MF Global seeks ‘bite-sized’ acquisitions in Asia

Broker sees growth in Asian demand for derivative-based products outpacing all other regions

Soaring Asian demand for derivative-based products is driving the growth of MF Global a leading broker of exchange-listed futures and options.

Kevin Davis, chief executive of MF Global, says Asia is the group’s fastest growing region economically, and the company is scouting for “bite-sized acquisitions”.

“We are seeing growth in Asia outpace all other regions… If we carry on at this pace, by the end of this financial year, Asia’s share of revenue should be north of 15 per cent, and close to 20 per cent next year.” he says.

“In 13 years we’ve done 17 acquisitions… That Process is about to start in Asia, where we intend to be at the forefront.”

He expects concern over the spread of the problems relating to US- sub prime loans to drive business towards listed markets. “In times of credit concern, people prefer dealing with central clearing counterparties rather than on a bilateral basis.” Mr Davis says. “Because we don’t take proprietary positions, people like trading through us. We are totally neutral.”

He adds:” One of our key credos is that we don’t care which way the market moves. We care that it moves. We have customer who are long and short.”

MF Global was formerly MAN Financial. It provides execution and clearing services for exchange-traded and over-the-counter derivative products, as well as for non-derivative forex products.

Asia share of revenue started at about 5-6 per cent a year ago, and had risen to 12 per cent by the quarter ended in September.

In that period, MF Global revenues were up 35 per cent to US$436 million.

In Asia, MF Global began to build its presence when it bought a financial futures and forex broker from standard chartered some 10 years ago.

In 2005 it bough Refco, which had a substantial presence in Singapore. More recently, it acquired FXA Securities in Japan, which provides forex products.

Singapore is the Asia-Pacific hub for MF Global, where chief executive Daniel Yeo is a veteran in the derivatives trade. The Singapore office currently has a staff of 175 and is still hiring. Most recently it hired a team of 13 in 24 hours to operate a new unit dealing in energy derivatives for institutional clients.

Mr Yeo aims to roll out more services geared towards the private wealth market. There will be a full brokerage suite, funds and structured products.

“We have been receiving good acceptance by investors because we provide direct market access.” Mr Yeo says. He adds that a major commitment will be to educate investors on various instruments.

One of the areas of expansion in Asia is contrasts for difference (CFDs) . These are derivative instruments, traded over-the-counter. A CFD is an agreement between two parties to settle, at the close of the contract, the difference between the opening and the closing prices of the contract. It is similar to a single stock futures contract, but without a fixed expiry date or contract size.

MF Global is gearing up to launch a CFD service for Philippine securities, a development that could boost trading on the Philippine securities exchange by 30 per cent, says Mr Yeo.

Mr Davis says MF Global seeks to structure its operations such that the various offices offer complementary services and can benefit from economies of scale.