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January 3, 2011

Cover Story: Tall Order

Nomura Gambles on Huge U.S. Equities Expansion

By James Ramage

These may be dog days for equities trading in America. But that hasn't stopped Nomura Securities International from making a bold gamble with its U.S. build-up.


Japanese securities giant Nomura Holdings, of which NSI is the U.S. broker-dealer, is making its strongest push yet to establish an American presence in investment banking. The equities group represents one of four divisions Nomura Holdings has been expanding for its U.S. strategy, alongside fixed income, investment banking and asset management.

It sees America as the vital missing component to reaching its goal of becoming a global investment bank. And for its U.S. equities division, Nomura believes it now has the worldwide reach, financial heft and the right people in place to be a full-service, bulge bracket powerhouse.

Make no mistake, becoming a bulge bracket bank in the U.S. is no small feat, as skeptics have been quick to point out. And Nomura isn't the first to attempt it. But to get to the necessary high level of market share, revenues and customer numbers in U.S. equities, Nomura said it will leverage its biggest asset. It's pushing its global markets acumen in research and trading to a U.S. investor base whose hunger for international investments keeps growing, said Ciaran O'Kelly, Nomura's head of equities in the Americas.

"Nomura is walking in here with a global banner," he said. "Take Asia, for example. Asia is becoming increasingly and rapidly more important to global investors. Nomura delivers Asia in a way that very few others can even think about doing."


Ramping Up

The last two years have been dramatic for Nomura's equities U.S. group. It grew from a staff of around 50 to more than 450, including new heads of cash, sales, electronic and program trading, as well as prime services, research and convertibles. Practically from the ground up, it built program trading and equity derivatives businesses. It also launched its algo suite, crossing network, analytics, market connectivity, smart order-routing and high-frequency trading business. Its electronic desk has established more than 100 accounts. And its U.S. equities business, as a whole, claims more than 1,000 clients--of which 850 are actively trading.

All told, this has been Nomura's biggest move into the U.S. by far. But it hasn't been its first.

Dusting off the annals of history, Nomura opened a U.S. office in 1927. Until 2003, though, it focused mostly on marketing and distributing its research product and deal flow that originated mostly in Asia. It also did some prop trading.

In 2003, Nomura brought in a group of traders and technologists from ITG--its head of sales and trading for the western region, a former head program trader and a top algo modeler--to build a high-touch and low-touch U.S. offering. The effort failed to gain traction, though, and the group eventually merged into Instinet sometime after Nomura purchased it in February 2007.