Global Stock Brokers Shut and Cut as Financial Industry Downsizes

Global Stock Brokers across continents are either firing hundreds of workers or are totally closing down. The reasons for this downsizing of operations by brokerages is

a) The Financial Industry has become too large to the size of the global economy particularly in countries like USA

b) The reduction in risk and capital means that big financial companies are reducing and selling their operations

c) The Broking Sector has seen a Peak in 2008 and now the only place to go for the next few years is Down

Financial Jobs are being cut across the world and the smaller outfits are feeling the heat. Changes in the structure of the industry are hurting as well as high speed trading and influence of technology means its harder for smaller outfits to compete. Even in India which is a high growth economy smaller outfits are shutting down while even the bigger ones like Fidelity and Blackstone are closing down.

Financial Jobs are being let go in the tens of thousands by European and USA Financial Institutions. The Financial Industry has become too huge as a percentage of the global economy with any value creation to say something like the IT industry. The share of  the market cap of the stock market had become too high during the boom boom years of 2008 and it is continuing to go down.Despite the best (some would say the worst) effort of the governments to prop up the Too Big to Fail Banks,jobs are being let go as there is not enough work. European Banks are shrinking their balance sheets as they are too leveraged and insolvent. Without the ECB crutch,almost all of them would go under.

London and French Banks are selling divisions and shedding jobs to become more leaner and survive till the government keeps them on life support. Major financial centers of London,New York are the worst hit in terms of financial job losses.

Asian Brokerages like Samsung, Daiwa have also been on massive restructuring closing operations and streamlining its business. Smaller outfits in the USA like Kaufman brothers and others have also shut down as equity trading volumes go down drastically .

Stand-alone U.S. brokerages hurt by 2011’s trading slump may struggle to raise capital or obtain adequate loans unless markets improve, adding to closures that imperiled more than 200 Wall Street jobs last month.

WJB Capital Group Inc. and Ticonderoga Securities LLC told employees in January that they would shut amid a shortage of capital, people familiar with their plans said at the time. Kaufman Bros. LP, the minority-owned investment bank that helped unwind U.S. stakes in bailed-out financial companies, ceased business Jan. 30. The New York-based firms each employed about 100 people or fewer.

Indian Asset Managers Exiting Industry

The Indian Mutual Fund and Asset Management Companies are  facing tough times and foreign asset managers are exiting in droves. Fidelity has put up  its $2 billion of funds on the auction block  trying to find a buyer as it exists India. This is only after a couple of months when Blackstone another of the trillion dollar asset managers existed the Indian business. In 2008 during the boom times, every Tom Dick and Harry of the asset management business wanted to get a piece of the Indian pie. The local brokerages were commanding super high valuations while growth and profits seemed endless.

However the Fairy Tale has ended with most MF companies reporting losses and declining revenues from higher competition . With Technology changing the face of the financial industry, its only the very nimble who have been making money .Others are trying to diversify into related areas to retain profitability. Fidelity one of the largest asset managers has a good presence in India but wants to exit. It has a technology services back end operation as well which it has been trying to sell for a long time. However in case of the MF it should have better luck given the size of the corpus . It is trying to get a 10% of the AUM as the sell price for its Indian business.

Samsung, Daiwa

Japan’s Daiwa Securities Group Inc. stepped up its job-cutting plans Tuesday, while South Korea’s Samsung Securities Co. is laying off staff in Hong Kong, the latest moves by securities firms to scale back their overseas operations in the face of a global economic slowdown.Daiwa Securities, Japan’s second-largest securities firm by revenue, reported losses for the fourth consecutive quarter on Tuesday and said it will lay off staff mainly in Europe and Asia. The firm plans to eliminate an additional 200 jobs on top of 300 positions it previously planned to cut.

Samsung Securities will exit equity sales, execution of trades and research for markets outside of South Korea, the memo said. It wasn’t immediately clear how many jobs Samsung Securities will cut. It employs about 100 people in its Hong Kong office, with the vast majority focused on equities sales. Even before a town-hall meeting in Samsung Securities’ Hong Kong office was convened to discuss the retreat back into its home market, some employees were clearing their desks, one of the people familiar with the matter said.