The latest 'in season’ trend
circulating amongst the top interdealer brokers (IDB) it seems
is crash course dieting, with many slimming down certain parts
of their business significantly.
New-York based broker GFI Group is the
latest to join the IDB weight watchers club
after it came to an agreement with CME Group to sell its energy
and FX OTC businesses, Trayport and FENICS for a total of
In addition, a private consortium of GFI
Group management led by executive chairman Michael Gooch, CEO
Colin Heffron and managing director Nick Brown, will acquire
GFI's wholesale brokerage and clearing business for just
The transactions come after rival broker,
London-based Tullett Prebon, said it plans to cut 210 employees
as regulatory pressures and declining profits mounts.
Furthermore Icap, the world’s
largest interdealer broker, plans to reduce the headcount at
its voice broking business as execution demands continue to
move onto the screen.
Now with this new 'private’
GFI, it seems it is following suite as having a smaller
business with a more focused strategy seems the way to go given
the state of the industry.
With volatility at almost record low
levels and profits declining in voice broking, IDBs are going
to have to diet to stay profitable and keep up with the
changing regulatory environment.
But how will the new and slimmer GFI
Certainly it will need enough funds to
keep its profitable operations open, especially its US-based
swap execution facility (Sef) as liquidity begins to
concentrate and becomes scarce.
Shareholders in the company are receiving
a good pay out from the CME deal, however for the consortium
that has taken GFI’s wholesale brokerage and
clearing business private, it will need these funds to stay
attractive in the increasingly electronic IDB world.