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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The number of futures commission merchants (FCMs) clearing for customers in the US is set to drop to just 54, a huge decline from pre-crisis levels. 

Recent data from the Commodities Futures Trading Commission (CFTC) shows 55 active customer clearing brokers in the US, though one more name now needs to be struck off the list.

The National Futures Association barred X-Change Financial Access (XFA) from operating as an FCM, bringing the number down to 54. 

The NFA found that “XFA's risk management policy failed to adequately address all risk areas, including capital risk”.

It subsequently banned XFA from operating as an FCM and landed the firm with a $75,000 fine.

One of the more recent high profile firms to pull away from offering clearing services was Jefferies, which sold its client activities under Bache to Societe Generale.

According to the CFTC report, the Jefferies FCM had been completely wound down with no customer assets in segregation. 

The drop-off in FCM numbers began 10 years ago, but has accelerated in recent years. Two more dropped out between Q2 and Q3 this year.

There were 154 FCMs in operation pre-financial crisis, with the numbers in 2005 even higher at 190.

“The global financial crisis resulted in an extended period of low rates and concentration of client funds, eroding both the interest rate and transaction commission elements of the FCM business model," said Steve Woodyatt, CEO, Object Trading.

"The number of cards in the FCM deck have not only been reduced but reshuffled.  There are fewer bank FCMs providing a single resource for the full range of client clearing, capital, funding and lending services.  

"But comprehensive market coverage isn’t easily attainable for the buy-side in either case." 

Capital requirements facing banks and declining margins and profitability in the FCM business has seen many big names pull away from the service. In Europe, firms including Nomura, BNY Mellon and RBS have also left the client clearing business.

As a result there has also been a consolidation with the top 10 FCMs. According to data from TABB Group, 75% of account balances at the end of Q3 were with the top 10 firms, while 36% were with Goldman Sachs, JP Morgan and Societe Generale.

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