On Thursday, Newedge announced a major overhaul of its business, which will reduce staff and focus on core profitable businesses in execution and clearing. Sources close to the firm said that an estimated 16 percent of employees worldwide will be cut. The firm is also looking at all of its offices to determine which may be consolidated or closed.
Nicolas Breteau, chief executive officer of Newedge, told JLN that the plan will be executed and completed by 2015. He called it a “transformation of Newedge to improve profitability and invest in core businesses.” He added that the firm doesn’t “think it’s a good idea to be a supermarket for the futures industry.”
Breteau said the firm plans to focus heavily on financial futures and options execution, particularly in interest rates, FX and index products. He also said its clearing operations will be further segregated from its brokerage services, with more IT investments going into clearing technology. The changes in clearing are due to the capital requirements, particularly Basel III, and will address the regulatory push toward more pre-trade risk management and real time risk monitoring.
Breteau also added that the change had been forced by the combination of lower trading volumes, low volatility and continued low interest rates. He also anticipates more consolidation among brokers. A recent Tabb Group report forecast that 15 percent of futures brokers will be closed, merged or sold in 2013.
“This is going beyond a cost cutting exercise,” he said. ” We not only want to weather the storm but to put ourselves in a winning position.”