ITG, the agency broker and financial technology supplier, has announced a programme of cost cutting across its US and European businesses, as a result of low equity trading volumes.
“With US equity volumes during the second quarter at the lowest levels since late 2007, this plan improves profitability and sharpens the focus of our core execution platform while affording us the flexibility to continue to build out our research offering,” said ITG’s CEO and president, Bob Gasser. “While the reduction in staffing levels is painful, the ITG management team and I believe that these measures are critical to our long-term success.”
According to an ITG spokesperson less than 100 positions will be affected, primarily from the technical development area of the business. The cost cutting measures, which are due to take effect during the third quarter of 2011, will impact staff, consulting, and infrastructure, and are expected to generate pre-tax cost savings in 2012 of more than US$20 million.
ITG will incur pre-tax charges associated with this plan estimated at between US$16 million and US$18 million, or between $0.23 and $0.26 per diluted share after taxes, in the second quarter of 2011.
The company also plans to record a second quarter 2011 non-cash goodwill impairment charge, which involves writing off the value of intangible assets accumulated via acquisition, in its US reporting unit. This is estimated at between US$210 million and US$230 million. ITG said that impairment was driven by weak institutional equity trading volumes and the decline in industry market multiples.
ITG management will provide more details during its Q2 2011 earnings call on 4 August.
Low trading volumes have affected brokers and venues this year; Citi is to launch a crossing network specifically to attract high-frequency trading order flow in Q4, while several venues are adjusting their pricing strategies to encourage greater liquidity provision.