Global Trading speaks exclusively to Paolo Tonucci and Jack Seibald about what the long-awaited addition of a capital markets division brings to Marex, and how this year’s Cowen acquisition has changed their scope.
Marex’s addition of a capital markets division for prime brokerage has been a long time coming.
“Five, six years ago, we consciously decided that we needed to extend a product offering,” Paolo Tonucci, chief strategist and CEO of capital markets at the firm, told Global Trading. “We started making acquisitions to give us presence and product sets in the US – that was the first step in dealing with geographic expansion.”
During this process, “it became evident that we needed to have a proper presence in financial products,” Tonucci continued. “Not just exchange-traded but a wider range, we needed to be able to service asset managers, the buy side, some of the inter-bank flows and other financial services companies. We recognised that we were subscale in that part of the world – and that’s a very big business area.”
Marex had a clear vision of what prime and outsourced trading could bring the company, with Tonucci noting a number of structural changes in the market. He anticipated increased fragmentation in how hedge funds are serviced, stating that “hedge funds are no longer the only providers of liquidity, they have more choices around who can service them”.
“The consolidation of banks has reduced the number of bank competitors, but the banks have been much more focused on which clients they want to serve that there’s a tier of clients who are somewhat underserved.”
The journey
By early 2023 Tonucci had his sights set on a credible prime offering. “It was clear to me that the chances of growing a credible financial products business that could service the buy side organically was close to zero,” he recalled. “I felt we had to buy it rather than build it ourselves. Those things take years of experimentation, knowledge and expertise before you can get them right.”
That March, TD Bank’s acquisition of Cowen closed – but Marex was hearing from its wider network that the fit wasn’t right. One of the company’s senior equities operators already had a relationship with Jack Seibald and Mike Rosen, heads of the prime brokerage services and outsourced trading division, and when Tonucci heard that Rosen was going to be in London he set up a lunch.
“The opportunity with this group couldn’t have come at a better time, and it couldn’t have been a better group for Marex,” Tonucci summarised.
In New York, Seibald heard about the London meeting. “In the last 27 years, I’ve spent more hours per day with Mike than I have with my wife,” he joked. “We’ve developed a relationship that can be best described as divide and conquer. We tend not to focus on the same thing at the same time, we work on different elements of the business and then consult with each other before making any decisions.”
After reflecting on what their next steps should be, “Mike and I felt a little more emboldened to push the narrative with Cowen management about the possibility of divesting the business,” Seibald said. “We’d [discussed it] previously, because we saw the writing on the wall before closing [the TD deal], but stuck it out and tried to make it work. They ultimately agreed to it and were helpful in convincing TD management, which was very gracious of them.”
Although they were driving for the sale of their company, TD’s team ultimately led negotiations. “Mike and I were only involved in any of the discussions regarding our business and the specifics about our business,” Seibald said. The bank allowed them to solicit interest from firms that they thought would be a good fit, but deals themselves were up to TD’s discretion.
Going public
Just as Seibald and Rosen had settled in, in April Marex announced the launch of its IPO; “a great success”, as Tonucci puts it.
“To be the first financial services company to come to market for quite a few months and to have that happen so successfully is really encouraging and a great endorsement of the capacity of the company,” Tonucci says.
Six months on
Six months on from the integration, Global Trading caught up with Seibald and Tonucci to find out how the partnership was progressing. Both were unequivocally positive about their work together so far.
“The most exciting thing is that we are in an organisation where across the management structure, people understand and are supportive of our business,” Seibald shares. “They have been exceptionally welcoming and made it so that it’s been relatively easy for us to transition to business without interruption to our clients.”
“The best part is, I get to spend much more time in London!” he joked.
“The similarity in culture was immediate, and the relationships are so easy and constructive,” Tonucci agrees. “It was a surprise. I’d normally expect more friction when everyone’s settling in and establishing themselves, but it hasn’t been like that at all.”
Stifel
Soon after the acquisition closed, Marex announced a new partnership with Stifel. “Marex doesn’t have a research offering. For some of the client base, access to research and to research analysts is very important,” Tonucci explains. “It’s not just that they devour all of the written research, but they get access to the analysts, some of the events and conferences that they run.”
Initially, access to research was provided by Cowen. “Under the new agreement with Stifel, clients can access the research directly,” Tonucci explained.
“We’ve also agreed that we be their preferred referral for any prime brokerage clients [and outsourced trading services]. They don’t offer that product, so it provides them an opportunity to further entrench themselves with their clients, and it’s really helpful for us.”
This type of symbiotic relationship is also present in the overall integration with Marex.
New places, new faces
Marex has a global footprint, which Seibald explains will allow his division to solicit in new markets, build brand awareness and onboard more clients. Already putting themselves on the map in Singapore, Australia and Hong Kong, “we think there’s an opportunity to really leverage the business in the EU and MENA,” he notes.
The integration has also necessitated a personnel expansion. “We identified a few parts of the organisation where we needed to enhance our capabilities,” Seibald says. One of these was capital introduction, which had to be paused during the transition from TD Cowen. “Marex’s management was totally aware of that and supportive of us initiating that process again once the transaction closed,” Seibald recalls. “In the US, we’ve already hired two people into the cap intro group.”
In the UK, the organisation has also onboarded a prime broker salesperson to help them break into the family office and private banking market. “There’s an awful lot of activity that takes place in the private banking sector with services that are not dissimilar to those we offer,” Seibald explained, “but are much more limited. We’re hoping that this person’s expertise will open the door for us and identify where those opportunities might come from.”
With opportunities abound and a strong relationship, Marex’s acquisition looks like it will be here for the long run.
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