ICAP Hires JPMorgan’s Daemon Bear to Head ‘Dark Pool’

By Nandini Sukumar

Dec. 5 (Bloomberg) -- ICAP Plc, the world’s largest broker of trades between banks, named Daemon Bear to set up and lead an alternative trading system and so-called dark pool for stocks.

Bear, previously head of equity trading at JPMorgan Chase & Co.’s asset management unit, will join the company in early January 2009 as head of Blockcrossing. ICAP confirmed Bear’s appointment and plans for the new electronic platform in an e- mail today.

The system for banks and fund managers will be created specifically to handle large blocks of shares and act as a dark pool that won’t display prices. The company wants to develop a multilateral trading facility by the second half of 2009, said a person familiar with the plans yesterday who declined to be identified because the plans weren’t public at the time.

London-based ICAP, which in 2006 ended merger talks with London Stock Exchange Group Plc, joins other so-called MTFs including Chi-X Europe Ltd., Turquoise, Nasdaq OMX Group Inc. and Bats Trading Inc., all of which aim to take market share from the traditional European stock exchanges. ICAP will focus on offering a dark pool.

Institutional investors are increasingly turning to dark pools, which compete with bourses including the New York Stock Exchange, LSE and Nasdaq OMX and allow investors to disguise their strategies. The systems match orders anonymously and don’t publicly disseminate quotes. In Europe, they are proliferating along with alternative exchanges as new rules spur competition and demand best execution for customers.

Previous Jobs

Bear was head of equity trading for 10 years at JPMorgan Asset Management and had previously worked at Invesco Ltd. and New Star Asset Management Plc, according to ICAP.

“Daemon is well known to the connectivity and trading technology community as well as considered an expert in buyside trading requirements,” Peter O’Toole, managing director at ICAP Securities, said in the statement today.

Bourses are trying to fight off the new rivals by cutting fees and introducing dark pools themselves. Deutsche Boerse AG started one called Xetra MidPoint on Nov. 24. LSE is setting up a dark pool known as Baikal, after the deepest lake in the world, which has its own chief executive officer and will be run separately from the bourse.

Record Profit

ICAP, led by Chief Executive Officer Michael Spencer, said Nov. 18 that profit jumped to a record as price swings triggered by the credit crisis boosted commissions on trading currencies and securities. Net income gained 5 percent to 84 million pounds ($123 million) for the six months ended Sept. 30.

While the collapse of the U.S. subprime-mortgage market has spurred almost $1 trillion of writedowns and losses at the world’s biggest banks, ICAP’s income increased as customers stepped up trading. Morgan Stanley said last month that so-called interdealer brokers face slowing growth as banks shrink their balance sheets and reduce transactions.

The company, whose shares are down more than 60 percent this year amid the worst financial crisis since the Great Depression, said it expects pretax profit for the year ending March 31, 2009, to be ahead of the average of 13 analysts’ current estimates of 347 million pounds.

ICAP benefits when price fluctuations increase because more customers use the products it offers. The company competes with brokers including GFI Group Inc. and BGC Partners in New York and Tullett Prebon Plc in London.

To contact the reporter on this story: Nandini Sukumar in London at nsukumar@bloomberg.net