The financial world may appear to be based on trades and investments, but without markets operators such as ICAP the City would grind to a halt. Acting as an intermediary between traders, ICAP's brokers help deals happen by ensuring their clients gain the best price possible on trades while maintaining anonymity.
In addition to being the world's leading interdealer broker, ICAP also offer a diverse range of post-trade risk mitigation services (PTRS). To find out more about working in broking and post-trade risk mitigation, we spoke to ICAP's Chief Executive Officer for Post-Trade Risk Mitigation Services, Mark Beeston.
As an industry, broking has evolved considerably over recent years. At present, there are essentially three different types of broking: voice, electronic and hybrid.
"Voice broking involves brokers acting as intermediaries on the phone between numerous clients to try and find deals," explains Mark. "At the other end of the scale, you have the electronic trading platforms where people enter the transaction types they are interested in and get matched with another dealer electronically." Hybrid broking, as its name suggests, offers a combination of these two methods.
While electronic broking offers the advantage of speed, voice broking remains an essential part of the industry. Understandably, clients are more willing to entrust large sums of money to human brokers than a computer system.
"A lot of the transactions that voice brokers are dealing with are bespoke transactions," says Mark, "but that's not to say that it's a bespoke service. Voice broking brings in the lion's share of revenue in the industry and is particularly well adapted to markets that are less uniform and more esoteric.
In the last decade ICAP have expanded the remit of their business beyond broking to include a range of PTRS. "ICAP is fairly unique among interdealer brokers in that we realised a while back that there was value in having a holistic relationship with our clients," Mark explains. "Part of ICAP's overall strategy is to become a more diversified financial markets operator rather than just a pure interdealer broker."
At the heart of this expansion lies PTRS, a service that provides clients with methods of removing risks from their trading portfolios, allowing them to increase their efficiency and lower costs.
"Certain trades performed by clients will produce risk," Mark explains. "Our services help people find ways to spend their time focused on making money, rather than worrying about whether they're going to lose money."
Graduates joining the PTRS team at ICAP can expect rapid exposure to work on the front line. Following an initial training period, graduate trainees will be assigned to one of ICAP's PTRS businesses (see box), and will be responsible for engaging with clients and selling them the benefits of ICAP's services.
"Clients submit their risks to our services for them to be eradicated," Mark tells us. "Trainees will be working with them on a daily, weekly, monthly or quarterly basis depending on the nature of the risk." As a result of these close relationships, trainees are often quickly given a high level of responsibility; two graduate trainees from the last couple of intakes are now each responsible for a business sector.
The "Big Bang"
One of the biggest challenges currently facing both brokers and the wider financial world is increased regulation in the wake of the financial crisis. Aspects of the broking market have needed to be overhauled, but Mark points out new regulations have also encouraged clients to adopt PTRS at ICAP.
"Banks are currently very motivated to use our services to address particular regulations, for example those centred on reconciliation - the process used to ensure two sets of financial records are in agreement. Regulation might make business more difficult but it's worth remembering it can create significant opportunities."
Mark also stresses that the increased regulatory environment, in many ways, makes this an ideal time for graduates to join the industry. "We'll probably look back in five years time and say that this was the moment when things changed dramatically. In the same way the wider finance world had a 'Big Bang' moment, this is arguably the 'Big Bang' of the derivatives industry, and we need people that are forward-thinking and not hooked into an old way of doing business."
ICAP's post-trade risk mitigation services
ICAP's post-trade risk mitigation services are offered to clients through a series of small to medium specialised businesses belonging to the ICAP group. Graduates joining this side of ICAP's business can expect to work with one or more of the following:
Reset is the market leading provider of post-trade risk mitigation services. As well as reducing portfolio risks in the interest rate, FX and inflation markets, Reset also helps address structural imbalances within trading portfolios.
Recently integrated into the Reset business, ReMatch rebalances the inherent market risk in credit derivative portfolios.
Through the Harmony Network, Traiana links over 500 firms (including banks, brokers and buy-side firms), simplifying trading relationships. As a result, the financial cost of maintaining multiple trading connections is removed and operational efficiency is increased.
TriOptima's range of post-trade risk mitigation services focus on over-the-counter (OTC) derivatives, those which are traded directly without the use of an exchange or intermediary.
Euclid Opportunities focuses on technological innovation, offering seed funding to technology start-ups designed to bring innovative tools and platforms to the financial markets.
Mark's top application tip
As well as his role in PTRS, Mark is also ICAP's global sponsor for their graduate recruitment programme so we took the opportunity to ask him for his opinion on what makes an candidate stand out.
"One of the most common things people tell us is that they're well suited to the job because they're a people person. That's great, but so is everybody else who applies. I compare it to triathlons; if you're only good at swimming, it doesn't help you too much because everyone else who enters is also good at swimming."
"You need a combination of skills: forward thinking, an understanding of human nature and the ability to understand the nuances of why our products are important for clients."