In a bid to cut costs amid the current commission slump, Nomura is folding its equities trading groups into agency-only broker Instinet.
All execution services, including cash, programs and electronic products, for the Americas, Europe, Middle East, Africa and Asia ex-Japan will be melded into Instinet , according to Instinet spokesman Mark Dowd,.
Nomura bought Instinet in 2006.
Nomura’s move comes as part of a larger consolidation of the Japan-based bank’s operations, which was announced in late June. Chief executive officer Koji Nagai announced the bank was scaling back its foreign operations, seeking $1 billion in global cost reductions. The cost cutting initiative is expected to be completed by 2014, according to a Nomura spokesman.
Nomura will focus on improving profitability in wholesale banking, with fixed income driving the business, chief operating officer Atsushi Yoshikawa told investors today during a presentation.
The company is looking to reduce costs by $450 million in Europe and the Middle East, $210 million in the Americas and $340 million in Asia. Roughly 45 percent of the worldwide cuts will be from trimming jobs, with the rest coming from other operational expenses, the company said. The bulk of the job losses will be in investment banking and equities, the company said.
That could result in about 100 job losses in cash equity sales and trading, according to one broker who spoke with Traders Magazine. Another person familiar with the matter said the merger of the trading operations into Instinet would definitely include staff cuts, but didn’t know how many or when.
One broker told Traders that Nomura decision seems logical. The firm’s lack of presence in the U.S. equities business as a standalone was likely the driver for the merger with Instinet, he said. Nomura had begun building its electronic equities business in October 2009.
Nomura is looking to focus its operations into more profitable segments such as its retail and asset management segments, another source said.
"Equities overall has not been profitable for them," said the source. "So it isn’t crazy to see this decision to downsize its U.S. equities desk."
He added that folding Nomura’s electronic products, such as algorithms and direct market access, are a natural Instinet fit.
There are about 10 people in firm’s electronic group. it is headed by Ciaran O’Kelly.
Amit Manwani and Michael Bos, both based in New York, quit Nomura in July, confirmed Keiko Sugai, a Tokyo-based spokeswoman at Nomura. She declined further comment.
More recently, Nomura’s Brian Bier joined Macro Risk Advisors.
Nomura also plans to reorganize itself into three business units. The first is the aforementioned execution services group, which will be taken over by Instinet.
The second is the Investor and Corporate Solutions division. This includes flow and structured derivatives, Delta One, convertibles, prime services, futures and options and syndication. It will remain with Nomura.
In May, the firm announced the launch of its Delta One America’s group and event-driven/special situations product offerings. It said it was beefing up its equities research staff.
The Delta One team’s goal is to generate trading ideas for clients through analysis of event-driven and relative value arbitrage opportunities, providing liquidity for executions of customer orders and spread trades.
The third is the research group, which will also stay with Nomura. Nomura research clients, who are transitioning to Instinet for execution, will continue to tap the bank’s equity research and corporate access offerings.
