With Nomura looking to shift its focus to Asia while implementing $1 billion in cost-cuts worldwide, its execution services in the region, ex-Japan, are being moved to its agency broker Instinet. Glenn Lesko, CEO of Instinet’s Asia operations, sees potential for more unbundling of trade and research commissions in the region, where this has yet to catch on to the same extent it has elsewhere.
“This aggregation of execution to Instinet allows us to offer ‘best of breed’ coverage and deliver the benefits of the agency model to customers. There are still a significant portion of clients in this part of the world who haven’t yet really looked at unbundling,” Lesko told TheTRADEnews.com in an exclusive unveiling of the firm’s thoughts for the region.
The actual shifting of services to Instinet will provide few logistical challenges for the company, according to Lesko, who describes its model as “very scalable right through from front to back office”.
While Nomura is migrating its execution services for cash equities, programme trading and electronic products in the Americas, Europe and Asia to Instinet, it will be business as usual in its home market in Japan, where unbundling is still almost unheard of. Nomura’s dominant position in Japan is understood to be another factor for sticking with the status quo there.
The global downturn in the equities business is forcing institutions to look at their cost bases across the board, and the doubling up of services at Nomura and Instinet was widely-regarded as an unaffordable luxury in the current climate.
“I think this is a clever response to changes in the industry which are systemic, rather than just cyclical. These changes are very global but less prevalent in Asia – by doing this now we are looking to the future. We’re in a fortunate position to have the opportunity to do this; all banks will be addressing these issues in the future,” said Lesko.
“The buy-side has been dealing with two separate execution businesses – everything was done in duplicate. Now, all that resource and liquidity is focused in one place and focused on delivering the absolute best agency execution, and clients can also easily avail themselves of the services like investment solutions and research, that Nomura offer,” added Lesko.
Some of Nomura’s staff in Asia are likely to join the migration to Instinet, while job losses also look inevitable. Lesko declined to comment on personnel matters.
Nomura’s new group CEO Koji Nagai told The Nikkei last week the company would be shifting its focus to growth in Asia as it scales back its operations in Europe and America. Nagai took over the reins in August from Kenichi Watanabe, who stepped down following an insider trading scandal in Japan. The shake-up also saw Watanabe’s deputy and the head of Nomura’s American operations replaced.
Nomura is also reportedly planning to expand its presence in more profitable sectors, such as retail trading and asset management, as part of its restructuring strategy.