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ICAP delivered a solid perormance

in 2011/12 against a difcult

economic environment. The act that

we maintained protability in a year

when trading volumes were under

such pressure is testament to the

eectiveness o our diversied business,

our global presence, our people and

the actions we took to manage our cost

base as market conditions changed.

Macroeconomic context

European growth in 2011 was weak with

several countries in recession. As many

countries embraced austerity measures,

growth remained subdued. The US economy

showed some signs o recovery during the

rst three months o 2012. Emerging market

growth continued, albeit at a slower pace.

Michael Spencer

Group Chie Executive Ofcer

Our role in the markets

Wholesale nancial markets play a vital role in

global economic development. As the worlds

leading interdealer broker and inrastructure

provider to these markets, ICAP is playing a

central role in their evolution and long-term

growth and is uniquely positioned to prosper.

Our perspective helps inorm regulators and

policymakers as they implement reorm. We

believe we have a responsibility to help createmore transparent, efcient and saer nancial

markets that support the global economy.

ICAP plays a pivotal role in bringing buyers

and sellers together in wholesale nancial

markets globally. Having continually

invested across all our businesses,

especially in technology, we are in a good

position to benet rom changing customer

and regulatory requirements, giving us a

signicant competitive advantage as we

look orward. We continue to maintain our

entrepreneurial edge and have the proven

appetite and ability to innovate and

develop new products and services.

We also remain ocused on markets

with structurally higher growth.

Our strong balance sheet and diversied

business give us options when we look at

where best to invest or the uture. This will

ensure ICAP is extremely well placed when

markets normalise.

Changing competitive environment

As the industry leader, ICAP continues to

benet rom greater scale and diversity than

its competitors, but the competitive landscape

in which we operate is changing. Regulators

continue to pursue an ambitious agenda or

reorm. In the US, the Dodd-Frank Act will be

substantially complete in 2012.

Regulatory reorm in Europe and the US islikely to push the model or price discovery

and execution towards pure electronic or

electronically-assisted voice platorms. This

provides customers with the ability to enter

orders electronically and to execute trades

directly or through a voice broker. These

reorms will change the OTC landscape.

Regulation and new capital requirements

are also pushing banks to de-leverage and

to move their ocus away rom long-dated,

structured and capital intensive products to

high ow, highly-liquid, standardised products

which lend themselves to electronic trading.

We are condent that these changes present

signicant opportunities or ICAP. We have

the scale and exibility to adapt. We have

invested in developing the technology and

platorms that will be needed to enable

our customers to meet new transparency,

trading and post trade requirements. We will

be ready to roll out swap execution acility

(SEF) services in the US once the regulators

have nalised the rules.

2011/2012 developments

New nancial utures and options team

We created a global nancial utures and options

team, hiring 31 employees in London, New York,

Chicago and Sydney, signicantly enhancing our

execution brokerage ofering. This is a business

with good structural growth prospects and we

are pleased with progress so ar.

Customer investment in i-Swap

ICAP has a history o partnering with its

customers. In November our o the worlds

largest swaps dealers (Barclays Capital, Bank o

America Merrill Lynch, Deutsche Bank and

J.P. Morgan) agreed to co-invest in iSwap Euro

Limited, which operates our electronic interest

rate swaps platorm. We believe this will greatly

enhance the platorms growth as swaps trading

becomes increasingly electronic.

Acquisitions in commodities

In our voice business, we made some small but

important acquisitions, Island Shipbrokers in

Singapore and Sun Commodities, a leading

broker o European biouels, to complement

existing businesses. As a result o the acquisition

o Island Shipbrokers, the Group has acquired

a urther interest in CTI Shipbrokers (India)

resulting in the company becoming a subsidiary

rather than an associate.

New electronic trading platorms or interest

rate options and equity derivatives

As our customers prepare or the new regulatory

environment, we have introduced screen-based

trading platorms or interest rate options (DerivX)

and equity derivatives (iLinked), which are

supported by our established voice service.

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Cost control

In response to market conditions, we

realigned our business resources to ensure

they matched customer demand by reducing

headcount in areas o lower proftability,

while investing and hiring in growth areas

such as fnancial utures and commodities.

We also removed 20 million o recurring

costs rom our cost base. We will continue to

review our cost structure and will implementoperational eciencies to ensure the uture

growth and proftability o the Group.

Management changes

The year saw some changes in ICAPs senior

management team.

Mark Price joined us rom Deutsche Bank

in October as Group Chie Operating Ocer,

bringing substantial operational and risk

management experience in fnancial

markets. His appointment reects our

commitment to maintaining the strong

control and risk management environment

we have developed.

Mark Yallop, the previous Group Chie

Operating Ocer, le us in September aer

six successul years. Mark made a signifcant

contribution to the strategic development

o our business and we wish him well or

the uture.

In February 2012, Hugh Gallagher, Chie

Executive Ocer Asia Pacifc, joined theGEMG. He has played a pivotal role in

developing our voice business across the

Asia Pacifc region and his input and regional

expertise will bring a valuable perspective to

the senior management team.

We also strengthened the management

o EBS in March 2012 by appointing Gil

Mandelzis as Chie Executive Ocer. He

will also retain oversight o Traiana. Already

a member o the GEMG, Gil brings signifcantFX experience and insight which will be

important to EBS as it continues to evolve

in this extremely competitive market.

Charity Day

Nothing sums up ICAPs culture like our

Charity Day where, on one day each year,

we donate our global revenue, including

broker commissions, to charity. To raise a

record 12.75 million in dicult times is a

tremendous achievement and speaks

volumes about our employees, customers

and suppliers. ICAPs Charity Day in December

2012 will be our 20th anniversary and we

hope it will bring the cumulative total raised

to more than 100 million.

Dividend

Our strong balance sheet and our ecient

conversion o proft to cash has enabled the

directors to recommend a fnal dividend o

16.00p per ICAP share which will be paid on

20 July 2012 to shareholders on the register

on 29 June 2012. The ull-year dividend will

be 22.00p per share, an increase o 2.05pper share.

Outlook

In the last quarter o our fnancial year

we saw an improvement in risk appetite

in some markets. However activity in April

and early May was slow with the ongoing

euro crisis and regulatory uncertainty

depressing trading volumes. Some resolution

on these important issues would give a big

and welcome li to market sentiment.

We reduced costs last year and are

embarking on a structural overhaul that

we expect will result in urther signifcant

run-rate savings o at least 50 million per

annum by the end o March 2014.

We remain confdent that the Group is well

positioned or growth in the medium term

and will meet its strategic objectives.

I would like to take this opportunity to thank

every ICAP employee or their contribution

to another successul year.

Michael Spencer

Group Chie Executive Ofcer

Investing in technology

In April 2012, ICAP completed the roll out o a major

upgrade o its world leading fxed income electronic

broking platorm, BrokerTec, which improved

its perormance signifcantly. These enhancements

have been well received by customers.

Investing in emerging markets

We continued to invest in emerging markets and

asset classes that we believe have signifcant

potential. For example, oshore renminbi (CNH)

will become increasingly important or

international trade and investment as China

moves towards a ully convertible currency. ICAPs

investment in both voice and electronic broking o

CNH allowed us to capture a signifcant market

share in what is a ast-growing market.

Investment in Japan

In Japan, we sold our Japanese government bond

business to Central Totan Securities Co Limited and

simultaneously purchased a 20% shareholding in the

combined business. At the same time, the Group also

increased its holding in Totan ICAP Co Limited,

a leading interest rate derivatives broker.

Expanding our post trade businesses

We oered more services in new asset classes

in addition to creating inrastructure support in

existing ones, such as Traianas comprehensive FX

clearing solution. We also added complementary

services that work in conjunction with clearing to

reduce customer and systemic risk.

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Iain TorrensGroup Finance Director

Michael SpencerGroup Chie Executive Ofcer

Mark BeestonChie Executive Ofcer, Portolio Risk Services

Mark Beeston is responsible or post trade riskand inormation business. Prior to joining IC AP inDecember 2009, he spent our years as Presidento T-Zero (now ICE Link). Beore this he spent 13

years at Deutsche Bank where, among other roles,he served as Chie Operating Ofcer or GlobalCredit Trading, Chie Operating Ofcer or OTCDerivatives and global head o Money MarketDerivatives trading. Mark represented DeutscheBank at board level across numerous industrycompanies and associations including ISDA,

Markit, OTCDerivNet and DTCC DerivServ.

Iain Torrens joined ICAP in 2006 as group treasurer,became group nancial controller in 2008 andGroup Finance Director in 2010. Beore joiningICAP, Iain worked in a number o senior nancialroles or CP Ships Limited and Cookson Group plc.Iain is chairman o the GRACC and a member o theGOC. He is a Chartered Accountant, CorporateTreasurer and a Chartered Secretary.

Michael Spencer was the ounder o Intercapital in1986 and became Chairman and Chie Executive oIntercapital in October 1998, ollowing the Exco/Intercapital merger. Michael, together with IPGLand its subsidiary companies, is a substantialshareholder in the Company. He is the chairmano IPGL and is on the board o many o IPGLsinvestments. Michael is chairman o the GEMG.

Hugh GallagherChie Executive Ofcer, Asia Pacic (voice)

Since September 2010 Hugh Gallagher has beenresponsible or voice broking, technology andsupport unctions throughout Asia Pacic. Hughwas appointed to the GEMG in January 2012. Hehas held several senior positions within ICAP since

joining in 1988, including Chie Executive OfcerICAP Australia. Prior to joining ICAP, Hugh workedor Citibank and Lloyds in FX and money markets.Hugh has more than 25 years experience workingin OTC markets in the Asia Pacic region.

David CastertonChie Executive Ofcer, London and EMEA (voice)

Since June 2008 David Casterton has beenresponsible or all voice broking and relatedsupport unctions in London and EMEA. Between1995 and 2008, David worked in a number osenior broking roles and had responsibility orinterest rate derivatives, money markets, repos,government bonds and nancial utures. Prior to

joining ICAP in 1995 he was wi th MW Marshallsand Guy Butler International.

John Nixon has management oversight andresponsibility or xed income ICAP ElectronicBroking and the Americas voice broking business.Prior to his appointment to the board in 2008, Johnhad served rom 1998 to 2002 as a non-executivedirector and rom 2003 to 2008 as a member othe GEMG responsible or strategic acquisitions.John has extensive experience in the interdealerbroking industry. He was previously the ChieExecutive Ofcer o Tullett and Tokyo Forex,now part o Tullett Prebon, where he worked rom1978 to 1997 in Toronto, London and New York.

John NixonGroup Executive Director Americas

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Mark PriceGroup Chie Operating Ofcer

Mark Price has overall responsibility or ITinrastructure, risk, compliance and humanresources. He joined ICAP in 2011 rom DeutscheBank where rom 2009 he was Chie OperatingOfcer or Global Credit and Emerging Market Debt.While at Deutsche Bank he held a number o seniorroles involving both business management andoperating responsibilities, including as the ChieOperating Ofcer or Sales, Deputy Head o themiddle ofce, and Head o the Credit TradingProduct Control Group. Prior to joining DeutscheBank in 1998, Mark worked at Merril l Lynch orthree years in Credit Derivatives Product Control.

He is chairman o the GOC and a member o theGRACC. Mark is a Chartered Accountant.

Gil MandelzisChie Executive Ofcer EBS

Duncan WalesGroup General Counsel

Douglas RhotenChie Executive Ofcer Americas (voice)

Douglas Rhoten is responsible or ICAPs voicebroking, technology and support unctions in theUS and Latin America, including ICAPs operationsin Brazil. He is also a director o SIF ICAP SA de CV,ICAPs joint venture in Latin America. Doug was aounding member o The Green Exchange and aormer member o the US Federal Reserve BankForeign Exchange Committee.

Gil Mandelzis co-ounded Traiana in April 2000and, on his appointment as Chie Executive Ofcero EBS in March 2012, was appointed ExecutiveChairman o Traiana. Gil led Traianas growthrom a small start-up to a recognised globalleader in post trade ser vices resulting in Traianasacquisition by ICAP in 2007. Gil was appointedto the New York Federal Reserves ForeignExchange Committee in 2012.

Duncan Wales has been responsible or theglobal legal unction since December 2008.He has occupied a number o senior roles withinthe legal and compliance departments at ICAP,including director o government aairs. Priorto its acquisition by ICAP in 2003, he was directoro legal aairs at BrokerTec. As well as havingexperience in investment banks, Duncan spentve years at Cliord Chance as a derivatives andOTC markets specialist. He is a member o theGOC and the GRACC. He is a member o the

GC 100 Group and the Council o the WholesaleMarkets Brokers Association.

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25

21

34

33

41

46

2012

2011

Operating profit* by business segment (%)

Electronic

Post trade risk and information

Voice

Results or 2011/12

For the year ended 31 March 2012, the

Group reported revenue o 1,681 million,

3% below the prior year. Uncertainty in the

Eurozone and constraints on market liquidity

resulted in a all in voice revenue and a

marginally lower perormance in our

electronic business. In contrast, the post

trade risk and inormation business sawstrong growth.

The Group reported an operating prot*

o 372 million, down 1% on the prior year.

The Groups operating prot* margin or

the year ended 31 March 2012 remained

unchanged at 22%.

Markets

ICAP provides services in a wide range o

geographies and asset classes, with the

breadth o its market coverage being a key

strength o the Group.

We report on our business segments

externally in the same way that we manage

and report them internally. The major

segments are voice, which we report by

geographic region, electronic and post

trade risk and inormation.

Prot beore tax* o 354 million was

up 1% on the prior year. Prot beore tax

on a statutory basis ell by 16 million to

217 million as a result o an increase in

the impairment o goodwill and other

intangibles o 92 million.

In 2011/12, due in part to a decline in ourvoice business, we moved closer to our

aim to generate operating prot evenly

between voice, electronic and post trade

risk and inormation.

The management o our cost base

represents a key area o ocus and during

2011/12, we removed 20 million o

recurring costs.

ICAP executes or arranges trades

on behal o its customers in one o

three ways, depending on the asset

class and market involved. These

methods exist in the electronic

and voice businesses as described

on the ollowing pages. ICAP also

requently assists market users

executing multiple transactions

simultaneously, which means that

more than one o these methods may

be involved in providing customers

with their desired outcome.

Asset class

2012Revenue

m

2011Revenue

mChange

%

Rates 681 704 (3)

FX 343 336 2

Commodities 203 211 (4)

Emerging markets 167 171 (2)

Credit 154 182 (15)

Equities 133 137 (3)

Total 1,681 1,741 (3)

** During the current year the allocation o asset classes has been amended to improve the accuracy o revenue

allocated to each asset. The prior year asset classes have been re-presented to enable comparability.

**

* From continuing operations beore acquisitionand disposal costs and exceptional items.

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Contract and settlement

Name give-up

Dealer 1 Dealer 2ICAP

Voice

Quote driven markets,anonymous negotiation, episodicliquidity, fewer market makers,

complex instruments, periodic tradingactivity, large notional amounts

HybridProvides traders with the combined

benefits of broker assisted andelectronic markets

ElectronicContinuous liquidity, price depth ofmarket, order driven market, many

market participants, standardisedinstruments, continuous pricing,smaller notional amounts

ICAPs voice strategy is to extend its hybridcapabilities urther, to invest in growth

markets and seize opportunities as they arise,

to expand market share in products where we

are not the leader, and to maintain our market

share where we are the leader.

Voice revenue ell across all geographic

regions, with the Americas seeing a 10% all,

as the credit and rates markets suered rom

reductions in volumes. This all was partially

oset by a good perormance rom our

energy business. A 36% all in the Americasoperating prot was principally due to the

decline in revenue. Declines in EMEA were

driven by weaker perormances in cash

products and repos. Asia Pacic experienced

both a decline in rates in Singapore, as we

rebuilt our team, and tough trading

conditions in equity derivatives in Japan.

This was partly oset by increased activity

in oshore renminbi in Hong Kong (CNH)

and commodities in Australia.

Voice

Our voice business is active in wholesale markets across all asset classes with the geographic

perormance as below.

RatesOur rates business comprises interest rate

derivatives, government bonds, repos, cash

products and nancial utures.

Rates perormed below the prior year.

Markets were more active in the rst hal

o the year, despite near zero short-term

interest rates. Risk appetite ell between

September and December as traders

closed their books earlier than normal or

the holiday season. Volumes improved in

January, prompted by volatility due toEurozone sovereign debt issues. ICAP

maintained its market leading position

in the euro, sterling and cross-currency

swaps businesses.

Our government bonds business perormed

in line with the prior year, beneting rom

issuance and the quantitative easing

programme increasing volumes in the UK,

as well as covered bond issuance in the US.

Voice perormanceRevenue

mChange

%

Operatingprot*

mChange

%

EMEA 566 (4) 106 (6)

The Americas 478 (10) 42 (36)

Asia Pacic 128 (4) 6 n/a

Total 1,172 (7) 154 (11)

* From continuing operations beore acquisition and disposal costs and exceptional items.

1. Name give-up broking

ICAP identies and introduces counterparties

who have indicated their willingness to trade

with each other, and who have reciprocal

credit arrangements. These counterparties

contract directly with each other, bearing

the settlement obligation as well as thecounterparty credit risk themselves.

Increasingly these trades are novated into

clearing and ICAP aims to automate the

messaging process where possible.

Hybrid broking provides traders

with the ability to enter orders

electronically and execute trades

directly, or to engage the services

o a voice broker to do so on

their behal.

This exibility o execution method

is a hallmark o ICAPs service to the

capital markets. By providing market

participants with execution methods

that range rom ully automated to

hybrid trading, supported by the skills

o a voice broker, ICAP delivers a servicecustomised to the market to deliver

optimal liquidity proles. We have

steadily migrated our products on to

our hybrid broking platorms and, in

most cases, have done so ahead o

the regulatory requirements. As a result,

ICAP is well positioned to provide a ull

complement o hybrid trading systems.

Hybrid

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ICAP contracts

and settles

ICAP contracts

and settles

Matched principal

Dealer 1 Dealer 2ICAP

Business review continued

We expanded our nancial utures and options

execution-only business by hiring 31 ormer

MF Global employees. The business is now run

on a global basis, with operations in London,

New York, Chicago and Sydney. Since the year

end we opened an ofce in Dubai.

In Japan, we sold our Japanese government

bond business to Central Totan Securities Co

Limited and simultaneously purchased a 20%

shareholding in the combined business. At

the same time, the Group also increased its

shareholding in Totan ICAP Co Limited, a

leading interest rate derivatives broker.

ICAP launched DerivX, a mid-price matchingplatorm or euro and sterling interest rate

and ination swaps and options and more

recently added Australian dollar interest

rate options xings to the platorm.

For the sixth consecutive year, ICAP

was voted rst in the interest rate broker

category in Risk Magazines annual

interdealer rankings.

FX

Our FX business comprises spot andorwards and a joint venture in options.

FX perormed solidly, with volumes in spot,

orwards and options all improving against

the prior year, as markets remained volatile

due to the ongoing uncertainty arising rom

the sovereign debt crisis. Forward FX had

its third successive record year, largely as a

result o being increasingly used as a money

market unding instrument. The start o the

second hal o the year saw growth continue

compared to the previous year. However,

activity slowed slightly at the beginning o

the ourth quarter. i-Forwards, our hybrid FX

platorm used or orward FX transactions,

continued to see increased volumes.

Commodities

Our commodities business comprises energy,

which includes power, oils, natural gas, coal,

sos, agriculture, alternative uels, in addition

to shipping, metals and intellectual property.

Continuing volatility in the global

commodity markets beneted ICAP during

the year. Growth was strong in energy,

especially oils, natural gas and emissions, as

well as in sos, agriculture and alternativeuels. However, this was more than oset

by disappointing perormances rom

shipping, metals and intellectual property.

Shipping has seen reight rates in both

tanker and dry markets remain at a cyclical

low due to the oversupply o ships and a

sluggish global economy. We expect the

tanker market to recover at a aster rate

than the dry market. In February 2012,

ICAP Shipping acquired the remaining 75%

o Island Shipbrokers, a Singapore-based

ship broking business, to strengthen itspresence in the tanker market and the

strategically important Asia Pacic region.

Our metals business has aced an increase

in competition, and intellectual property

has experienced disappointing auctions.

In February 2012, ICAP acquired Sun

Commodities, a leading broker o European

biodiesel and alternative uels based in

Geneva. The acquisition marked an

expansion into European alternative uels

and strengthens our presence in the

broking o physical commodities.

Emerging markets

ICAP is active in emerging markets across

Asia Pacic, Latin America, Central and

Eastern Europe and Arica. While local

markets remain robust, international markets

are suering rom the withdrawal o balance

sheet capital or market making activities.

This has had a signicant impact on our

revenue growth, with rates and credit

businesses contributing to the decline,

but with Latin America growing strongly.

Brazil continues to be an area o ocus or

ICAP. Revenue was 25% above the previous

year, largely driven by activity on BM&F and

Bovespa. We have restructured our Brazilianbusiness and we expect to breakeven in late

2012/13.

37

30

15

2012

2010

2011

Brazil revenue (m)

Credit

Our credit business comprises corporate

bonds and credit derivatives.

Credit experienced challenging markets

and underperormed against the prior year,

particularly in the Americas. Volumes in the

credit markets were muted due to global

credit concerns and a reduction in risk

appetite, which impacted new corporate bond

issuance. Secondary trading has also been

adversely aected, with much o the new

issuance yet to nd its way into the market.

2. Matched principal broking

ICAP enters into simultaneous or

near-simultaneous purchase and sale

transactions on behal o customers and

is responsible or settlement. Settlement

risk to ICAP is minimised through use o

the delivery versus payment settlementmodel (where delivery o the traded

instruments, i.e. the change in their

ownership, occurs at the same time,

and is dependent on payment).

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Exchange give-up

Customer Exchange Other exchangemember

Customer clearer Other clearerClearing house

ICAP

The implementation o the LTRO acility by

the European Central Bank has not changed

the downward trend in bank lending growth

in the Eurozone. However, activity started

to pick up in the ourth quarter as increased

liquidity became evident.

Equities

Our equities business principally comprises

equity derivatives. The equity derivatives

market was volatile during the year, with

large and requent swings caused by global

economic and political uncertainty. Our

equity derivatives business saw slight

revenue growth in the Americas and minor

declines in EMEA and Asia Pacic.

ICAP maintained its market share in equity

derivatives and continues to see uture

opportunities rom regulatory reorm.

However, the equity derivatives business

aces challenges rom contracting volumes,

commission compression and increased

competition rom new entrants.

In March 2012, ICAP launched iLinked,

the rst ully tradeable Delta One equity

derivatives platorm. The platorm operatesas a hybrid, oering traders the ability to

transact either electronically or by voice.

iLinked oers a range o equity-based

exchange or physicals, which will allow

traders to access a transparent pool o

liquidity across 120 instruments. Other

Delta One and equity derivative products

will be added during 2012/13.

Electronic

ICAP operates EBS and BrokerTec, the

worlds leading electronic trading platorms

in the OTC FX and xed income markets.

The platorms oer efcient and eective

trading solutions to customers in more than

50 countries across a range o instruments

including spot FX, US Treasuries, European

government bonds and EU and US repo. The

platorms are built on our bespoke networks

which connect participants in wholesale

nancial markets.

Electronic

perormance m

Change

%Revenue 301 (1)

Operating prot* 127 4

* From continuing operations beore acquisition anddisposal costs and exceptional items.

ICAPs strategy is to grow our global

electronic business through increasing

volumes o existing products and by

developing new markets.

Combined average daily electronic volumes

or the EBS spot FX and BrokerTec xed

income platorm or the 12 months ended31 March 2012 were $800 bil lion, an

increase o 3% on the previous year, with

the highest ever average daily volume,

$906 billion, being achieved in June 2011.

Electronic reported revenue o

301 million, a decrease o 1% over

the prior year. Operating prot increased

by 4% to 127 million.

To support our market-leading

position urther at a time o heightened

competition in electronic trading, we

continue to invest in product development,

operations and technology.

FX

Average daily FX electronic broking

volumes on the EBS platorm were

$152 billion, a 1% increase on the prior

year. Since late October, volumes on the

EBS platorm declined largely due to

quieter market conditions and the range-

bound nature o two o EBSs main

currencies, the Japanese yen and the

Swiss ranc. Revenue generated romCommonwealth and emerging market

pairs has been maintained, with continued

growth in ruble volumes.

The EBS platorm continued to demonstrate

its role as the FX markets central source

o pricing and liquidity. This was seen on

4 August 2011 when heightened volatility

resulted in $407 billion traded on EBS,

the third-highest volume in its history.

EBS attracts growing interest rom a widerange o counterparties or xing orders.

Volumes are improving in its continuous

match block trading solution. Interest in

both NDFs and CNH also continues to grow

rom a variety o counterparties across

all regions. EBS completed its rst ever

non-deliverable FX swap (NDS) trade in

June 2011. NDSs are designed to make

traders FX position management simpler

and more accurate.

3. Exchange broking give-up

ICAP executes a trade on an exchange in the

capacity o executing broker on behal o a

customer. The customers clearing member

accepts the trade or settlement, at which

point ICAP ceases to be party to the

transaction and settlement risk transers.This model is used to broke nancial,

commodity, equity derivatives and cash

equities instruments. ICAP is a member o

the worlds largest derivatives exchanges.

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EBS continues to win leading industry

awards including, or the ninth consecutive

year, Best Electronic Broker by FX Week,

and Best Matching Platorm award in the

2011 Prot & Loss Readers choice Digital

Markets Awards.

Rates

Government bonds and repo

Total average daily volumes in US

Treasury products, EU repo and US repo,

at $648 billion, increased 3% versus the

prior year. Trading on the BrokerTec

platorm reected a number o actors,

including the negative impact o the

Eurozone crisis on investor condence,lower risk appetite and continued

rationalisation within banks. In addition,

the at yield curve or US Treasuries has

created ewer trading opportunities.

Both the US and Europe saw a all in

repo activity, as a shortage in collateral

was exacerbated by the European Central

Banks rst LTRO in December 2011,

raising 489 billion. Another unlimited

three-year LTRO, raising a urther

530 billion, ollowed in February 2012.

In Europe, electronic trading o European

government bonds continued the growth

seen in the previous year, with January

2012 reporting record volumes recorded

in Austria, Belgium and Italy, and the

second highest monthly turnover in France.

Following a slow summer in UK gilts, business

picked up towards the end o 2011/12.

We continue to invest in BrokerTec.

In March 2012 we launched a new

generation platorm, considerably

improving order volume and latency.

Interest rate swaps

In November we received regulatory

approval or iSwap Euro Limited to operate

a multilateral trading acility (MTF) or OTC

derivatives. iSwap Euro Limited now runs

ICAPs electronic platorm or IRS trading

and is operated and controlled by ICAP, with

Barclays Capital, Bank o America Merrill

Lynch, Deutsche Bank and J.P. Morgan

together investing $34 million. The our

shareholding banks support the platormwith streaming prices.

iSwap Euro Limited provides a trading

platorm or euro IRS, as well as electronic

execution services, in a wide range o

interest rate products. The platorm is

managed by ICAP as a part o its technology

inrastructure and control environment.

ICAP has accordingly continued to

consolidate 100% o its prot in its post-tax

earnings. Once the other shareholders have

recognised their non-controlling interests,ICAP will retain 43% o iSwap Euro Limiteds

post-tax earnings. ICAP believes that this

co-investment will assist in the growth and

development o the platorm, as swaps

trading becomes increasingly electronic.

ICAP continues to earn all voice and

broker-assisted hybrid IRS earnings.

The transition rom a voice-brokered

market to an electronic venue normally

takes a number o years, as the liquidity

pool migrates slowly and as customers

become more comortable with the new

trading environment.

Following the launch o i-Swap, initial trading

volumes on the platorm exceeded our

expectations. However, as the euro crisis

unolded in the summer o 2011, volatility

spiked, spreads on interest rate derivatives

increased and electronic trade activity on

i-Swap diminished. The results o the recent

elections in France and Greece and the

potential ramications or past commitments

to austerity and the scal pact have troubled

markets. Volatility has increased and risk

appetite diminished. Current conditions are

not supportive o active electronic markets

in IRS and we anticipate continued volatility

over the summer.

In January 2012, i-Swap won the OTC

Trading Platorm o the Year award in the

Risk Awards 2012. This award recognises

best practice in the risk management and

derivatives markets.

MyTreasury

MyTreasury is our electronic money market

trading platorm or corporate treasury

investors. MyTreasury currently oers

corporate treasurers access to AAA-rated

money market unds and term deposits.Other products, including certicates

o deposit, short-term loans, commercial

paper and repos, are planned to be launched.

The ICAP International Ruble Settlement Forum

to enable more reliable and ecient ruble trade

settlement, and or the banks to commit to

implementing BESP. ICAP co-hosts the IRSF

which is held twice a year, with the support

o all major ruble market participants.

ICAP established the International Ruble

Settlement Forum (IRSF) in 2007 to bring

together the Central Bank o Russia (CBR)

and correspondent banks. The aim o the

IRSF is to encourage the CBR to mandatecorrespondent banks to use its Banking

Electronic Speedy Payments (BESP)

real-time gross settlement system,

24


10/24

The value o unds invested via MyTreasury

increased by 41% rom the previous year

to 18 billion. The platorm oers access

to more than 2,000 und accounts. The

pressures on interbank liquidity, along with

the need or banks to strengthen their

capital bases, have increased levels o

interest in participation in MyTreasury.

For the ourth consecutive year,

MyTreasury was awarded the Treasury

Management International Best Money

Market Fund Dealing Portal award by

the readers o Treasury Management

International.

Credit

ICAP has electronic platorms with

unctionality that has been developed to

address dierent aspects o the credit

derivatives markets. These credit platorms

provide automated trading to all major

banks and have consistently been one o

the top three interdealer credit platorms.

Our European platorm has beneted rom

double-digit growth, specically in CDS

Index and high yield products.

Post trade risk and inormation

The post trade risk and inormation business

comprises the portolio risk services

businesses (Reset, ReMatch and TriOptima),

the transaction processing business, Traiana,

and the inormation business.

Post trade risk andinormation perormance m

Change%

Revenue 208 13

Operating prot* 91 15

* From continuing operations beore acquisitionand disposal costs and exceptional items.

ICAPs aim is to continue to develop itspost trade risk and inormation business by

providing innovative services that enable

our customers to reduce risk and costs,

as well as to increase efciency, return on

capital and capacity to process trades.

The post trade risk and inormation business

continued to perorm strongly, reporting

revenue o 208 million, an increase o

13% on the prior year. Operating prot

increased by 15% to 91 million, reecting

improved market conditions, additionalcustomers, as well as increased usage

rom existing customers.

Reset and ReMatch

Reset is the market leading provider o risk

mitigation services within the interest rate

and ination markets, and accounts or the

largest proportion o ICAPs post trade

risk revenue and operating prot. Resets

expertise in short-end risk management

helps its customers to control multiple

orms o xing and basis risk across

numerous asset classes.

Despite a persistent global backdrop o

low interest rate policy, with little prospect

o change and widespread central bank

liquidity, the high levels o stress in the

European sovereign markets resulted in

greater LIBOR volatility as counterparty

credit concerns impacted unding markets.

Reset beneted rom both this volatility

and rom oering an expanding product

set to its customers, including a bond bulk

risk service in European government bonds

and a oating/oating basis product.

ReMatch provides market risk mitigation

and portolio rebalancing services to

address the problems derived rom thebuild-up o illiquid, calendar spread and

net open positions in CDS portolios. In

October 2011, ReMatch launched a new

service to mitigate risk arising rom quanto

CDS (sovereign contracts denominated

in a dierent currency) that reerence

European sovereigns. Quanto CDS enables

banks to reduce their positions in what

would otherwise be illiquid maturities.

ReMatch has become a signicant orce

in the market in CDS or western European

sovereigns, emerging market sovereignsand corporates. Sovereign market stress,

particularly in Europe, created signicant

increases in demand or ReMatch, most

notably in the second hal o the year.

BrokerTec platorm upgrade

ICAPs BrokerTec business successully launched

a new trading system using a customised version

o the NASDAQ OMX Genium INET platorm,

which provides customers with substantially

increased perormance and a greatly enhanced

user experience. The new system provides very

low latency and high throughput, and maintains

all o the built-in capabilities specically

designed or manual traders. It retains all the

unctionality previously available and is built

using technology that enables BrokerTec to

increase order volume tenold and, in some

cases, decrease order input latency by as

much as 50 times. The platorms average

latency is now less than 200 microseconds,

with previous average latency at

approximately 10 milliseconds.

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TriOptima

TriOptima, through triReduce and triResolve,

is the market leader in risk elimination and

risk mitigation solutions or OTC derivatives,

primarily through the reconciliation and

elimination o outstanding OTC derivatives.

The triReduce service decreases

counterparty credit risk, the number o

outstanding contracts and the gross notional

value through early termination o existing

contracts or rate, credit and energy swaps.

Since 2008, triReduce has eliminated more

than $230 trillion in total notional volume

or interest rate and credit deault swaps.

As we anticipated last year, during 2011/12triReduce saw an increase in activity and

eliminated $72 trillion in notional volume

in interest rate swaps alone. Eliminating

trades helps to reduce systemic risk and

reduces potential administrative exposure

in the event o a deault.

The increased use o compression o trades

demonstrates to regulators that risk in

the system can and should be reduced by

actively managing portolios. This is as

relevant or centrally cleared trades as it isor bilateral trades, as sending trades to a

central counterparty (CCP) does not ully

eliminate risk.

The triResolve service acilitates the

management o counterparty credit

exposure and reduction o operational risk by

reconciling entire OTC portolios. triResolves

revenue grew as its customers increased

their ocus on operational and credit risk

through portolio reconciliation, margin

call management and dispute resolution.

Traiana

Traiana provides global banks,

broker/dealers, buy-side rms and

e-trading platorms with solutions to

automate post trade processing o nancial

transactions. The Harmony network is the

backbone o Traianas post trade business.

It is used by more than 500 o the worlds

leading nancial companies and has become

the market standard or post trade

processing o FX. Traiana is ocused on

growing its original FX business and

exploiting the strengths o the Harmony

network by adding new asset classes and

services to the platorm.

At 31 March 2012, Harmony was

processing an average o 1.1 million

transactions per day, an increase o more

than 25% rom the same period last year.

In addition, Traianas trade aggregation joint

venture with CLS Group, CLSAS, continued

to expand. CLSAS is processing more than

324,000 transactions per day, having grown

by more than 85% over the past 12 months.

As part o the strategy to expand into new

asset classes, the platorm was extended

to provide solutions or exchange tradedderivatives, equity derivatives/CFDs and

cash equity transactions.

Traiana announced an industry eort to

reduce risk in algorithmic trading o FX

with leading FX prime brokers and trading

platorms. This initiative oers customers the

ability to centrally monitor and manage FX

electronic communication networks trading

activity and trading limits on a global basis.

The initiative contributed to growth during

the year and is expected to provide additional

growth opportunities in the uture.

In January 2012, Traiana launched another

new service on the Harmony platorm.

Harmony CCP Connect provides a

comprehensive solution or OTC FX clearing,

including connectivity, workow automation,

trade matching and afrmation. With a single

connection to Harmony, it provides access to

all CCPs, thus lowering costs and complexity

or market participants. The solution

supports all proposed US and European

clearing rules and workows, simpliying

compliance or FX clearing companies and

their customers. In January 2012, Traiana

Harmony was certied by the CME Group

or the submission o OTC FX derivatives. In

March 2012, Traiana announced that six othe largest FX clearers had chosen Traiana

Harmony or their comprehensive client

clearing solution.

Inormation

ICAP Inormation is the leading provider

o OTC market inormation, delivering

independent data solutions to nancial

market participants. It empowers customers

to make trading decisions with OTC market

inormation across key asset classes. ICAP

Inormation provides data services acrossICAPs brokered product range and oers

innovative solutions or real-time, end-o-

day and historic products.

ICAPs data is the key source o

mark-to-market data or the industry and

o intelligence behind algorithmic trading

and research models or customers. With

average daily volume data brokered by

ICAP ed into our data products, there are

29 million average daily data updates in

process, more than 950,000 transactions have

been completely eliminated within SwapClear.

As illustrated, the triReduce compression

methodology can signicantly mitigate

counterparty credit risk. It levels out the peaks

and troughs in the bilateral risk landscape.

TriOptima compression gains pace

TriOptimas compression o interest rate and

credit deault swaps continued to gain pace,

in particular its compression o cleared trades

within LCH.Clearnets SwapClear. In February,

TriOptima announced that $110 trillion in total

notional volume in euro, Japanese yen, sterling

and US dollar interest rate swaps had been

eliminated by 21 SwapClear members using

TriOptimas triReduce service since the rst cycle

in 2008. Terminating risk-neutral trades in

SwapClear contributes to reducing systemic risk

and acilitates system processing by increasing

operational eciency and reducing potential

exposure in the event o a deault. Through this

26


12/24

1.5

2.5

0.5

-0.5

-1.5

-2.5

1.5

2.5

0.5

-0.5

-1.5

-2.5

more than 96,000 instruments delivered

to end users. The business has exhibited

strong perormance versus the prior year

with growth in both revenue and prot.

It employs a subscription-based charging

structure which provides a regular

revenue stream.

The depth and breadth o our products

expanded in 2011/12 with the launch o

Eurex ICAP Swap Spreads, in collaboration

with Deutsche Brse, which enabled us to

develop a real-time benchmark or euro

yield spreads. In the xings and reerence

space, we expanded our partnership with

Thomson Reuters with the delivery o spotFX xes and the development o new

services in emerging markets, ollowing

the launch o ICAP LatAm. In March 2012,

ICAP agreed to extend its data product

and distribution agreement with QUICK

Corp in Japan or three years.

Prot or the year

Year ended 31 March

2012

m

2011

m

Prot beore tax* 354 350

Acquisition and disposal costs (137) (94)

Exceptional items (23)

Prot beore tax rom continuing operations (statutory) 217 233

Tax (77) (50)

Prot rom continuing operations 140 183


The Group reports a solid perormance

with prot aer tax, acquisition and disposal

costs and exceptional items o 140 million

rom continuing operations.

Acquisition and disposal costs

The Group saw amortisation o intangibles

remain in line with the prior year with no

material intangibles acquired in the year.

Impairments to goodwill and intangible

assets increased by 92 million in the period

rom 11 million to 103 million principally

relating to Link and Arkhe. While Link has

maintained its market share, it aces certain

challenges due to a contracting market.

The impairment in Arkhe was oset bya 31 million release o legal liabilities

booked on acquisition that created the

original goodwill balance. There is no cash

impact rom making these impairments.

A gain o 13 million was recognised

primarily on the sale o our Japanese

government bond business.

Exceptional items

The Groups policy is to disclose separately

items in its income statement as exceptional

which are non-recurring and, in terms o

both size and nature, material.

No exceptional items have been included

or the year (2011 23 million charge).

TaxThe overall objective continues to be to

plan and manage the tax aairs o the Group

efciently while complying with local tax

regulations. The Groups eective tax rate,

excluding acquisition and disposal costs,

exceptional items and discontinued

operations is 27% (2011 26%).

The Groups tax charge is aected by the

varying tax rates in dierent jurisdictions

applied to taxable prots, the mix o those

prots, and the rules impacting deductibilityo certain costs. The Group continues

to take a prudent approach to the

management o its tax aairs and provisions

are set to cover tax exposures. We expect

the Groups eective tax rate, excluding

acquisition and disposal costs, exceptional

items and discontinued operations to be

between 27%-29% or the nancial year

ending 31 March 2013.

The triReduce compression cycles signicantly

mitigate counterparty credit risk and thereby

risk in the wider nancial system by levelling out

the peaks and troughs in the risk landscape.

Each peak in the graphs represents the risk one

o the counterparties participating in the given

triReduce compression cycle has to all the other

participants beore and aer the cycle.

1.5 2.5 -0.5 0.5 -2.5 -1.5

0.5 1.5 -1.5 -0.5

$bn

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Counterparty risk beore a triReduce cycle

(net notional bn)

Counterparty risk aer a triReduce cycle

(net notional bn)


13/24


Traiana launches new era in risk management or the FX industry

In June Traiana announced that it had partnered

with the leading FX prime brokers and trading

platorms to launch an industry-wide initiative to

monitor centrally and manage FX trading activity

and trading limits globally. The new version oHarmony CreditLink provides the

FX industry with the control and real-time risk

management capabilities to manage risks rom

algorithmic and high requency trading. This

initiative was the culmination o a comprehensive

efort by prime brokers Citi, Deutsche Bank,

J.P. Morgan and Morgan Stanley, together with

platorms Bloomberg Tradebook, Currenex,EBS, FXCM, Hotspot FX and Thomson Reuters.

Balance sheet

The Groups net assets at 31 March 2012

were 1,210 million (2011 1,251 million).

Gross debt is 629 million, a 64 million

increase as a result o additional drawings

under the RCF to nance the capital increase

in the UK regulated entities and the issue o

European Commercial Paper. Committed

headroom at 31 March 2012 was

324 million (2011 362 million).

At 31 March 2012, the earliest debt

maturity date relating to the RCF was

31 May 2013. However, on 20 April 2012

this acility was extended to 31 May 2014.

Cash and cash equivalents increased by143 million to 547 million, as a result o

cash received rom the investment by our

partners in iSwap Euro Limited and

additional unding o UK regulated entities.

As a consequence, net debt has reduced by

79 million to 82 million.

Restricted cash at 31 March 2012

was 50 million (2011 73 million).

This represents cash which the Group

does not have immediate and direct

access to, such as a CCP clearing house.This balance uctuates with trading.

At 31 March 2012, the Groups Pillar 1

regulatory capital headroom remained

relatively stable at 0.9 billion (2011

1.1 billion) as a result o the low market

and credit risk in the Group. The Group

continues to benet rom the BIPRU

Investment Firm Consolidation waiver

which runs until April 2016.

Interim dividends are calculated as 30% o

the previous years ull-year dividend. This

approach is expected to continue or the

2012/13 nancial year.

Operating prot*/cash conversion

The Groups consolidated cash ow

statement is set out in the nancial

statements.

The Group continues to generate substantial

ree cash ow. Over the long term it is

expected ree cash and post-tax prot will

converge. At 31 March 2012 our ree cash

ow conversion was 103% compared to

81% in 2010/11, primarily as a result o animprovement in short-term working capital.

Earnings and EPS

We believe that the most appropriate EPS

measurement ratio or the Group is adjusted

basic EPS as this measure better reects the

Groups underlying cash earnings. Adjusted

basic EPS rom continuing operations

excludes the impact o the perormance o

acquisition and disposal costs, exceptional

items (note 23) and discontinued operations

(note 25). The calculation o EPS is set out

in note 2 to the nancial statements.

Adjusted basic EPS rom continuing

operations increased by 1% to 40.1p.

The Groups basic EPS rom continuing

operations reduced rom 28.1p to 21.1pand total basic EPS, including discontinued

operations, reduced rom 28.7p to 21.1p.

During the year the Group purchased

14.3 million shares in to Treasury Shares to

oset the dilution caused by the prior year

scrip dividend.

Dividend

For the past our years, the Group has paid

a dividend equal to 50% o adjusted basic

EPS reecting the boards desire to balancedistributions to shareholders against the

wider capital demands o the Group.

For the current year we propose, subject

to shareholder approval, to increase the

nal dividend to 16.00p. This will result

in an increase in the ull-year dividend

o 2.05p to 22.00p equal to 55% o

adjusted basic EPS.


28


14/24

Free cash ow

Year ended 31 March

2012

m

2011

m

Cash rom ongoing operations* 425 363

Interest and tax (113) (86)

Cash ow rom ongoing operating activities 312 277

Capital expenditure (52) (69)

Dividends rom associates and investments 8 2

Ongoing ree cashow 268 210

Discontinued and exceptionals (21)

Free cash ow 268 189

* Cash generated by operations beore exceptional items.

Cash generated rom ongoing operationsincreased by 62 million in 2011/12

primarily as a result o a decrease in

restricted unds (23 million) and the impact

o initially unsettled trades (25 million).

Net payments in respect o interest and tax

increased by 27 million, primarily reecting

an increase in tax payments as the prior year

beneted rom a tax reund.

13

12

11

2012

2010

2011

Technology spend

as a percentage of revenue (%)

Fixing services (volume matching services)

Investment in technology

Our investment in technology enables

us to provide sophisticated solutions

across a wide range o products to

our customers around the world giving

us a signicant competitive advantage.

The ability to transact on systems with

the highest level o stabilty is o vital

importance to our customers. We ensure

that our electronic, voice and post trade

platorms not only meet the current

needs o our customers but also

anticipate their uture requirements

in a rapidly changing environment.

ICAPs low latency, exchange based messaging

technology has created increased trading

opportunities or customers. Strategically,

it provides ICAP with a generic, highly

congurable platorm to enable urtherexpansion into other asset classes. ICAPs

browser based ramework underpins the

next generation o web solutions,

allowing services to be more easily

distributed to our customers. These new,

exible and proven technologies provide

ICAP with the necessary agility requiredto proactively adapt to both market

and regulatory changes.

Following the previously successul launch o

xing services in asset classes including credit,

ination and interest rate derivatives, ICAP

continued to expand in this area over the past

nancial year with the launch o IC AP DerivXweb based xings. The introduction o

powerul algorithmic matching, together with

The Group distributed 135 million o itsree cash ow to shareholders through its

dividend and bought back 14.3 million shares

in to Treasury Shares at a cost o 56 million.

Event aer the balance sheet date

On 20 April 2012, the Group extended

the maturity date o the $880 million RCF

incorporating up to a $200 million swingline

acility by one year to 31 May 2014.

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25

21

19

34

33

29

41

46

52

2012

2010

2011

Operating profit* split (%)

Electronic

Post trade risk and information

Voice

40.1

39.9

35.4

2012

2010

2011

Adjusted basic EPS (pence)Adjusted basic EPS (pence)

21

19

10

10

69

71

29

31 2012

2011

Diversified revenue (%)

Total subscription

Bank execution

Non-bank execution

103

81

116

2012

2010

2011

Conversion of profit to cash (%)

Perormance

ICAP aims to have a split o operating

prot* that is evenly distributed between

its voice, electronic and post trade risk and

inormation businesses. In 2011/12 we

moved closer to this aim with a strong

perormance in post trade risk and

inormation, due in part to a decline

in voice perormance.

Denition

Operating prot* split between ICAPs

business segments o voice, electronic

and post trade risk and inormation.

Perormance

ICAP aims to diversiy earnings through growth in

its post trade risk and inormation business which

has a dierent pricing model and wider customer

base as well as through growth in markets such

as commodities which historically has a broader

range o customer types. The increase in this

years non-bank execution ees to 21% is

primarily a result o the improved perormancein the post trade risk and inormation business.

Perormance

ICAP aims to deliver superior EPS growth

or our investors. For ve years in a row,

adjusted basic EPS has increased year-on-

year. For 2011/12 adjusted basic EPS has

marginally increased to 40.1 pence per

share as a result o a lower cost base

osetting weaker revenue.

Perormance

The Groups business model efciently

converts prot into cash and over the

medium to longer term we expect prot and

cash conversions to converge. The increase

in this years ratio to 103% is a result o an

improvement in the working capital position.

Denition

Percentage o revenue derived rom

bank and non-bank execution revenue

and subscription ees.

Denition

Adjusted basic EPS is the prot aer tax*

attributable to the equity holders o the

Group divided by the weighted average

number o shares in issue during the year,

excluding shares held to satisy employee

share plans and shares purchased by the

Group and held as Treasury Shares.

Denition

Conversion o prot to cash is calculated

as cash generated rom operations beore

exceptional items less cash rom operations

relating to non-controlling interests, interest,

tax, capital expenditure plus dividends

received rom associates and investments

as a percentage o operating prot*.


30

Key perormance indicators


16/24

23-25

23-25

22-24

2012

2010

2011

Global market share (%)

13

12

11

2012

2010

2011

Technology spend

as a percentage of revenue (%)

498

542

533

2012

2010

2011

Revenue per voice broker (000)

22

22

22

2012

2010

2011

Operating profit* margin (%)

Perormance

Revenue per voice broker provides a

measurement o broker productivity.

The reduction in 2011/12 reects the

all in revenue, especially in the Americas,

rom ongoing Eurozone sovereign debt

issues and regulatory uncertainties. In

addition, the average number o brokers

has increased by 3% as we invest in ourcapacity in higher growth areas.

Perormance

ICAP continues to invest in its market

leading electronic and hybrid platorms.

This enables us to anticipate and respond to

our customers needs. The percentage o

revenue spent on technology has increased

to 13%, reecting the replatorming o

BrokerTec and investment in hybrid during

the year.

Perormance

Global market share remained in line

with the prior year and was between

23% 25%. We estimate the size o

ICAPs total available market was

$12 billion.

Perormance

ICAP aims to improve its operating prot*

margin which remained unchanged or the

year at 22%.

Denition

Voice revenue divided by the average

number o voice brokers or the year.

Denition

Spend incurred in the maintenance and

development o all inormation technology

systems as a percentage o total revenue.

Denition

ICAP estimates its share o the overall

available market, excluding global cash

and equities and including shipping,

post trade risk and inormation.

Denition

Operating prot* divided by revenue

rom continuing operations.


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ICAP plc / Annual Report 2012 /Key perormance indicators


17/24

The risks we ace

ICAP is an interdealer broker and provider

o post trade risk mitigation, messaging and

data services. Consequently it has a very

dierent risk prole rom that o a bank,

investment bank, asset manager, insurance

company or hedge und. ICAP is not

required to commit material amounts o

capital in the conduct o its day-to-day

business; the prot and cash ows o thebusiness are driven by the level o activity

o its customers and do not depend on the

valuation o its assets and liabilities. ICAP

does not have material exposures to market

risk or long-duration credit risk.

The macroeconomic stresses simulated

by regulators o the banking and insurance

industries, or instance, do not create

material risks or ICAP directly but could

potentially have an adverse aect on

revenue. ICAP is primarily commission

earning and its nancial perormance was

largely unaected by the credit crunch,

or the crisis that ollowed the Lehman

bankruptcy in 2008. This is because the

Group does not carry credit sensitive assets

on its balance sheet or any o length o

time and does not leverage its capital.

Market and regulatory environment

New nancial regulations may potentially

redene some aspects o interdealer

broking and create new types o

competition between interdealer brokers

and other market intermediaries or

execution business.

In the US, the Dodd-Frank Act requires

certain classes o derivatives to be ondesignated contract markets or SEF.

In Europe, there are similar proposals in

MiFID II that will mean certain standardised

derivatives will be traded on exchanges,

organised trading acilities or multilateral

trading acilities.

The precise scope and impact o these

proposals on market operating models

are yet to be dened.

ICAP already operates ten MTFs in Europe

and is preparing to operate a SEF in the

US once the rules are nalised. ICAP also

engages heavily with the clearing agents

on behal o itsel and its customers. The

regulatory push or urther standardisation

and clearing o OTC derivatives is in line with

ICAPs current operating model.

The Group is proactive in its assessment

and management o emerging risks

and opportunities within the dynamic

environment ICAP operates in. GivenICAPs leading position as an existing

operator o MTFs in OTC derivatives and

its balanced portolio o voice, electronic

and post trade risk and inormation

businesses, the Group is well positioned to

take advantage o the proposed legislative,

regulatory changes and emerging markets.

Our risk appetite

The board monitors the risk prole o

the Group using eight risk categories:

operational, liquidity, strategic, credit, legal

and compliance, market, reputational and

nancial. The three principal risks o the

Group are considered as operational,

liquidity and strategic.

The Group acknowledges that it willbe subject to residual risk in pursuit o

achieving its strategic objectives (even aer

mitigating actions). Setting and monitoring

risk appetite (the willingness to accept a

level o risk) is used as a key indicator which

the board uses to monitor progress against

its stated goals.

ICAP uses a risk appetite ramework

to set appetite and tolerances or risk in

each category, including qualitative and

quantitative actors.

The Groups process or setting risk

appetite includes an annual assessment o

the Group strategy, analysis o known and

potential emerging risks, and the evaluation

o these against the current risk appetite

o the Group.

This ramework includes an assessment o:

the Groups risk behavioural trait;

internal and external inuences;

loss events (internal and external);

income statement projections; the capital held; and

other business intelligence (or example,

market and analysts reports).

The Group tracks and monitors its risk prole

and a process exists to report and escalate

breaches should risk appetite be exceeded.

The Groups risks, risk appetite and mitigants

are described on pages 33 to 35.

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The three principal risk categories

Operational risk

Description Risk appetite Mitigation

Operational risk is the risk that the Group maysuer a nancial loss or reputational damagedirectly or indirectly rom inadequate or ailedinternal processes, human error, systems ailureor external events. Operational risk is intrinsicin all o the Groups diverse activities. The mostsignicant Group operational risks are: extended ailure o IT networks, systems

or communication; broker error;

internal or external events aectingbuildings or people;

loss o critical sta; inadequately managed projects including NBIs; activity beyond permitted mandate; and inaccurate booking, settlement or clearing

o transactions.

ICAP endeavours to minimise losses due tooperational ailures through mitigating controlsapplied to its systems, processes and people. TheGroup accepts that even aer mitigating controls,residual risk remains.

A control ramework exists within which risks andcontrols are identied, assessed and monitored.Key risk indicators are reported to the boardthrough the Audit and Risk Committee, theGRACC and the GOC.

The Group has or many years invested heavily ininrastructure to mitigate its own risks. Additionallythe Group is a leading provider o risk mitigationservices as part o its service oering.

Formal business continuity plans and appropriateremote data back-up and disaster recoveryacilities are available or each o the Groupskey locations.

Liquidity risk


Liquidity risk is the risk that any part o theGroup does not have sufcient nancialresources available to enable it to meet itsnancial obligations as they all due.

A signicant proportion o the Groups earningsare rom invoiced commission earning businesses,including name give-up brokerage, post traderisk services and inormation services. However,as a result o providing services to its customers inmatched principal transactions and execution (andsome limited instances o clearing) in exchange-traded products, the Group can be required toplace collateral and margin at clearing houses owhich it is a direct member and at third partyclearing providers who act on the Groups behal.

Liquidity risk is monitored and reported usingvarious metrics to ensure that, under businessas usual and stress-tested scenarios, the Groupis able to meet its nancial obligations.

The Group takes a multi-dimensional approachto liquidity risk management.

There is a centralised provision o contingencyunding or its trading entities. Additionally each

entity has access to appropriate liquidity.The board regularly reviews the liquidity demandso the Group through the GRACC.

Group risk and treasury unctions share globalday-to-day liquidity risk management executed bythe individual businesses.

The Group seeks to diversiy its unding sourcesand maintains an investment grade rating romFitch and Moodys.

Strategic risk


ICAP is exposed to strategic risk through itsservices becoming superseded by competitorsolutions, changes in the Groups customerbase, changes in market structure or ailureto appropriately implement strategic projects.

ICAP aims to be the inrastructure provider tothe worlds wholesale nancial markets, in bothexecution and post trade. In order to maintainand develop this position ICAP is willing to exploreorganic growth, acquisitions and potential alliancesto remain relevant to its customers.

ICAP maintains constant dialogue with itscustomers and regulatory oversight bodiesin order to leverage environmental and changingcustomers needs. ICAP is thereore able toprovide and enhance services that are:

relevant; scalable;

exible; and have realistic opportunities or growth

and longevity.

All new business opportunities go through a wideranging and rigorous process and adhere to duediligence policies.

The Groups diverse business model allows ICAPto adapt and mitigate against changing demands,

habits or the evolution o the environment.

The economic model o the Group, particularlywithin voice, means the cost base largely exeswith earnings, thereby mitigating the impact oany loss o market share in those services.

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Secondary risk categories

Credit risk


As an interdealer broker, ICAP does not extendlong-term credit nor does it take proprietarypositions. However, counterparty ailure to ullits obligations may result in ICAP having:

an open market position; possible liquidity implications; unpaid receivables; or

loss o access to, or actual loss o unds that theGroup has deposited with nancial institutions.

Counterparty credit risk is intrinsic in all theGroups activities. Although most prevalent inthe matched principal business, this risk is presentin all businesses where ICAP may suer loss i acounterparty does not perorm on its obligations.ICAP manages credit risk limits or eachcounterparty based on indicators o credit quality(internal ratings) in order to limit the potential lossthe Group could suer as a result o a counterpartydeault. ICAP accepts, however, that even aermitigating controls, there will be residual risk thatcould lead to losses.

Processes and controls are in place to limit andmonitor the Groups exposures. These include(but are not limited to):

client on-boarding and limit setting/monitoringprocess;

undertaking transactions on a delivery versuspayment basis;

near real-time monitoring o counterparty limitsand their utilisation on a global basis; and

regional accounts receivable teams monitoringnon-recovery o commission and ee income.

Legal and compliance risk


Legal risk is dened as the risk o a loss o legal,human or nancial integrity, reputation or capitalas the result o government action, legislation,contract or other laws and regulations.

Compliance risk is the risk o legal or regulatorysanctions, material nancial loss, or loss toreputation which may be suered as a resulto the Groups ailure to comply with laws,regulations, rules, related sel-regulatoryorganisation standards and codes o conductapplicable to its activities.

The Group seeks to anticipate and remainin compliance with all applicable laws, rules,regulations and industry standards. The Groupoperates in a complex business environment andaccepts that disputes will occur rom time to time,and that contentious matters may thereore arisein the course o conducting its business.

The management o compliance and legal risk is,in the rst instance, the responsibility o seniorcommercial management as supported by theGroup legal and compliance unctions.

ICAP maintains an internal legal department, whichacts as an independent advisory and investigationunction and is directed to both enable and deendthe Groups strategic aims and business. Theprocesses o the legal unction aim to ensure thatthere is appropriate advice available to the Group,that the Group has clear rights and obligations indocumentation and has timely access toappropriate external legal resources.

The Group maintains an independent complianceunction. Compliance risk is mitigated by way othe ICAP compliance risk management ramework,which is operated globally.

Market risk


ICAP does not take active market risk in the pursuito any o its business objectives.

ICAP, through its FSA investment rm consolidationwaiver, is prohibited rom proprietary trading.

Any incidental exposure to market risk ismonitored by risk management and reportedto senior management. It is polic y to liquidateany exposure to open positions as soon as it isreasonably practical.

Policies, procedures and controls are in place toreduce the likelihood o positions arising, includingthe monitoring and requesting o intra andend-o-day exposures.

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Reputational risk


ICAP benets rom its reputation or integrityand its position as the worlds leading interdealerbroker and provider o post trade risk andinormation services. Any diminution in itsreputation could thereore have a material impacton its perormance. Reputational risk is a secondorder risk that would be the consequence o thematerialisation o other risks, such as:

a series o operational ailures; unoreseen nancial losses; strategic ailures; legal and compliance risks; and

any negative reputational damage to thewholesale nancial markets.

ICAPs business is predicated on building andmaintaining relationships with its customers,lenders, investors, regulators and the media. Thereis thereore limited appetite or reputational risk.

The primary mitigation o reputational risk isthrough active management o other risks.

ICAP considers the impact o its overall reputationand seeks to dierentiate itsel rom its competitors,its customers, shareholders, other stakeholders andthe media.

The controls applied across the other risk categoriesreduce the likelihood o reputational damage.

Financial risk


Currency riskThe Group presents its consolidated nancialstatements in pound sterling and conductsbusiness in a number o other currencies,principally the dollar and the euro. Consequentlythe Group is exposed to currency risk due toexchange rate movements (note 10).

Interest rate riskThe Group nances itsel through a combinationo xed and oating rate debt obligations andmaintains cash on its balance sheet to meeta combination o local regulatory capital rules,clearing house deposits and other commercialrequirements, including margin calls which arisethrough the provision o clearing services incertain markets to brokerage customers.

ICAP is exposed to both interest rate and currencyrisk through the nature and geographically diverselocations in which it operates.

ICAP operates in accordance with its hedgingpolicy to manage interest rate and currency riskswithin board approved limits.

This policy contains a number o rules on governingthe use o derivatives and hedging instruments.

The board approves nancial risk managementpolicies through the GRACC with the objectiveo minimising income statement volatility.

Further details o the Groups interest rate andcurrency risk hedging strategy and the level ocover in place at 31 March 2012 are contained innote 10 to the nancial statements. Details o theGroups sensitivity to changes in interest rates andcurrency rates are set out in note 10 to thenancial statements.

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many types o neurons. The trial involves a

pioneering technology to enable the precise

delivery o GDNF into the brain, with the

potential to reverse the disease process.

The Cure Parkinsons Trust and the Parkinsons

community are awaiting the results o the study.

As a key participant in the wholesale

nancial markets, we believe that ICAPs

success contributes to the economies in

which we operate by helping companies

and organisations manage and mitigate

their business risks.

ICAP ulls its corporate responsibilities

in a number o dierent ways. For our

shareholders we aim to produce superiorreturns over the long term. For our customers

we aim to provide products and services

which, in turn, will enable them to create

value. For our employees, we aim to provide

an environment that is intellectually

challenging, motivating and supportive.

As an interdealer broker, our principal

contribution is to acilitate trading in the

wholesale nancial markets to help ensure

the efcient unctioning o the global

markets. Our voice and electronic

platorms source liquidity and enable price

discovery or our customers. The move

towards hybrid and electronic trading

platorms in OTC markets, in which ICAP

is a leader, together with our post trade

risk and inormation business, helps

make markets more resilient, saer and

more transparent.

Our business

ICAP employs more than 5,100 people

worldwide, an increase on the previous year

o almost 200, mostly as a result o the

expansion o existing key businesses and

strategic acquisitions.

ICAPs ability to attract and retain the

highest quality people and leverage their

intellectual capital is one o the key actorsdriving the success o our business. As the

Group has expanded, ICAP has attracted

people with a broad range o skills. The

brokers and their managers still comprise

the largest group in the employee base

and have very specic skills. They are highly

entrepreneurial, dynamic, team-spirited

individuals with extremely strong

networking and interpersonal skills with the

ability to excel in a pressurised environment.

The Groups remuneration policy is

perormance based and is structured to

be both consistent with, and to promote,

eective risk management in respect o

ICAPs activities. Further details o the

remuneration policy, now applicable to the

Group, are provided in the remuneration

report set out on pages 56 to 64.

ICAP continues to monitor employee

efciency and productivity closely.

Broker compensation is directly linked

to commission which varies rom desk

to desk. Commission arrangements are

structured to ensure no more than a

minimal risk remains outstanding at the

time o payment. As a result, there is no

requirement or deerral conditions to be

attached to commission payments.

Our people development

ICAP is committed to providing and

promoting equal employment and

advancement opportunities and anenvironment that ensures tolerance

and respect or all employees. ICAPs policy

is that no employee, contract or temporary

worker will be treated less avourably,

victimised or harassed on the grounds

o disability, gender, marital or civil

partnership status, race, nationality, colour,

ethnicity, religion or similar philosophical

belie, sexual orientation, age or any

distinction other than merit.

The development and training o talented

individuals is an area o ocus or ICAP.

We aim to provide an environment that is

motivating and supportive. During the past

year we have ocused on ensuring that

we continue to recruit high calibre people

with the relevant skills and experience to

develop the business despite increasingly

challenging market conditions. Our

leadership team also works to maximise

retention o key employees.

The Cure Parkinsons Trust project

A donation rom ICAPs Charity Day has

enabled The Cure Parkinsons Trust to und

a revolutionary and potentially lie changing

clinical trial conducted at Frenchay Hospital,

Bristol. This involves the growth actor GDNF

(Glial Cell Line-derived Neurotrophic Factor)

which in humans has promoted the survival o

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Corporate responsibility

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