The past week saw many more examples of something that we
all knew in our heart of hearts. The derivatives industry is in
a dynamic phase.
The most explicit examples were in changes at the top of
some of the industry’s best known firms.
Chris Gibson-Smith, the long-time chairman of the London
Stock Exchange, (with no small amount of modesty) waited 'til
the end of his address to the British exchange’s
AGM on Wednesday to step down from that position.
Gibson-Smith, who will stay on until a replacement is found
next year, has steered the LSE in his eleven years through many
defining chapters in the exchange’s long
He saw off takeovers from Deutsche Boerse, Nasdaq OMX and
even (randomly) Macquarie and worked on the LSE’s
bid to merge with Canadian exchange that was eventually killed
by Canadian authorities.
More recently, Gibson-Smith has overseen the
LSE’s acquisition of LCH.Clearnet as well as index
firms FTSE and Russell (due for completion around the end of
Yet one of his greatest legacies could be something that has
yet to come to light – namely the LSE’s
currently top secret futures exchange.
LSE chief Xavier Rolet has often said it was a mistake the
LSE did not buy Liffe in 2001 (because it was outbid by
Euronext) and this new venture could be the move that sets up
the exchange in what will be the most interesting asset class
for the next few years at least.
Separately, last week also saw Terry Smith step down as
chief executive of Tullett Prebon to be replaced by John
Phizackerley, the European chief executive of Nomura.
Phizackerley comes with a good pedigree. In another life, he
could have been a strong candidate to replace Gibson-Smith
given the strong ties between Nomura (or what was Lehman) and
the LSE - Rolet himself was formerly with the bank before it
But 'Phiz’ inherits a Tullett faced with
challenges. Bank deleveraging and dwindling risk appetite has
crushed volumes and this has hurt the inter-dealer brokers more
Michael Spencer, another industry veteran, spelled out the
predicament brokers find themselves in when last week he
reported thin quarterly broking revenue barely mitigated by
improvements in tech revenue.
The inter-dealer brokers are feeling the squeeze of both
weak markets and bank retrenchment in the face of draconian
Phizackerley is no spring chicken but some fresh blood will
be good for Tullett, and other firms and institutions could do
worse than following Terry Smith’s lead.
The futures industries in the US and Europe particularly are
crying out for a new generation of individuals and firms to
come through and embrace the many changes taking place in this
There is some evidence of this in brokerage. Some of the
large traditional players have been pulling back strategically
in some areas which has created opportunities for firms that
have traditionally been peripheral to move in and clean up
those clients being kicked out by banks.
Jefferies, Wells Fargo and others are quietly getting their
systems and teams right to maximise on what looks like a once
in a generation window of opportunity.
Regulation is changing the market for good and it is
incumbent on the industry to embrace that change. If you
can’t beat them, join them.