Class war in the City as rival brokers square up

One of the biggest class wars seen in the City broke out today as working class East Ender Terry Smith set out his plans to rival Tory grandee Michael Spencer as the world's biggest financial broker.

In the red corner stands Mr Smith, a pugilistic product of Stratford Grammar School and chief executive of the world's second largest inter-dealer broker, Tullett Prebon. He likes going to the dogs.

In the blue corner is Mr Spencer, treasurer of the Conservative Party who founded his Icap money broking firm 22 years ago and turned it into the biggest player in the industry. He frequents Twickenham and the Royal Opera House.

Mr Smith's second is Essex-born Mickey Gooch who founded his GFI Group in New York 21 years ago and has turned it into the world's third biggest player. The pair want to merge their businesses in a deal worth more than £1.6 billion.

Mr Smith said: "Talks are going very well and have been very constructive. I would hope a deal is just weeks away - possibly a month or a month-and-a-half. It takes quite a while to do these transatlantic deals."

Inter-dealer broking is one of the hidden areas of the City but massively important and profitable.

The IDBs, as they are known, link investment banks and other professional traders wanting to deal in currencies, bonds and derivatives linked to shares, property and debt. They enable banks to shift huge trades anonymously without alerting the underlying markets. The sums involved are enormous. During June, Icap completed trades worth more than £400 million every day. The global market is worth trillions of dollars a day.

The biggest markets are in London and New York where thousands of traders sit with phones glued to their ears. The traders are in the mould of Harry Enfield's Loadsamoney character of the Eighties. A dealer in the Czech crown, for example, will handle millions of pounds worth of business a week but might not be able to name the country's capital.

IDBs regularly fight each other in court over attempts to poach staff with lurid details of recruitment taking place over drinks in lap-dancing clubs.

Mr Smith, a former trader, says: "I'm from the East End, no doubt about it. My sporting interests in boxing and hunting are as unpolitically correct as you can get. I'm probably the only chief executive who goes to watch boxing in Bethnal Green." He recently put up £100,000 to campaign for a bust of an unsung Battle of Britain hero to occupy the fourth plinth in Trafalgar Square.

Mr Spencer is, on the face of it, more traditional City toff material, even if he is a self-made billionaire. He is widely respected as a genius even by his many critics. His parties are legendary.

For his 50th birthday bash in the south of France, he hired Robbie Williams for a reputed £1 million.

He is also a philanthropist. Once a year Icap and all its dealers contribute a day's commission to charity. Last year's event saw everyone from Bill Clinton to Prince Andrew drop in to man the phones for an hour. It raised £9.2 million, taking the total raised since 1993 to £42 million.

The animosity when one man speaks of the other is almost physical and Mr Smith believes his rival could try to halt his deal with Mr Gooch.

He said: "There's always a danger of Mr Spencer intervening in one way or another because he recognises that we will be such a strong competitor to his business."