP Icap believes there is clear potential to build further, complementing Liquidnet’s strengths and shared unconflicted agency-only model with its own product expertise, dealer relationships, and connectivity,” the firm says.
Observing that the market structure in credit and Rates trading has evolved significantly in recent years, TP Icap says it expects to use its credit market expertise, its established relationships with the global dealer community, and Liquidnet’s existing capabilities, to expand the Liquidnet offering to include a range of D2C tools and protocols. “In a growing market segment, TP Icap expects the enlarged group to present a highly attractive offering to market participants,” it says.
The firm also sees similar opportunities in Rates, where it notes that OTC trading represents an increasing share of interest rate derivative trading and that electronification in the D2C segment is “growing particularly rapidly. The firm says it believes it can create a “powerful competitor in the D2C electronic trading arena.”
The brokerage firm also expects greater opportunities from a combined data and analytics business, saying that Liquidnet’s investment analytics team and artificial intelligence and machine-learning tools are expected to complement and enhance TP Icap’s product development and service capabilities. “TP Icap’s global sales team expects to present useful tools and products (such as the recently launched Bond Evaluated Pricing service) to the Liquidnet client base, accelerating penetration of the buyside market for data and analytics,” it states.