UK broker TP ICAP to stop serving some EU clients, blames COVID-19

By Huw Jones

LONDON (Reuters) - British broker TP ICAP said on Monday it has to stop serving some clients in the European Union for the time being because it does not yet have enough staff in its new Paris-subsidiary to meet French regulatory requirements.

The EU has refused to grant financial firms in Britain direct access to the bloc after post-Brexit transition arrangements came to an end on Dec. 31, meaning they need branches or subsidiaries in the EU to continue serving clients there.

French regulators have also said that brokers who want to provide investment services must not only have a unit in the bloc but also be sufficiently staffed, TP ICAP said.

"Due partly to the extraordinary circumstances relating to the COVID-19 pandemic ... it has not yet been possible to complete the relocation of staff to the EU 27 or the local hiring of brokers in the EU-based offices...as quickly as originally planned," the world's biggest interdealer broker said.

TP ICAP said it needs to bulk up its Paris hub with between 60 and 100 staff. The 27 EU countries account for less than 10% of the company's revenues.

The French regulator's stance indicates EU supervisors are holding their line by not tolerating financial firms with large London offices relying on thread-bare EU operations to serve clients in the bloc.

TP ICAP had said earlier this month that regulators would allow it to continue serving EU customers from London to support "stability and connectivity of markets" while it finalised preparations in France.

However, it said it did not expect a material financial impact from any temporary reduction of services to EU clients and its shares were little changed in London on Monday.

It said it would complete the relocation and local hiring of staff at the "earliest opportunity".

TP ICAP, which last October agreed to buy share trading venue Liquidnet, acts as a broker between institutional customers for commodities, shares, currencies, interest rate swaps and bonds.

It said it would continue to provide some services to clients in the EU where possible based on temporary permission regimes and existing access rights.

On Jan. 4, trading worth 6 billion euros ($7.3 billion) daily in euro-denominated shares moved from platforms in London to newly-created hubs in the EU without a hitch.

EU securities watchdog ESMA warned financial firms in Britain this month not to abuse longstanding "reverse solicitation" rights that allow a non-EU broker to serve an EU client if the client made the first approach.

(Reporting by Huw Jones; Editing by Edmund Blair, Kirsten Donovan)