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 $580m.
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 $165m.
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 cope?
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.