You announced in September that you had acquired AustraliaÆs BrokerOne and earlier acquired a 70% stake in Refco. Is growth through acquisitions a stated strategy of the MF Global?
There are multiple facets to our growth strategy in Asia. MF Global began its Asia operations just a decade ago when it acquired Standard Chartered, a financial futures and foreign exchange broker in Singapore. Today we have a presence in eight regions with more than 700 employees and leading positions on some of the regionÆs busiest exchanges.
MF GlobalÆs growth strategy in Asia consists of four key legs: building our core franchises across Asia; expanding the suite of products we offer (eg CFDs in Australia); executing on organic initiatives (eg Hong Kong start-up); and through acquisitions û Refco, in late 2005 bought in India and significantly increased the size of Singapore; additionally, in 2007, we acquired FXA in Japan and BrokerOne in Australia.
How have the acquisitions you've made so far, been working?
Some of the best acquisitions weÆve made as a company are the ones weÆve done in Asia and we expect to continue to be active in the market as opportunities present themselves. MF Global has a long track record of consolidation, acquiring 18 companies in the last 18 years.
While the consolidation opportunities in Europe and North America are fewer today, we view Asia as a significant area in which to bring our acquisition and integration skill set to work.
In the last six months, we acquired two leading companies in their respective regions. FXA Securities is an online retail foreign exchange business with some of the best technology in the foreign exchange marketplace. As an organisation, we had been looking for the right retail FX platform and believe weÆve found a uniquely differentiated product in FXA. We are now in the planning process to begin to roll out the platform throughout all of Asia and Europe as well. Even still, in Japan alone, FXA is adding nearly 700 new clients per month and performing well beyond our expectations.
BrokerOne was the largest retail and professional trader on the Sydney Futures Exchange. We acquired the company at the end of September and believe it will be fully integrated within six months. The acquisitions plays a vital strategic roll for MF Global in Sydney by not only taking us to No.1 on the Sydney Futures Exchange by executed volume, but by diversifying our customer channels to include retail and professional traders.
What are your criteria in terms of acquisitions?
We look at acquisitions to fill one or more of three strategic criteria. The acquisition target must expand our geographic presence, enhance our product offering and or improve our market position. For example, our acquisition of FXA Securities established our presence in Japan, gave us a retail FX platform and improved our position in one of the fastest growing markets in all of Asia û retail and institutional foreign exchange.
Let's talk about risk appetite. How have Asian clients (both institutional and retail/HNW) been changing in terms of their perception of and appetite for futures and options?
Broadly speaking, the Asian culture has always had a balanced view toward risk. To a large degree, that remains unchanged. Asians manage risk well and that is why we are seeing the proclivity among Asian consumers to embrace futures and options. Not only are they keenly aware of the risk management benefits, they also understand the strategic use of leverage to generate higher rates of return.
We are seeing in our FX business, for example, retail and institutions coming to the FX markets for a variety of reasons, like the Asian housewife speculating on currency markets to the large institution hedging on foreign currencyÆs impact on its operations.
Is MF Global creating new products tailor-made for the Asian clientele?
Yes, we continue to bring products to market that our clients demand. The demand in the Asian theatre for products such as online foreign exchange, contracts for differences (CFDs), binaries and spread trading are significant. This is not fully reflected in volumes of local exchanges as many of these products are traded on an OTC basis. The growth and demand for these products mirror the dynamic economic surplus and wealth creation that occurred right across Asia.
So, while certain parts of the securities and futures industry remain constrained by infrastructure and legacy regulation, we anticipate growth through product innovation to continue apace.