Trading leaders the London Stock Exchange and broker ICAP will show the value of a diversified business model when they shrug off challenging market conditions to report strong results on Wednesday.

The LSE, which is in exclusive talks to buy Europe's LCH.Clearnet, will report strong first half revenues, driven largely by its Italian clearing house as well as solid trading and technology inflows, analysts said.

The interest income generated by LSE's Italian clearing house has grown four-fold in only 15 months. Approximately 15 percent of LSE's revenues and possibly as much as 35-38 percent of the group's current earnings now derive from that business, said Goldman Sachs analyst Chris Turner in a note on Tuesday.

Similarly, ICAP, which matches the buyers and sellers of foreign exchange, bonds and swaps, is set to exceed last year's 867 million pounds of revenue for the six months to the end of September.

The first six months of the year has seen ICAP continue to focus on organic growth, increasing the number of asset classes our post-trade business supports and developing our electronic and hybrid initiatives, said ICAP Group Chief Executive Michael Spencer in September.

The LSE and ICAP barely overlap in terms of trading but they are both looking to boost their post-trade revenues at a time when regulators are looking to force their main clients to use more of these services.

The Dodd-Frank bill in the United States and the markets in financial instruments directive (Mifid) reforms in Europe aim to drive large swathes of the vast $600 trillion over-the-counter (OTC) markets on to clearing houses.

Clearing houses, such as LCH.Clearnet, the LSE's CC&G and Deutsche Boerse's Eurex Clearing, sit between trading partners ensuring no one firm is out of pocket in the event of a default, such as that of Lehman Brothers in 2008 or futures broker MF Global last month.

The firms' numbers held up in the middle part of the year but analysts are bearish with Turner predicting a fall in LSE interest income and Numis seeing ICAP squeezed by its main banking clients scaling back.

(Editing by Jon Loades-Carter)