BNY Mellon's new European equities and fixed income brokerage further positions the custodian and institutional services firm as a full-service provider to institutional clients, according to managing director Ian Gass.
Launched officially last week, the European brokerage will be an extension of US execution business BNY Mellon Capital Markets, an established counterpart to institutional customers alongside the group's custodian services. The London-based business will provide execution services on an agency or principal basis for equities and fixed income across European venues, signifying a broadening of BNY Mellon's strategy to become a global front-to-back financial services firm for institutional clients.
According to Gass, the move to Europe has been driven by client demand, although recent regulatory reforms in the US and Europe also played a part in the strategy.
"We're in a position in the marketplace through which we can leverage other services which have historically not been our traditional domain as a custodian bank, such as collateral management and execution," Gass told theTRADEnews.com.
Under Title VII of the Dodd-Frank Act in the US and the European market infrastructure regulation, swaps trades must be collateralised and cleared through central counterparties. As a leading custodian bank, BNY Mellon will be able to offer clients advantages through channelling a greater number of services through the organisation across asset classes.
Although the European brokerage will seek to expand its current client base, it will only service institutional market participants. Gass said that equities and fixed income will be the initial focus, but suggested derivatives-related services may be added in the future.
"Currently our London derivatives desk offers fairly vanilla OTC derivatives, but expanding that business would be a natural progression in the long term," he said. OTC derivative products currently offered include currency and interest rate swaps.
European equity brokerage has become somewhat of a saturated market and volumes in recent years have been sluggish, due in part to macro issues in the region. But Gass asserts these factors add impetus for existing clients to seek greater efficiencies through expanding their activity with a large counterpart.
He added that new trading venues such as MarketBourse – currently being set up by former Chi-X Europe CEO Tony Mackay, and Aquis Exchange - similarly in development by fellow Chi-X Europe alumni Alasdair Haynes – will likely be added to the list of venues BNY Mellon will access.
"We'll offer access to a broad range of platforms. Initially our focus will be on more traditional venues, but we will consider connectivity to other new equities trading venues," Gass said.
BNY Mellon Capital Markets EMEA began operations on Monday 22 April.