Instinet Europe CEO Adam Toms believes the agency broker is heading for a trebling of market share following strong growth globally since consolidating Nomura Group equity execution business under its brand.
According to the firm’s own estimates, Instinet has doubled its execution volumes in Europe and Asia-Pacific and experienced a 50% jump in the US, suggesting legacy clients are supportive of the new singular offering. A doubling of Instinet’s market share in Europe would give the firm between 3-4% of overall equity trading in the region.
Nomura will remain an executing broker in its home market of Japan, but has fully realised the shift of its electronic, sales and program trading execution services to Instinet for all other regions globally – a move first declared in September. The move consolidated the group’s equity trading services for institutional clients into a single unit for the first time, swelling front-office headcount in Europe to 70.
Adam Toms, CEO of Instinet Europe, told theTRADEnews.com the transition was complete and despite the extensive procedural documentation needed to switch execution across from Nomura for clients, many had responded actively. He said 90% of clients that decided to switch over were now operational.
“Since the move, we’ve doubled execution volumes in Europe and it wouldn’t surprise me to see this eventually triple. We’ve also doubled execution volumes in Asia-Pacific and we’ve seen a 50% rise in the US. This was somewhat expected, but it clearly shows that clients have supported the transition,” Toms said.
Toms said the role shift for Instinet meant it stood apart from other agency-brokers because it could offer a wider range of services and boast a larger market share.
“With Instinet’s enhanced offering, we’re working for 100% of the fee pool, rather than the 20% agency brokers compete for or the 80% that banks work for,” he said.
Toms cited an IPO deal earlier this month brokered by Nomura for Belgian postal operator bpost as an example of Instinet’s new capabilities. The US$1.1 billion deal involved months of preparation and an investor roadshow hosted by Nomura and resulted in Instinet collecting orders as they hit the book.
The separation of execution from other global market and investment banking services has also aligned the agency-broker with a UK regulatory initiative to create a clearer divide between broker payments for research and execution services. In November, the Financial Services Authority – now Financial Conduct Authority – responded to established industry practice of mingling payments for services for execution and research, which included corporate access. This established practice contravened rules for asset managers, but punitive measures were rarely sought.
The FCA believes separating these payments will lead to fewer conflicts through use of tools such as commission sharing agreements (CSAs), which Instinet has supported.
“The majority of clients in Europe are using CSAs or our ability to pay the Nomura research platform, which also aligns well with the renewed FCA push since November to separate buy-side payment for research and execution,” said, Toms adding that he predicted use of CSAs would rise in the US as buy-side firms looked to capitalise on independent research providers.
He said the next steps for Instinet would be expanding its multi-asset class offering, in particular for FX and fixed income trading as it seeks to meet the “equitisation” of other markets, with a growing amount of trades executing electronically on exchange-like platforms.
Nomura’s shifting of execution services to Instinet sought to reduce overlapping business lines, after it acquired the agency broker in 2007 and failed investment bank Lehman Brothers’ Asia operations in 2008.