ICAP taps Australia
Maureen Nevin Duffy
exist to broaden products into Kuala Lumpur and Singapore
Despite global demand for all commodities ebbing over
the last couple of months, interdealer broker ICAP tapped
Australia as a new place to expand its commodities broking
The firm, which set up its agricultural and soft commodities
broking in Sydney this month, believes clients still
need to hedge their exposures no matter what the supply/demand
ratios are doing, according to Garry Booth, an ICAP
broker who formerly led the three-broker team for MF
Global, the Chicago-based futures broker that lost more
than US$1bn of its clients’ money.
Booth concedes that “the volumes on most global markets
shrank. But customers still have the desire to access
liquidity pools to hedge away risk.”
Commodity forecasters such as Shawn Hackett of Hackett
Financial Advisors would agree. He is shorting commodities
right now and expecting downward price pressure at least
into the summer of 2012, when he expects a hard landing
in China to bottom out commodities for a return in 2013–14.
Hackett, who publishes the Hackett Money Flow Commodity
Report, a monthly newsletter covering all the agricultural
commodity markets, said commodities lost 25% of their
value this year, a situation he doesn’t expect to pick
up for at least eight months. He reasons that coal,
which he calls the most non-correlated commodity against
the agricultural products, lost 38% of its value – a
sign, he says, that all commodities will follow the
path of the others due to the world’s linked markets.
“If soft commodities are going down, they all are,”
said Hackett. “And there’s no place to hide – hard or
But ICAP, though, is prepared for any further slide
or possible upside. The firm has seized the opportunity
to roll out a ready-made specialist team in agriculture
and soft commodities with 10 years experience in the
Australian region, according to Booth. The operations,
he says, close the gap between already established offices
in Europe and in the US with Asia.
ICAP plans to broaden the product base into Kuala Lumpur,
Singapore and “wherever clients have exposures”. It
already provides broker execution services in New York,
Chicago, London, Sao Paulo and Louisville.
From Sydney, Booth’s team plans to trade with the Matiff,
the NYSE Euronext, the CBOT, CME, ICE and ICE Canada
Futures in grains, wool, cotton and sugar. The group
will offer broking services in cotton, corn, milk cocoa,
coffee, canola and sorghum.
Booth added that though concerns still run high over
the fallout from MF Global’s accounts, any losses on
the commodities side have not completely discouraged
investors from putting money to work.
“I think every customer who’s got exposure in there
does have concern, however if they’re going to continue
to have exposure in the market they need to manage that
exposure,” he said.
Going forward, Booth notes that a large part of the
monies associated with MF Global will be returned to
the customer. ”They are returning to the domestic grain
futures exchange,” he said. “We’re looking forward to
helping them manage the risk in this growing market.”
Unlike MF Global, ICAP does not act as a clearing agent
participants may indeed keep hedging their exposures
while others might weigh up whether to shift from soft
to hard commodity assets, market participants say. Still
others could pull out of commodity markets altogether,
possibly going to cash, until market forces realign.
Some bright spots, however, still exist. The droughts
and heat waves that baked the US West and Midwest last
year did not inflict the corn and grain shortages on
world markets that were projected. In fact, some regions
produced bumper crops.