The industry’s consolidation goes beyond cash equities into derivatives, James Boyle, head of equities trading in Asia Pacific for Citigroup Inc. said in Hong Kong Dec. 18.
“Before, options market-making, warrants, single-stock options and cash could all run as silos and get decent returns,” he said. Now, “all the banks are looking at it from the efficiency side and how to best serve customers,” he said. “Some banks will even have the same trader running several businesses.”
In Asia outside of Japan, Barclays Plc is combining traditional client-facing equity sales with program and electronic trading under the same managers, Di Iorio said. That change has already been made to units in the U.S. and Japan.
Internal Competition
The nine largest global investment banks -- Deutsche Bank AG, Barclays Plc, JPMorgan Chase & Co., Bank of America Corp., Citigroup, UBS AG, Credit Suisse Group AG, Goldman Sachs Group Inc. and Morgan Stanley -- announced more than 30,000 job cuts in the first nine months of the year, according to data compiled by Bloomberg.
Deutsche Bank is also considering reducing bonuses for investment bankers by as much as 20 percent on average for 2012, according to four people briefed on the matter. The Frankfurt- based lender is attempting to boost profitability and tie pay more closely to company performance.
Small brokerages that make trades by phone or sell research are finding it harder to earn commissions amid shrinking volume and increased automation.
ThinkEquity LLC, Rodman & Renshaw LLC and WJB Capital Group Inc. closed last year, while Atlantic Equities LLP, the London- based brokerage that provides research on U.S. stocks to European clients, ended a foray into New York. Trading firms from Ticonderoga Securities LLC to Oscar Gruss & Son Inc. have also fired equity traders or shut during 2012.
More Shrinkage
“It’s still an overbrokered industry and it will continue to shrink,” Alec Levine, an equity derivatives strategist at Newedge Group SA in New York, said in a Jan. 8 interview.