The TRADE’s best of 2019: Sell-side

John reviews the best of The TRADE News’ coverage of the sell-side over the past 12 months.

Mergers and acquisitions were the flavour of the year for 2018 and although there were fewer big money deals completed in the past 12 months, that certainly wasn’t for the lack of attempts to do so. Pan-European trading venue Euronext completed its acquisition of Oslo Børs after a drawn-out bidding war with rival Nasdaq, and is currently engaged in a similar tussle over Spanish exchange Bolsas y Mercados Españoles (BME) with SIX Swiss Exchange. Elsewhere, Deutsche Börse closed its acquisition of analytics firm Axioma in mid-September, to form a new intelligence division, Qontigo.

However, the biggest and most surprising, news of the year dropped in September, when Hong Kong Exchanges and Clearing (HKEX) tabled a £32 billion acquisition offer for London Stock Exchange Group (LSEG). The offer was hastily rebuffed by LSEG, with chairman Don Robert expressing surprise and disappointment that the bid was made public just two days after it was received. Undeterred, HKEX vowed to persist with its acquisition strategy as tensions between the two parties mounted, with LSEG also making pointed comments about its ongoing partnership work with the Shanghai Stock Exchange. The drama came to an end in October when HKEX chief executive, Charles Li, posted on his blog that the pursuit of LSEG had been called off having failed to secure the backing of LSEG’s shareholders. None of which may have come to pass if HKEX had simply seen The TRADE’s coverage of LSEG chief executive, David Schwimmer, talking down future cross-border mergers involving the group due to rise of nationalism and a negative focus on exchanges.

One of the year’s other big stories was intertwined within the LSEG/HKEX narrative, as in late July, the London venue confirmed that it was in discussions to acquire Refinitiv in a $27 billion deal that would create one of the largest data and trading powerhouses globally. At the start of August, the deal was done and LSEG announced that it expected to close the acquisition in 2020. Part of HKEX’s offer for LSEG was the stipulation that the deal for Refinitiv be abounded, which did not go down too well in Paternoster Square, and most likely played a not-insignificant role in how the story played out.

It has been a tough year for Deutsche Bank, to say the least. In March, rumours of a possible merger with Commerzbank became loud enough that the two institutions moved to confirm that discussions were ongoing, although the deal never materialised after talks collapsed in late April. However, it is the story of Deutsche Bank’s other struggles this year that have grabbed the headlines, with chief executive, Christian Sewing, warning shareholders of cutbacks and structural changes during its Annual General Investors meeting. The warning became reality in July, when Deutsche Bank unveiled its planned overhaul of the business, which included reducing its workforce by 18,000 and transitioning its US-based prime brokerage and electronic equities business to BNP Paribas. The German institution’s struggles have been beneficial to its peers on the sell-side, however, with Barclays announcing that it had gained around $20 billion in prime balances from Deutsche Bank and BNP Paribas estimating revenue gains of around $400 million from the transition deal, which it expects to be finalised by summer next year. The newly slimmed down Deutsche Bank, which saw total headcount fall to below 90,000 for the first time in a decade in October, is progressing well with its transformational strategy, Sewing said in December, raising its investment bank revenue expectations due to its fixed income and currencies sales and trading operations.

Elsewhere this year, brokers are stepping up to the plate in the post-MiFID II landscape as banks struggle to keep pace in the algorithmic trading space, according to this year’s Algorithmic Trading Survey, published by The TRADE in April. Hopwever, there are always exceptions to the rule and this year Credit Suisse hailed the turnaround of its flagship algorithmic trading platform following a revamp, with revenue income of $359 million in its global markets division, a massive 141% increase year-on-year.