In the interest of transparency, I must confess to being a small shareholder in Icap. The news that it purchased Traiana for $247 million this week – or 16.5 times the company’s projected revenue to the year ending in January 2008 – triggered some turgid coverage about how it was going to potentially challenge CLS in the post-trade environment. I simply don’t see where that story is coming from.
The issue of how much CLS is charging is fairly emotive, but it is not a given that it is too expensive. That view seems to emanate from those who reside in the front end of the very active banks. It is important to remember that CLS is an industry-owned consortium and the industry itself decided not to allow pre-settlement netting.
However, it is apparent that some back offices are creaking. Traiana is used by many of the market’s great and powerful to streamline their post-trade processes. The company already provides a netting service to various platforms, including Icap’s EBS, which allows banks to effectively aggregate trades with certain clients. CLS has repeatedly said it has no issue receiving these on a netted basis.