NOMURA HAS LONG been a force to be reckoned with in Japan, but the acquisition of the Asian and European businesses of Lehman Brothers in September 2008 could help the firm realize its global potential in FX. This has been reflected in its dramatic leap in the 2010 FX Survey, from 57th to 18th position.
But this performance needs to be taken in context. In 2008, Lehman ranked 11th for market share in Europe and fourth for market share in Asia.
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“We have been able to forge relationships very quickly with many of the smartest accounts on the street” Richard Gladwin, Nomura |
Lehman’s global head of FX, Richard Gladwin, joined Nomura in November 2008 and immediately began to build its FX business.
Gladwin says: “In the first six months we spent a lot of our time working almost entirely on infrastructure – on technology, legal arrangements, credit arrangements. The infrastructure had been set up for a much smaller scale of business – in both volumes and by the scope of products traded.
“We were told when we first arrived in London that we couldn’t do more than 500 trades a day otherwise everything would break. That was the scale of the business in London at the time. Now we regularly transact hundreds of thousands of tickets a day without any problems but it has taken a large amount of work to get to that point.”
Keeping teams together, Gladwin says, was also crucial to the launch of the new Nomura. “One of the key advantages was the way that Nomura acquired pieces of the Lehman Brothers business,” he says. “Lehman’s FX hub in Asia was in Singapore and we acquired that lock, stock and barrel so we kept the Asian team in its entirety including all the support areas – operations, IT and product control as well as all of the front-office people.
“That enabled us to get traction very quickly because we weren’t having to worry about strange cultural dynamics or getting different groups of people to work together. Everybody knew very much what the business was about.”
A similar process occurred in the European part of the Lehman business, where Nomura retained more than 80% of the staff. Nomura’s improved FX business took a big step forward, when it once had 30 people in FX globally, it now has more than 200.
However, Nomura did hit a problem that slowed its expansion: it had never had any kind of operation in the Americas, and had nothing to build on. “The lack of operations in the Americas slowed our progress more than anything, although we were fortunate that the firm enabled us to go out quite quickly after establishing ourselves in Asia and Europe and recruit in the US,” says Gladwin. “It is very difficult, as an FX business, to be taken seriously as a global player if you don’t have boots on the ground in every time zone. A lot of people from Europe and Asia spent a lot of time in the US hiring people, and we were able to assemble a team that went from zero to 35 from April to July 2009 and then we were up and running by the end of August in most products in the US, including a Latin America franchise.”
Nomura was still lacking in big clients, apart from those in Japan; research was identified as crucial to further development. “We pretty much retained all of our research capabilities that we had at Lehman and we’ve added some significant players,” says Gladwin. “We managed to recruit these people because they bought into our vision of what we wanted to do with the business. With that intellectual capital, we have been able to forge relationships very quickly with many of the smartest accounts on the street and we carried across a number of personal relationships with many big clients from our time at Lehman Brothers. Building an institutional relationship is a step further than that because clearly they need to get to know and trust the firm. That takes a bit of time.”
The foundations of the business have been laid; Gladwin believes it is now about closing the gaps. “We started this with a three-year plan in mind,” he says. “What we need to achieve in this coming year is to continue to grow our client footprint. From a product perspective, we did a great job of filling out or offering last year. There are still one or two gaps and of course the market moves on but we need to push the envelope of what the market is achieving. We think we now have a very good electronic offering but because of the changes we made to our technology we feel we can add new features and new products much more quickly than most of our competitors and that will be a big area of effort in the forthcoming year.”
