This is Part 2 of Futures' exclusive interview with Newedge CEO David Escoffier.
Societe Generale recently completed its acquisition of Credit Agricole's 50% stake in Newedge bringing Societe Generale’s ownership to 100%.
Newedge CEO David Escoffier says the transaction, besides bringing clarity to Newedge, which was needed, will create the right model going forward to be profitable in a changing world. “It is important to present clarity,” Escoffier says in an interview with Futures.
It also is necessary to be a bank, he explains. “Now, we can connect clients to more than 125 markets. I don’t think any other firm has that type of reach. Newedge could do part of that, and now thanks to Societe Generale, we have added cash markets, the one leg of the trade that was missing before.”
He adds that being a bank will be very helpful with OTC clearing. “We are a one-stop shop.”
This is particularly true in the post Dodd-Frank world. “Markets are about less leverage, less capital, and more transparency,” Escoffier says. “In the end, it is an agency business, what I call ‘Agency+’: a mix of agency and the ability to provide back stopped balance sheet risk taking for your key accounts. That is precisely the mission of Newedge Agency teams in Global Markets.”
Escoffier explains that Newedge’s new model brings all the large bank benefits to the table to provide more choices for its clients. “Trading financial instruments can be very complex. We serve smart, sophisticated clients who need a service provider to have the necessary technology platform and market expertise for them to invest long-term,” he says. “Previously, Newedge operated more or less as a collection of small teams. All of these small teams were working semi-independent from one another; it is much more efficient to have a functional team that can cross-sell products and services to clients.”
Newedge is now in the camp of the large bank FCMs and SocGen is massive. It is a 150-year old institution with more than 148,000 employees, based in 76 countries and has 32 million clients throughout the world.
It offers retail banking in France, International retail banking, it offers financial services and insurance with a presence in emerging economies. It offers corporate and investment banking, private banking, asset management and securities services.
It is that mountain of business services that Escoffier says Newedge can leverage into a more profitable business model.
“We want to invest, offer more financing and additional cross-margining for clients, and produce more research, so we’re committing more resources to these areas,” says Escoffier. “At the same time, we are confident in our agency business model and its relevance to clients in the new world. Name me one investment bank or big brokerage in the industry that is confident they have the right model. We are very confident.”