US-based agency broker Cowen Group has expanded its European client base following its acquisition of Convergex, as firms in the region grappled with MiFID II implementation.
Chief executive, Jeffrey Solomon, explained on the Group’s quarterly earnings call that MiFID II has seen European asset managers rethink broker lists in terms of research and trade execution.
“In Europe, we actually gained new clients as accounts look to consolidate their broker list around those providers that matter most during their MiFID II implementation process,” he told investors.
“With the introduction of MiFID II last month, we are seeing what we expected to see - buy side firms are continuing to make choices to stop doing business with the firms that cannot help them achieve their return objectives and are aggregating their order flow with partners like Cowen who provide real value in research and trade execution.”
MiFID II’s unbundling and best execution rules have forced asset managers to re-evaluate traditional broker relationships in terms of research, trade execution and liquidity. For brokers, MiFID II means demonstrating trade performance has become increasingly important.
“Organisations that emphasise collaborative in-depth, cutting-edge research are rare among our peers,” Solomon added. “Even rarer are organisations that emphasise that kind of research product, as well as provide innovative market liquidity solution for clients on a non-conflicted basis. Our clients are willing to pay us for both.”
In April, Cowen Group confirmed its acquisition of brokerage and trading services provider Convergex for $116 million, as it sought to expand its brokerage and trading business globally.
The Group said the acquisition had proved positive in terms of reaching clients in Europe who continue to tackle MiFID II implementation.
“We got the international business as part of the Convergex acquisition,” Solomon explained. “I would say it has been a real pleasant surprise, not that I didn’t have high expectations, but it certainly gave us that window into deeper conversations with clients globally who are grappling I think with MiFID II implementation.”
In 2017, Cowen Group’s annual brokerage revenue surged 51% year-on-year to $313 million, representing a three-fold increase since 2012. Overall revenue reached $659 million in 2017, up 40% from $471 million in 2016, driven by the investment banking and brokerage business units.
“Over the past few years, we have positioned ourselves to take advantage of that trend by being a top broker of choice among clients who seek both sophisticated research, as well as market liquidity through a non-conflicted agency model,” Solomon concluded.