Nomura ramps up global markets business and revamps electronic platform

Singapore

NOMURA, Japan's largest brokerage, is ramping up investment into its global markets business to increase market share in equities, foreign exchange and structured lending.

A key priority is revamping its electronic offerings, said Rig Karkhanis, Nomura head of global markets, Asia excluding Japan, calling it the "number one priority".

The Tokyo-based company is also hiring more people for equities, FX and electronics.

Nomura has three big businesses within global markets; outside Japan, the primary focus is Asia, said Mr Karkhanis in a recent interview.

The three big businesses are equities, credit and macro.

"Equities, and that's a business that we are planning for significant investment," said Singapore-based Mr Karkhanis who's also head of global FX and emerging markets.

The firm sees a lot of upside both in the cash business as well as in its equity products business such as equity derivatives, generally in demand by institutional investors like hedge funds, he said.

It made a number of key hires recently - including Rob Webb and Julian Petit Pasquier from Citi - to bolster the equity business, and it's going to increase headcount in that space over the next few years, he revealed.

The other key business is credit or corporate fixed income; it is very strong in certain areas like the flow credit business which is helping clients trade bonds, he said.

An area the firm intends to do more is in special situations and structured lending where it provides financing to clients who are unable to access normal sources of liquidity, he noted.

The firm will double the amount of funding for areas like real estate infrastructure lending and buying up real estate non-performing loan portfolios, according to Mr Karkhanis.

Nomura's biggest business in the region is macro which includes FX and rates which is sovereign fixed income or government bonds.

As an offshore player serving institutional clients, Nomura is competing against the likes of Morgan Stanley and Goldman Sachs.

"On a global basis, it's very clear actually that we have some strengths but our clear weakness is the electronic platform," he said, adding that it was due to lack of investment.

But that is about to change.

Recently the firm combined the global emerging markets (EM) business and the FX business to create critical mass.

"Many of the products within EM, particularly FX products, are exactly the same as the FX products in the G-10 world," he said.

G-10 currencies are the 10 most traded currencies in the world.

"So electronification, for example, creating efficiencies around systems, creating efficiencies around personnel, as well as leveraging clients across both platforms was the main reason that we brought these two pieces together."

"The number one priority is for us to strengthen our electronic offering," he said.

Existing technology teams - comprising 50-70 people - many of which are actually based in Europe are being aligned with products, he said.

Hiring will likely increase by 15-20 per cent over the next couple of years as required, Mr Karkhanis added.

Its current NomuraLive system is strong in certain pockets but the idea is to expand the product suite and become more competitive to try and gain market share, he said.

He hopes to introduce new products in the next three to six months. "If we can get our platform right, we can gain market share very rapidly."

Nomura is also going through a significant expansion in its FX options business globally, he said.

It does a lot of offshore NDF or non-deliverable forwards business and big markets are India and Korea, he pointed out. NDF contracts are written for currencies which face trading restrictions.

In Singapore Nomura is the largest China FX options liquidity provider.

Nomura operates its FX business out of four main centres - Japan, Singapore, London and New York; it is in the process of making a number of hires in each of the centres to strengthen its offering across the board, Mr Karkhanis said.

In Singapore, Nomura has about 550 staff, with roughly 160 in global markets.

Internationally Asia is most important, and it is also the most profitable region for the group, he added.

Asia ex-Japan made 22.8 billion yen (S$276 million) in pre-tax income in fiscal year 2017-18.