Analyst/Investor Day June 2006 1
These materials do not constitute an offer to sell or the solicitation of an offer to purchase any security. These materials contain "forward-looking statements" as defined in the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on current Company expectations and are subject to risks and uncertainties, which could cause actual results to differ materially. Such risks and uncertainties include, but are not limited to: fluctuations in interest rates and foreign currency exchange rates; market acceptance of new trading technologies; global and regional economic conditions and legislative, regulatory and political developments; and domestic and international competition in the Company's global markets. Additional information regarding these and other factors is available in the Company's reports available on request from the Company. This document may not be distributed where to do so would be unlawful. This document may not be distributed in the UK except to persons falling within article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001. 2
ICAP Americas Ron Purpora - COO Doug Rhoten - CEO 3
Securities Division Voice and Hybrid Core Divisions Treasury Products Mortgage Securities Federal Agency Issues Repurchase Agreements Corporate Products including Corporate Bonds CDS Emerging Markets Equity and Related 4
Treasuries Off-the-Run Products Highlights Highlights Estimated Estimated Market Market Share Share North North America America Market Share 59% Rank #1 Hybrid Brokerage Service 50% conducted electronically with Brokertec Enhanced group margins ICAP accounts for all electronic trading in this product group Dominant market shares in Bills, Short Coupons, TIP s 6% 20% 12% 59% ICAP Tullett-Prebon Hill Farber BGC/Cantor 5
Mortgage Securities Highlights Highlights Market Share 32% Rank: Co-Leader Technology Deployed Voice Service with proprietary screens Separate liquidity pools for e- trading ICAP accounts for all electronic trading in this product group 36 brokers, 29% margin on Net Brokerage Developing products Derivatives CMBS, ABS 31% Estimated Estimated Market Market Share Share North North America America 5% 3% 5% 32% 24% ICAP Tullett-Prebon Hill Farber Tradition Chapdelaine BGC 6
Agency Issues Highlights Highlights Estimated Estimated Market Market Share Share North North America America Market Share 75% Rank #1 Technology Deployed Voice service with proprietary market screens Separate liquidity pools for e- trading ICAP accounts for all electronic trading in this product group 20% 4% 1% 75% ICAP Tullett-Prebon BGC Tradition 7
Repurchase Agreements Highlights Highlights Estimated Estimated Market Market Share Share North North America America Market Share 59% Rank #1 6% 3% 3% Franchise approach Scale Technology Deployed Separate liquidity pools for exclusive e-trading 29% 59% Hybrid capabilities among franchises ICAP Tullett-Prebon BGC Tradition Hill Farber 8
Corporate Products Corporate Bonds Highlights Highlights Estimated Estimated Market Market Share Share North North America America Market Share 34% Rank #1 Technology Developing STP capabilities Voice brokered markets Lower liquidity Drivers Transparency initiatives CDS migration 14% 10% 25% 5% 34% 12% ICAP Tullett-Prebon Chapdelaine FIMAT BGC Others 9
Corporate Products CDS Highlights Highlights Estimated Estimated Market Market Share Share North North America America Market Share 17% Rank #2 11% 17% Established Single Name, EMK, Hi-Yield Index 12% Growth in Structured, CMBS Technology 26% AffirmXpress Automated confirmation process offering significant efficiencies One of 3 participating brokers Hybrid Market development Drivers Market take-up at expense of cash credit 16% 10% 8% ICAP GFI Tullett-Prebon CreditEx CreditTrade Chapdelaine Others Consolidation 10
Capital Markets Introduction Divisions covered Emerging Products Structured Products Equity Derivatives Emerging Markets Energy Interest Rate Derivatives Money Market Foreign Exchange 11
Product sectors Commoditized low margin, slow growth AREA PROFIT MARGIN MARKET GROWTH Repo Low Low Cash Medium Low Forward FX Medium Low Emerging Spot FX Low Low Hybrid model i-depo e-trading needed for higher margins STP High Margin Voice AREA PROFIT MARGIN MARKET GROWTH $ IR Derivatives High Medium IR Options High Medium NDF s High Medium Energy High High FX Options High High Specialization Consolidation Volbroker e-trading Emerging Products AREA PROFIT MARGIN MARKET GROWTH All Products High High 12
Build Verbal Liquidity Market Share Goal: 35% Production Specialization Displace Customer Sales force Invest in Emerging Products Customers Help Drive Process 13
Creating Indices 19900 Telerate CMM on Telerate 19944 ISDA Swapfix Fed Funds (Telerate page 5) SwapPX GovPX LatAm markets through Bloomberg Mexico markets through Bloomberg ICAP Markets Blog 14
Foreign Exchange Voice market Spot Spot 35% 65% ICAP Tullett-Prebon 10% Forwards Forwards 10% NDF s NDF s 15% 40% 15% 45% 35% ICAP Tullett-Prebon Tradition Other 30% ICAP Tullett-Prebon GFI Other 15
Money Market Highlights Highlights Estimated Estimated Market Market Share Share North North America America Market Share 38% Rank #1 Technology ifeds Financial Oxygen STP Benchmark Index Telerate Page 5 Partnership Financial Oxygen (JP Morgan & BOA) Future Drivers ifeds Whole Loans GSE s 17% 28% 17% 38% ICAP Tullett-Prebon Eurobrokers Tradition 16
ICAP Voted Top Broker in 22 Interest Rate and 11 Currency Derivatives groupings. Summary of 2005 Risk Survey Rankings: ICAP #1 in: Interest Rate Swaps Interest Rate Options OIS Cross Currency Swaps FX Forwards Credit Derivatives 17
$ Interest Rate Derivatives Highlights Highlights Estimated Estimated Market Market Share Share North North America America Market Share 40% Rank #1 Technology FRACross Swapswire STP iswap & Datatec Benchmark Index Telerate 19900 & SwapPX ISDA Swapfix Partnership Swapswire ISDA Drivers FRACross Short Swap push Hybrid trading Structured Products 13% 30% 12% 5% 40% ICAP Tullett-Prebon Other GFI Tradition 18
Emerging Market Derivatives Highlights Highlights Estimated Estimated Market Market Share Share North North America America Market Share 50% Rank #1 Technology Datatec Sipo Benchmark Index 12 Bloomberg pages LatAm PX Partnership Drivers LatAm Stock Exchanges FRACross Chilean IRS Colombian IRS Asian IRS Mexican CPI 20% 12% 18% 50% ICAP Tullett-Prebon Local Brokers GFI 19
Non-Securities Growth Highlights Highlights Operating Profit Increased by 265% Net Revenue Increases by 130% Profit Margin Increased from 15% to 24% 01/02 02/03 03/04 04/05 05/06 Operating Profit 01/02 02/03 03/04 04/05 05/06 Net Revenue 20
Macro Market Trends Key Environmental Factors Macroeconomic imbalances in commodities and credit Search for Yield. Commoditisation of flow markets.. Agency to principle model equity markets.. Liberalization of emerging markets Impact on ICAP Price volatility. Growth in CDS, FX, Energy, Derivatives, Futures. Growth in structured credit, equity, commodity and interest rate products. Higher volumes, polarized risk, e-trading opportunities and expanded customer base. Supplement reduction in dealer sales forces. Growth in local currency derivatives, fixed income and credit markets. 21
ICAP s biggest opportunity Growth Products Structured products Equity derivatives Emerging markets Consolidation Opportunities Energy Equity Derivatives Equities 22
ICAP Voted Best of the Best within energy commodity markets The highest honor within the brokerage category 2 nd year running 23
Energy Positioning Opportunity Opportunity - Consolidation Consolidation Operating Profit Increased by 290% Net Revenue Increases by 270% Operating Profit Net Revenue 01/02 02/03 03/04 04/05 05/06 24
LatAm Strategy Opportunity Opportunity Grow Grow footprint footprint Drivers for Growth in the Market Continued liberalization of local LatAm markets NDF sectorization Derivative sectorization International distribution of local products Our Positioning SIF/Garban Mexico Technology Datatec & Sipo LatAm Expansion 5 Stock Exchange Joint Ventures Purchase and merge 2 largest Colombian voice brokers Open Brazil branch 25
Structured Products Division Products Structured CDS Structured Interest Rate FX Options Structured Notes Commodities Equity Derivatives/Exotics Status Hired 10 broker Structured CDS team in 2005 Hired 5 broker Index team #1 broker in FX Options Restructuring to combine with derivatives 26
Equity Derivatives Hyper growth in index products Dealer move from agency to principle model Reduction of dealer sales forces Expansion of customer base Need for bilateral block trade negotiation Sectorization of single names Structured and exotic desk Expand variance and correlation desk 27
Structured Interest Rate Products Opportunity Opportunity Pursue Pursue emerging emerging sectors sectors Libor digital caps/floors CMS spread caps/floors Callable range accrual swaps Capped callable floaters Constant Maturity Mortgage US CPI swaps/options Other structured swaps 28
Opportunities Emerging Products Exotic Derivatives Structured CDS Structured Equities Real Estate Derivatives Growth Energy Consolidation (Oil) Equity Derivatives Whole Loan Brokering Logistic Derivatives Electronic Trading 29
Product evolution Developing Products Foster Bank Interest Build Market Share Commoditization Migration to electronic 30
A Global E-broking Business Jack Jeffery CEO of ICAP Electronic Broking 31
A strategy for growth ICAP s e-strategy will create the largest global electronic broker in liquid, commoditised OTC markets 32
Foreign Exchange 33
Jan-05 Jul-05 Jan-06 Jun-06 Spot FX volumes Global FX Average Daily Volume - Single Count 200 180 160 140 120 100 80 60 40 20 0 34 Jan-04 Jul-04 Jan-03 Jul-03 US$ Billions Jan-96 Jul-96 Jan-97 Jul-97 Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02
Foreign Exchange EBS Spot Average daily volumes - USD 145 billion Record trading of USD 259 billion on 17 May 06 Top five trading days all recorded in 2006 >2,000 traders on >820 dealing floors across the globe 35
Mar-2006 May-2006 EBS Prime volumes EBS Prime Average Daily Volume (US$bn) 50 45 40 35 30 25 20 15 10 5 0 36 Jan-2006 Nov-2005 Sep-2005 Jul-2005 US$ Billions Jan-2004 Mar-2004 May-2004 Jul-2004 Sep-2004 Nov-2004 Jan-2005 Mar-2005 May-2005
Foreign Exchange EBS Spot Average daily volumes - USD 145 billion Record trading of USD 259 billion on 17 May 06 Top five trading days all recorded in 2006 >2,000 traders on >820 dealing floors across the globe EBS Prime 149 users now live 37 non-bank customers including hedge funds 112 bank customers 37
EBS Spot Ai - algorithmic trading volumes EBS Ai Volume Trend Analysis 45 40 35 30 25 20 15 10 5 0 38 25 % 20 % 15 % 10 % 5 % 0 % June-2006 Ai Average Daily Volume ($ bil) Ai Market Share % May-2003 Sep-2003 Jan-2004 May-2004 Sep-2004 Jan-2005 May-2005 Sep-2005 Jan-2006 May-2006
Foreign Exchange EBS Spot Average daily volumes - USD 145 billion Record trading of USD 259 billion on 17 May 06 Top five trading days all recorded in 2006 >2,000 traders on >820 dealing floors across the globe EBS Prime 149 users now live 37 non-bank customers including hedge funds 112 bank customers EBS Spot Ai API or black-box FX trading Average daily volumes - USD 30 billion Record day 24 May 06 USD 59.3 billion 20% of EBS volumes from API-based trading EBS Market Data The source of global spot FX pricing Premium live feed and historical data commercialised 39
Fixed Income 40
Fixed income volumes Average Daily Volume - Single Count 5 4 3 2 US$ Billions 1 0 Apr-03 Jul-03 Oct-03 Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Agency Mortgages Canadian Govt Euro GB Eurobonds 41
Apr-06 Fixed income Average Daily Volume - Single Count 250 200 150 100 50 0 42 US$ Billions Apr-03 Jul-03 Oct-03 Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 UST US Repo EU Repo
Fixed income:us treasuries Asia US treasuries 65% market share for the past year London EU US Treasury Actives Volume totalled a record $365 billion in May 06 Volumes continue to break records month over month Volumes increasing each month in 06 65% increase in volume from May 05 London market share ~ 60% US treasury volumes volumes consistently above forecast in 06 43
Fixed Income US - Repo and Mortgages US Repo Volumes remain healthy in face of new competition Customer benefits Total Anonymity STP Significant cost saving benefits Mortgages ICAP offers the only e-broking platform for Mortgage-Backed Securities (MBS) Continued growth in e-traded volumes Customers seeing cost and STP benefits of e-broking New functionality added 44
Fixed income: Eurobonds Launched in Feb 2006 across: Bank capital Industrials Autos and Telecoms First electronic trading in CDS and Euro Credit bonds on the same front end Eurobonds Volume of 959m in May 06 - up from 373m in April 06 June 06 volume so far 737m 8% of business electronically traded (4.5% in April) 11% so far in June Averaging 25 trades per day 18 firms have so far traded Eurobonds with two further firms enabled. 38 traders have so far executed e-trades 45
EU Repo Repo daily volumes - 159 billion nominal single count daily 24% increase on June 05 (ICMA Repo survey saw 15-18% increase in outstanding Repo) Record volume day of 200 billion on 7 March 06 Daily average Repo transactions is now at 5,000 46
Global trends in spot FX Increasing cross-border trading activity Increasing proprietary risk taking at banks Growth of single and multi-dealer bank portals Growth of leveraged investors/hedge funds Growth of prime broking Continued development of algorithmic trading engines Liberalisation of emerging markets 47
Global trends in Fixed Income Emerging markets offer opportunities for growth Algorithmic trading will force differentiation in trading models Integration of third party front, middle, and back office systems into trading platforms Increased competition among prime broking firms Migration towards e-execution for less liquid products 48
Foreign Exchange: New products Non Deliverable Forwards Estimated USD 1 trillion market (BIS 2003) Provisional launch in Q4 2006 Enhanced EBS Spot dealing screens Offering up to 22 currency panels on one screen Designed to facilitate: trading in multiple currencies high frequency trading placing more orders into the EBS market 49
Fixed income: New products North America Canadian Government bonds launched Q4 05 Credit Default Swaps Q1 06 Yield Curve Swaps In pilot RP Cross Europe Euro Eurobond sector Euro-Sterling - roll-out Q4 06 Euro-Financials in pilot phase Eurobonds issued by a financial corporate 50
Key drivers for success Superior customer 1 Customer satisfaction relationships 2 3 A trusted global brand 4 Focus on customer needs and market competition 5 Maintaining and building the liquidity pool 6 Unique product selling points 7 Leading technology 8 Solid and scaleable business model Talented and 9 Robust analysis dedicated people 10 51
ICAP Technology Briefing Business value creation through technology Jay Spencer Global Chief Information 52 Officer
ICAP IT Profile Equities Fixed Income Emerging Commodities Futures Derivatives FX Market Markets Information / Analytics PRODUCT MANAGEMENT & DESIGN DERIVATIVES FINANCING GOVERNMENTS REPO AGENCIES JGBs MORTGAGES CORPORATES EXCHANGE TRADED CLEARING CREDIT DERIVATIVES IRS / I-SWAP STRUCTURED PRODUCTS SPOT FORWARDS Application Development & Architecture PRODUCT DEVELOPMENT Infrastructure & Architecture Market Data & Analytics Development Production Support & Quality Assurance Networks CORE IT Operations Support Internal Systems TOTAL STAFF = 341 53
EBS IT Profile 54 DERIVATIVES FINANCING GOVERNMENTS REPO AGENCIES JGBs MORTGAGES CORPORATES EXCHANGE TRADED CLEARING CREDIT DERIVATIVES IRS / I-SWAP STRUCTURED PRODUCTS SPOT FORWARDS
Key Management Drivers Ensure delivery commitments are met to support: organic growth balanced voice and electronic needs product opportunities defined in corporate strategy Operation efficiency execution on defined plans cost savings and cost leverage IT business control Legacy synergies EBS integration 55
Keys to successful EBS Integration Minimize distraction to existing ICAP and EBS delivery schedules Retain critical players Get to steady state organization over next 12 months Apply insourcing options and flexibility built into EDS agreement 56
We know how to manage it; we ve been here before Project funding Product plans; business-as-usual Most experienced players assigned to EBS Integration steering and delivery teams Protection key players with agreements Timely organisational changes 57
Leverage from the EBS acquisition Product knowledge Development resources and capacity with similar skills IT Infrastructure expertise Globally based solutions team and operations support Major conversion to new infrastructure completed by EBS 58
Primary Synergy Opportunities Redundant capex spend Overlapping networks and costs to support Consolidated System Command Center and operations staff Consolidated IT facilities and centers Duplicated Telecoms EDS contract savings Overlapping organisation functions 59
Future Opportunities New revenue opportunity leverage trading architectures Front end consolidation application container architecture Diverse matching technology 60
Summary Slide We have the resources We have the capability We make efficient use of capital Above all, we have a unique blend, range and distinct combination of product and technical skill 61
Integration of EBS and ICAP Steve McDermott Executive Director, ICAP 62
Introduction Maintaining momentum in the business Clarity of overall business objectives A dedicated project management office to oversee the process of integration Impressive people and the technology Prioritising the immediate decisions 63
Transaction synergies (21 April 2006) Projected Projected Transaction Transaction Synergies Synergies US$ US$ millions millions Sources Sources of of Synergies Synergies US$ US$ millions millions $m 35 Non-Technology Technology $32m IT Network: $9m 30 25 20 IT Infrastructure: $10m Other IT: $2m Cost to Achieve $24m 15 10 Property and other: $11m 5 0 2006/7 2007/8 2008/9 Full Impact Note: The costs to achieve the synergies of $24 million will be treated as an exceptional item in the income statement in 2006/7 and 2007/8 64
Integration IT - People, Network and Hardware ICAP Electronic Broking - Sales, Product, Marketing Support - Property, HR, Finance, Legal and Compliance Combining the cultures 65
Challenges e-broking now substantial business Recognition of the power of e- broking and greater understanding in voice business of benefits Committed to investing to building the e-business further Potential revenue synergies Staying ahead of the curve 66
Investor Relations queries to : Mike Sheard Director of Corporate Affairs ICAP plc 2 Broadgate London EC2M 7UR (44) 207 050 7103 mike.sheard@icap.com 67