Olivetree Financial is currently at the centre of merger talks, the TRADE can exclusively reveal.

One of the interested parties is said to be New York-based financial services firm StoneX. It is unclear whether negotiations will result in a deal, and whether it will be a full buyout, merger or a potential joint venture. 
 
Olivetree recently conducted a strategic review of its operations in the US, resulting in a number of job losses, according to a source, who spoke on condition of anonymity as the matter is private.  
 
The broker is choosing to focus on European markets as this is where it sees more opportunity in the near term. It still employs a number of people in New York, the person added. 
 
An Olivetree spokesperson declined to comment. StoneX also declined to discuss the matter when contacted by The TRADE, beyond noting that the firm does not comment on “employee movement”.  

The number of independent brokerages in Europe has been falling in recent years following a wave of consolidation. TP ICAP, the world’s largest inter-dealer broker, acquired Louis Capital, an equities and fixed income specialist, in July 2020. In November of the same year, Makor Group announced that it had entered into a strategic alliance with rival Churchill Capital. 
 
A boom in deal-making has also seen firms adding headcount to teams that specialise in mergers and acquisitions. M&A in Europe reached a 14-year high in 2021 and deals involving European targets totalled $1.4 trillion, an increase of 46% over the previous year, according to data from Refinitiv. 
 
The surge in M&A activity worldwide has been fuelled in part by private equity funds and the growth of special purpose acquisition vehicles (SPACs), Refinitiv said. 
 
Olivetree recently added to its event driven team in London with two senior hires from BTIG, as reported by The TRADE. Greg Levett and David Abraham joined the broker in September 2021, while Tim Caulton also re-joined the firm in July. 
 
The firm also made a number of hires in the US around the same time, with the appointment of Richard Orlando and Robert Weibel, also event driven specialists. 
 
Event driven strategies seek to profit from corporate events, including merger and acquisitions, restructurings, and spin offs. 
 
StoneX, formerly known as INTL FCStone, describes itself as an institutional-grade financial services network. The company’s London-based subsidiary, StoneX Financial, joined the London Stock Exchange (LSE) and its pan-European multilateral trading facility (MTF), Turquoise, as a member in May of last year, in a move designed to expand its offering in cross-border equities and boost its cross-asset capabilities.  

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Talks between the two firms first emerged at the beginning of October. The acquisition is the latest high-profile purchase for Virtu after it took over proprietary trading firm Knight Capital Group (KCG) in 2017 for $1.4 billion.

The deal with ITG represents a 40% premium on the average closing share price of ITG of $21.55 in the month prior to the news reports of the potential sale, potentially valuing ITG at just under $1 billion.

“ITG has made tremendous progress in executing on its Strategic Operating Plan over the past two years, and the agreement with Virtu is a result of the dedicated efforts of our management team and employees,” said Minder Cheng, chairman of the board of directors, ITG.

“After careful consideration, ITG’s board of directors determined that the proposal from Virtu, which provides an immediate and significant cash premium, offers the most value for ITG stockholders. The combination of Virtu and ITG will create an industry-leading financial technology franchise with true global capabilities and scale.” 

Virtu stated the acquisition is a ‘natural next step’ in its goal to offer a full range of agency services, including transparent trading and workflow technology, analytics and liquidity solutions.

“The combination announced today brings together complementary strengths that amplify our ability to help our clients source liquidity and improve their workflow,” said Douglas Cifu, Virtu’s chief executive officer.

“We are fully committed to growing and improving the complete agency execution offering that ITG’s clients use every day – liquidity, execution services, workflow technology and analytics.

“This combination will leverage Virtu’s financial technology – the same technology that drives our market making performance – to optimise all aspects of the business, from order routing and algo performance to middle- and back-office efficiency.”

JP Morgan is serving as the financial advisor and Wachtell, Lipton, Rosen & Katz will provide legal counsel to ITG.

ITG recently reported an adjusted net income of $5.4 million in the third quarter, compared to the adjusted net loss of $3.6 million it suffered during the same period last year.

It reported a net loss of $2 million in North America for the quarter with revenues at $61.6 million, compared to a net loss of $6.6 million last year. Meanwhile in Europe and Asia-Pacific, net income was up $6.9 million to $58.5 million.

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 The deal, which is subject to regulatory approvals, will see Northern Trust acquire the global institutional equity brokerage who focus on market research and offering trading and execution services.

“This transaction aligns with our commitment to provide clients with a comprehensive set of solutions to meet their investment servicing needs, said Michael O’Grady, president of corporate and institutional services at Northern Trust.

“We look forward to expanding our brokerage capabilities in EMEA and APAC to better serve our institutional and Global Family Office clients globally. Our clients also will benefit from the deep expertise and sophisticated trading solutions from the Aviate Global team.”

Guy Gibson, co-founder of Aviate Global also spoke about the acquisition.

“We look forward to leveraging Northern Trust’s strong global brand and full range of asset management, asset servicing and wealth management services.”

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The deal will see financial broker Nissan benefit from regulations through Orc Flow Control, Orc’s risk management tools.

Lee Nguyen, Vice President of Global Sales, Nissan Century Securities spoke about the new partnership.

“We are pleased to leverage Orc’s electronic execution solutions to provide a solid direct market access option which facilitates the trading needs of our mutual clients for not only Japan but also other global markets.”

“The richness of Orc’s out-of-the-box risk layer also meets our internal compliance needs.”

This is the latest partnership for Orc, which specialises in electronic trading for listed derivatves, after its recent partnership with CameronTec.

Orc’s group President Greg Chambers also spoke of his approval at the forthcoming Nissan partnership.

“Orc’s proven track record in providing world leading trading risk management and electronic execution technology is the key behind the continued up take of the Orc Execution Bricks platform in the region.”

“We look forward to developing the relationship with Nissan in order to service the needs of our global Trading Bricks customers.”

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Independent execution broker ITG have announced the appointment of Francis Troise as new CEO and President.

Mr Troise will leave his current role as head of execution services at J.P Morgan to take up the role in January 2016.

Chair of the ITG Board of Directors Maureen O’Hara commented on the new appointment.

“After a thorough and careful search process, the Board chose Frank as the right candidate to lead ITG at this pivotal time.”

“Frank is a well-known industry expert with an impressive track record of growing electronic trading operations, establishing strong relationships and building talented teams.”  

The appointment comes after former CEO Bob Gasser stepped down from the position in the wake of ITG’s involvement in a dark pool rule violation scandal during 2010-11.

ITG has now settled the matter with the US Securities and Exchange Commission and paid a fine in excess of $20 million.

Prior to his current position at JP Morgan, Mr Troise served as head of trading at Barclays Capital and head of US electronic execution at Lehman Brothers. He also spent eight years at ITG in a number of roles including as a managing director.

“I am thrilled to be returning to ITG, a firm which I know first-hand is relentlessly focused on providing world-class customer services and best execution.” Mr Troise added. 

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Societe Generale Securities Services (SGSS) has launched a new dealing desk outsourcing service for asset and investment managers. 

The service, named I-DEAL, covers the entire trading value chain, including order placement, order-routing and execution, reporting services, and market middle-office services. 

It also integrates with SGSS’ post-trade services including custody services, depositary control, fund administration and asset servicing.

“I-DEAL replaces clients’ needs to adapt their organisations and resources to meet challenges that are not core to their business activities,” said Léonard Ollier, head of Business development , I-DEAL, SGSS.

“This new service enables asset managers to gain both in agility and efficiency while meeting a triple-need of maintaining ties with the market, monitoring and improving trade execution and ensuring optimal management of their investment strategies.”

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Searching for your clearing broker used to be much like strolling down a long stretch of restaurants in your favourite holiday destination. Everyone desperately wants you to come in and dine with them, meaning you weigh each option up carefully before gracing the most appealing with your business.

Those days are now over for many buy-side firms, thanks to a new set of regulations targeting the balance sheets of banks. The process has now become more like trying to gain membership to an exclusive and very selective club, and even once you have secured that coveted entry you may yet be kicked back out again in the near future.

Many of the largest brokers and futures commission merchants (FCMs) – as they are referred to in the US – are now cherry picking their clients in light of the stringent regulations they now face. It’s not a decision they are happily making, it is a result of new rules such as the leverage ratio and other ways global watchdogs are looking at reducing systemic risk in the banking system.

Even though these regulations target banks, the knock-on effect on the brokerage finance models has hit the buy-side. The leverage ratio reduces available balance sheet commitments for client business, making it hard for them to take on too much risk from clients.

This pressure has forced them to look more precisely at the fit of each buy-side firm’s risk profile and how it will impact their own balance sheet.

Every buy-side firm is different in this case, depending on its size and derivatives appetite, but with clearing mandates on the horizon, many are looking for a clearing broker, whether it be their first, second or third.

What you need to be looking for

So in light of these wholesale changes and the on-going window shopping, what do the buy-side need to look for in their provider when aiming to find the perfect match?

Well to begin with there are some essentials as ensuring there are robust systems in place, the right business commitment and of course the price they are charging. Considering the severity of new regulations there are also many questions around risk and collateral that the buy-side will have for their potential suitors.

Hannah Meakin, partner in the financial services team at Norton Rose Fulbright, says that the clearing brokers should also be able to explain clearly the choice of accounts and the different levels of risk involved.

“We are surprised by the number of asset managers who still don’t really understand this,” adds Meakin.

“Also they need flexibility and commitment regarding collateral and commitment, in that the clearing broker will not limit the types of collateral they will accept or the terms and haircuts on which they will accept it, at least not without sufficient notice. Some asset managers and funds may need the ability to post a wider range of assets or a service whereby the clearing broker can convert whatever assets they have into more liquid collateral.”

A handful of sell-side institutions – namely BNY Mellon, RBS and Nomura – have pulled away from offering client clearing, forcing their clients to begin their search again.

A trend of ‘unboarding’ has also sprung up whereby clients are being cut-off by their clearing providers. This has made it a concerning time for medium to small-sized asset managers either maintaining existing relationships or searching for new ones.

Commitment needed

“They [clients] need to know people will be there for them,” said Jamie Gavin, head of EMEA OTC clearing sales at Societe Generale. “We know some clients who were with RBS and then moved to BNY Mellon, it is terrible for them. They want to know if they are going to have to do this for a third time.

“People are now starting to get very nervous that some clients are getting unboarded and some are getting re-priced and they want to know that their clearing broker is going to be there for them.

“That is the whole point of clearing right? You are a safe harbour in a storm for them and if they have concerns that you are not going to be there for them then that is a worry.”

Gavin believes that with the amount of clearing brokers and FCMs pulling away from the space, the worst case for the buy-side is having to start onboarding with another new broker and going through the whole selection and due diligence process.

One large European asset manager – who preferred not to be named – said ‘unboarding clients is an issue for smaller asset managers’. The danger of unboarding and brokers pulling away from the space could affect all types of buy-side firms according to Gavin.

“It is not just smaller clients getting ‘unboraded’ out it is larger ones as well, which you wouldn’t expect,” he adds.

“We are seeing institutions who took a while to select their first clearing broker and go live, now looking to fill their second and third spots. Finally, we are seeing clients who have not chosen anybody yet.

“It is quite surprising because you would have thought it would be some of the less sophisticated clients, but we have seen quite a few large asset managers come forward recently and are only just kicking off their RFI rounds now. It is quite a mixture.”

The other concern surrounding the termination of the deal with a clearing broker is the notice period, according to Sebastian Reger, partner at law firm Sackers.

It will never happen to me

He agrees that the biggest risk is whether the brokers will continue with client clearing and says that for buy-side firms the termination period could be as short as a month.

“Clearing members reserve the right to essentially terminate the services on a relatively short notice,” says Reger.

“The other risk is that clearing members can reduce the credit line they give you. They reserve the freedom to cut credit lines and they may make you reduce existing transactions.

“From a buy-side risk point of view, that members can pull out of the business, or don’t like your credit profile or cut the transactions they can do for you is a big concern.”

Reger also highlighted that moving clearing broker isn’t always a straightforward process.

“If you move clearing brokers, we don’t tell our clients that they can definitely move 100% of their transactions across,” he adds.

Mandatory clearing is set to come into force towards the end of 2016, meaning the time for buy-side firms to act is now. Though some have begun clearing early, others are biding their time. The same goes for clearing broker selection. Many have one clearing broker in place, but that is often not enough, especially with the uncertainty surrounding the clearing space.

Decision time

At Norton Rose Fulbright, Meakin represents both buy-side firms and clearing brokers and says the agreements between the two should pick up now that there is certainty around the start date.

“Many haven’t started negotiating agreements yet but we hope they may start to do so more actively now that they can see the first clearing obligation coming into effect.”

Meakin adds that only the biggest asset managers have begun clearing at present and the others are still putting arrangements in place.

“Various reasons for this including a desire to get a feel for what different clearing brokers will accept, such as what terms will really become market standard, and the need to get so many different internal stakeholders engaged and to sign off.”

Stefan Schmidt, derivatives trader at Frankfurt-based asset manager Union Investment, explained that they looked for one local and one foreign broker among other requirements when making their decision.

“Our criteria was finding two experienced fixed-income-brokers with extraordinary skills in trading and clearing OTC derivatives, one local and one foreign,” he explained.

“Since our EMIR project began in 2013 we have started trading bilateral collateralised and of course we started trading interest rate swaps centrally cleared. Credit default swaps will follow in the next three months.”

Schmidt added that the decisions were not made in line with any pre-existing deals with their two clearing brokers, and that the firm wanted access to clearing houses LCH.Clearnet and Eurex Clearing.

“People are looking for regional experts,” says Steve Woodyatt, CEO of tech vendor ObjectTrading. “Where there is a regional specialism there is an advantage.”

Woodyatt added that the services the buy-side receive are changing. He believes that fees may not have fluctuated much in recent years, however the services the buy-side receive may be diminishing.

“Fees are not going down or up much, but value is being removed from the packages so people are getting less for their money,” he says. “Suddenly some of these sell-side firms don’t offer market data in the package, for example.”

The clock is ticking and as mandatory central clearing for the buy-side draws closer, firms will have to start securing their clearing broker relationships and that could mean a lot of research and tick boxes in order to find the perfect match.

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Global Prime Partners, a London-based boutique prime brokerage, has received regulatory approval from the Securities & Futures Commission (SFC) of Hong Kong.

Following its approval, Global Prime Partners will now begin trading from its Hong Kong office, and will provide execution and prime brokerage services to Asian based fund managers, family offices and professional traders.

The office will be headed by Alastair Sclater, who joined the firm in 2014 following stints at UBS, Mizuho Securities and Newedge.

As a boutique prime brokerage, Global Prime aims to capture demand from smaller and medium sized fund managers, which have largely been dropped as clients by the larger banks and brokering firms.

“The opening of our Hong Kong office demonstrates our long term commitment to client servicing in Asia… The entire broking industry is experiencing a new wave of demand from sophisticated investors who are finding it harder to attract the attention of banks and custodians,” said Julian Parker, CEO, Global Prime Partners.

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German investment bank Berenberg has added an equity trading desk to its New York office.

Berenberg Capital Markets, the US subsidiary of the bank, has hired a team of six traders to execute institutional equity trades in both the US and Canada.

The team will be led by Scott Duxbury, who joined from Jones Trading in December 2014. He has over 25 years of industry experience with senior roles at Rencap Securities and Merrill Lynch.

Other key names include Lars Schwartau, formerly at Berenberg head office in Hamburg, who joined the US team in April as global head of trading and sales trading.

Hebdrik Riehmer, managing partner at Berenberg, said: “The launch of our trading desk in New York further strengthens Berenberg’s expanding presence in the US and extends our offering to institutional clients.

“Having opened offices in New York, Boston, Chicago and San Francisco over the last four years, this latest development underlines our growing reputation in the region.”

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Bank of America Merrill Lynch (BAML) has hired two senior members to its Asia Pacific research team.

A note to employees and seen by The TRADE confirmed BAML has hired two senior economists, Helen Qiao and Jaejoon Woo.

Qiao will join on 8 October and takes the role of Greater China chief economist and head of Asia economics ex-Japan. She previously worked at Morgan Stanley where she was chief Greater China economist since 2011.

Before joining Morgan Stanley Qiao spent six years at Goldman Sachs as a China economist and has a bachelor’s degree in international trade from Renmin University of China and a PhD in economics from Stanford University.

She will report directly to Steve Haggerty, head of Asia Pacific Research.

Woo has been appointed as Korea economist and will report to Qiao.

He was formerly an economics professor at DePaul University in Chicago, where he had been since 2003. Woo also worked at the International Monetary Fund as a senior economist from 2009 until 2014 and has held a range of other academic roles.

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