Chris Willcox

The deal, valued at an all-cash purchase price of $1.8 billion, is expected to close by the end of 2025, subject to customary closing conditions and regulatory approvals, and will see Nomura acquiring Macquarie’s three “Target Companies” in a 100% stock purchase transaction. 

Through the move, Nomura will gain $180 billion in retail and institutional client assets across equities, fixed income and multi-asset strategies. 

Similarly, the deal aligns with the Japanese company’s aim to expand its global asset management, and Nomura’s investment management franchise’s total assets under management are expected to increase to approximately $770 billion upon completion of the deal, with more than 35% being managed on behalf of clients outside of Japan.  

Kentaro Okuda, Nomura president and Group chief executive said: “This acquisition will align with our 2030 global growth and diversification ambitions to invest in stable, high margin businesses.  

“It will be transformational for our investment management division’s presence outside of Japan, adding significant scale in the US, strengthening our platform, and providing opportunities to build our public and private capabilities.” 

More than 700 Macquarie employees are set to join the Nomura Group. Several senior individuals are set to stay in their existing roles including resident of the Macquarie Funds and head of Americas for Macquarie Group, Shawn Lytle, chief information officer for equities and multi-asset, John Pickard, fixed income chief information officer, Greg Gizzi and Milissa Hutchinson, head of US wealth.  

Chris Willcox, Nomura’s chairman of the investment management division added: “This transaction will accelerate the expansion of our global investment management business and will be a significant step in building a truly global franchise with a comprehensive set of solutions to serve investors worldwide.” 

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Kluth has been promoted to the role after serving as portfolio manager/analyst at the firm over the last two years.

Before joining Macquarie, Kluth spent nine years at AMP Capital, serving in a variety of senior positions.

Most recently, he served as global head of dealing for just over a year, following a one-year stint as head of dealing for EMEA and Americas.

Elsewhere in his tenure at AMP Capital, Kluth served as senior multi-asset dealer and as an equity dealer.

Kluth announced his promotion in a social media post, adding: “Eight years in London flew by, and I’m very excited about this new opportunity. I am especially proud of the trading team we put together, and grateful for the opportunity to be part of the wonderful culture of Macquarie’s Global Listed Real Estate team.

“My first day in Sydney will be 19 February, and I look forward to reconnecting with the many friends and colleagues there.”

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The European equities market is set to get even more competitive now as smaller sell-side institutions continue to exit the market and the largest brokers absorb market share.

For several years shrinking commissions and stringent regulatory requirements imposed on the European market through MiFID II have made it difficult for participants to make equities trading pay. Rising costs have progressively encouraged economies of scale as a necessary means of survival in the market. 

“We’ve seen the market share in Europe has increasingly gone to the big three or four US banks and I think that’s even more notable since MiFID II,” Alex Jenkins, head of the trading desk at Polar Capital, told The TRADE.  

“When I think about the capabilities of the large US institutions, the amount of information analysis they have based on their own data, and the capabilities of their central risk books across asset classes, it’s just vast. I don’t know how you expect any smaller player to keep up with that.” 

Commerzbank was one of the latest participants to bow out of the market, confirming it would shut down its equity sales trading business in February as part of a drastic restructure plan that would see it reduce ‘costly complexity’ across its portfolio. Named Strategy 2024, the plans also outlined the bank’s intentions to cut 10,000 jobs in the next three years. 

“We have already started to review each and every client relationship on its return profile,” Manfred Knof, CEO of Commerzbank, said in a February statement. “In future, we will only deploy capital in client relationships that provide us with a decent return.” 

The bank joined a long list of other sell-side firms that, dwarfed by the giants on the other side of the pond, have chosen to cut their losses.  

Research and regulation 

Ongoing trends relating to regulation in Europe, particularly requirements enforced under MiFID II, have made equities a prickly asset class for institutions to handle.  

In particular, rules dictating how the buy-side consume and pay for research under MiFID II unbundling have had a significant impact on smaller boutique firms that relied on execution to pay for research. 

“We’re no longer in a situation where we can pay for research via execution, and that’s going to have an impact on those houses which in the past have relied on execution to help pay for that research function, particularly some of the boutique guys,” added Jenkins.  

Research unbundling requirements brought with them additional costs that larger firms have been able to absorb more easily, making equities a more profitable business.  

“The process of valuing research, modifying internal systems and communicating the MiFID II unbundling rule changes with clients was a big lift for buy-side firms,” said Anish Puaar, European market structure analyst at Rosenblatt Securities. 

Evidence of the impact of unbundling in Europe is clear from strategic partnerships recently forged in the industry. In late 2019, Kepler Cheuvreux and Macquarie joined forces to form an equities and research alliance. The deal saw the pair launch a platform for equities programme trading, and cross-distribute co-branded equity research to their client bases in Europe and Asia Pacific at the start of 2020. 

At the same time, Macquarie confirmed plans separately to reduce its domestic cash equities presence in Europe and the Americas in favour of refocusing its efforts on its business in Asia Pacific.

New regulatory requirements expected under the MiFID II review have the potential to make equities even more costly for participants with EU regulators keen to focus on a consolidated tape and continuing to encourage trading volumes from dark to lit venues. This will likely accelerate the need for scale seen in the market as participants are expected to absorb additional costs and navigate fragmented trading landscapes following Brexit. 

“That’s [the MiFID II review] going to come with a whole bunch of market structure changes, while Brexit could also pose further complexity as firms grapple with the best way to route orders to UK and EU venues. The recent Treasury consultation includes proposals that will likely result in significant divergence between UK and EU rules,” added Puaar. 

“Larger firms with scale and resources will find it easier to absorb those changes and deal with the regulatory headwinds.” 

SI regime  

The systematic internaliser (SI) regime, which became a key part of MiFID II, has also contributed to the ongoing requirement for scale in the European equities market. 

Trading volumes on SIs operated by brokers and banks have surged in Europe in the post-MiFID II era. A statistical analysis by the European Securities Markets Authority (ESMA) published in November  revealed that SIs had dominated the European equities landscape during 2019. However, the regime favours larger institutions that benefit from big balance sheets and extensive central risk books, allowing large US banks to consolidate market share.  

“The SI regime which says you’ve got to use your own capital again tends to favour firms that are prepared to deploy their own capital when trading with clients. That’s tended to be, not exclusively, the US banks,” said a former member of the sell-side who spoke to The TRADE on condition of anonymity.  

Regulatory changes amending the SI regime under MiFID II, for example relating to mid-point crossing, have also added to rising costs in the equities market that have somewhat excluded the smaller boutique players.  

“Banks spent a lot of time building SIs to meet regulatory obligations such as those related to pre- and post-trade transparency. But EU regulators have continually tweaked the SI rules, such as changing tick sizes and restricting mid-point trading, which requires systems to be constantly modified. These tweaks mean banks always have to be on their toes to remain compliant,” added Puaar. 

This need for scale has forced consolidation across banks and brokers in Europe as the smaller sell-side firms aim to bulk up to keep up with the larger players.   

Most notable was the deal agreed between Deutsche Bank and BNP Paribas in July 2019 in which Deutsche Bank agreed to transition its prime brokerage and electronic equities franchise over to its French rival. The agreement with BNP Paribas came as part of the bank’s restructuring plans that included exiting from equities sales and trading all together under a major restructure plan that aimed to reduce costs by around €6 billion by 2022.  

Through the integration of Deutsche Bank’s business, BNP Paribas said it was looking to become the top prime broker in Europe competing with the likes of Morgan Stanley, Goldman Sachs and JP Morgan.  

The French investment bank also acquired the remaining 50% stake in its long-standing partner and equity brokerage firm Exane in July in a move which brought its cash equities trading and research back in-house. Combined, both deals were intended to bulk out its business as it looks to stake its claim for the top spot as the leading institution in European equities.  

Never ending cycle 

As the market has continued to consolidate down to a few key players this has only sought to exacerbate the growing need for scale as the big players get bigger and the small get smaller. 

“The larger banks also have much more flow, and flow begets flow to a certain extent. They are able to improve their workflows and their hedging abilities with the more flow that they have,” concluded Jenkins.  

“It’s very difficult to play catch up; the big investment banks have already made large investments and significant developments in their equities platforms and they’re able to grow from that stronger footing.” 

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The trading hub, expected to launch in the first quarter next year, will be an extension of the commodities and global markets division’s digital trading platform Aurora, which allows clients real-time access to Macquarie’s products and services. 

Macquarie said locally hosted liquidity on the engine will give users access to developed and emerging regional markets including Australia, Singapore, Japan, China, Taiwan, Korea, and India. The brokerage operates similar FX trading and pricing engines in London and New York.

“We have a strong presence across Asia with extensive client coverage in deliverable and non-deliverable FX and derivatives,” said Tom Freeman, managing director, Macquarie Commodities and Global Markets. “We also recognise the importance of technological innovation in global financial markets and we are excited to offer our clients access to FX liquidity in Singapore – at any time, and from anywhere – through this market-leading digital platform.”

Macquarie’s arrival in Singapore follows a string of market participants also choosing to set up trading hubs in the region as part of a regulatory scheme. US investment bank Goldman Sachs was the most recent arrival, confirming in September that it would be building an FX trading and pricing engine, also in the first quarter of next year.

The moves are part of the Monetary Authority of Singapore’s (MAS) strategy to boost Singapore’s status as the leading FX trading centre in Asia Pacific. Under the initiative, various other major financial institutions have rolled out FX trading systems in the region including JP Morgan, BNP Paribas, BNY Mellon, Deutsche Bank, and Barclays.

“We welcome Macquarie’s establishment of its first FX pricing hub in the Asian time zone in Singapore. Tapping into the growing pool of global liquidity providers that are anchored in Singapore, Macquarie will be able to offer better price discovery and trade execution quality to its clients in the Asia Pacific region,” said Lim Cheng Khai, executive director at MAS.

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The cooperation agreement will see Macquarie and Kepler Cheuvreux launch a platform for equities programme trading, and cross-distribute co-branded equity research to their client bases in Europe and Asia Pacific (APAC), as of early next year. 

It aims to combine and leverage Macquarie’s equity trading and research footprint in APAC, which currently services more than 1,000 institutional clients with a team of more than 100 analysts, with Kepler Cheuvreux’s European footprint, which consists of 1,200 institutional clients and more than 130 analysts.

“Kepler Cheuvreux has an incredibly strong client franchise in Europe,” said Laurent Quirin, CEO of Kepler Cheuvreux. “The addition of Macquarie’s leading APAC research boosts our research distribution capability to more than 3,000 companies and is a significant milestone in our journey to becoming a global broker in Europe.”

Macquarie confirmed plans in a separate statement to reduce its domestic cash equities presence in Europe, the Middle East and Africa (EMEA), and the Americas regions, to focus on its business in APAC. According to a report from Bloomberg, Macquarie will cut around 100 equities staff in London and New York as part of the new strategy, which the institution described as being “in response to structural changes in the broader market”.

Banks and the sell-side have struggled in recent years against a backdrop of declining equities commissions and major changes in how asset managers consume and pay for research under MiFID II in Europe. Despite being a European directive, the rules have been making waves globally as larger firms opt to adopt the regulation in business operations outside of the region.

“Our partnership with Kepler Cheuvreux will allow us to leverage our respective strengths and complementary footprint in both regions. We’ll both be able to service a broader selection of clients through a unique model offering global program trading, along with high quality European and APAC equities research and distribution,” Dan Ritchie and Adam Zaki, Macquarie’s global co-heads of cash equities, concluded in a joint statement. 

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David Fass, formerly CEO of the EMEA business, will take on a new role as co-head of Macquarie Infrastructure and Real Assets (MIRA) for the Americas. Macquarie said that there will be a transition period ahead of the leadership changes.

Paul Plewman will take on the role leading Macquarie’s business in the EMEA region, coordinating the firm’s activity and strategy, promoting cross-group collaboration and heading up external and regulatory engagement.

He has been with Macquarie for 14 years, overseeing the commodities and global markets business in EMEA for the past 11 years. As part of the promotion, Plewman will also become a member of the company’s management committee and report to Macquarie’s Group CEO, Shemara Wikramanayake.

The company said in a statement that under Fass’ leadership over the past seven years, Macquarie has seen record growth in the business, with its EMEA income totalling 29% of the Group’s total income for 2018.

“EMEA continues to be a hub for the Group’s global activities, from which both Macquarie’s infrastructure asset management business, MIRA, and its green principal investment business, the Green Investment Group are led,” Macquarie said.

“The EMEA business has £64 billion of assets under management, invested across businesses and assets which employ almost 50,000 people. As one of the largest investors in UK infrastructure in the past three years, Macquarie has led £15 billion of green investment into the UK alone.”

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Bateson is thought to have tendered his resignation in August and left the firm on gardening leave this month.

He first joined Macquarie’s London office in 2010 to head up portfolio trading, coming from Numis Securities where he worked as a trader for two years.

Other past roles include at Bear Stearns, JP Morgan and Lehman Brothers. He began his career in 1996 as a trader for Desdner Kleinwort.

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Macquarie has launched a digital platform for equities research as it looks to address regulatory shifts and increased cost restraints for the buy-side.

The platform - known as Macquarie Dimension - provides users with access to analysis and proprietary content and is designed to cater for clients who don’t require full-scale institutional equities research, but want the option to access research.

Macquarie previously provided research on an enterprise license basis, with unlimited access to all content and services.

The new platform is an alternative to the traditional consumption model for sell-side research, aimed at meeting client needs driven by cost, Macquarie said.

Peter Bentley, global head of Macquarie Dimension, described the platform as a “complementary service to our existing full-scale research offering”.

“The platform completes Macquarie’s research offering - providing a flexible solution to meet all of our clients’ varying requirements,” he said.

Nicholas Chamber, head of Macquarie Dimension EMEA, added the platform can “quickly and easily understand user preferences, helping them focus and drill down into the detail that is most relevant to them.”

Macquarie’s equities research team currently covers a variety of leading blue-chip stocks globally, including financial institutions, telecommunications, oil, gas and mining.

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