Japan's Nomura <8604.T> is touting the independence of its trading platform Instinet, to distinguish itself from other investment banks, as it joins them in shrinking its equities business to help cut $1 billion in costs.
Costly trading systems and research teams has led investment banks to target equities to bear the brunt of cost cuts in a shrinking financial services industry.
Since 2008, Nomura allowed Instinet to compete with the trading operations it inherited from defunct U.S. rival Lehman Brothers - an expensive duplication it will now largely eliminate in favour of the independent brokerage.
In addition to cutting costs, the hope is that customers will find using an agency-broker like Instinet more attractive, rather than using a platform on which Nomura trades, which some clients may think doesn't get them the best deal.
"Many people thought that Instinet would be folded into with Nomura but we've gone the other way, to protect the independence of Instinet," Instinet Chief Executive Adam Toms told Reuters.
The two businesses cater to different client groups. Instinet is popular among pension fund managers, which value anonymity when trading, while Nomura is stronger with high-frequency hedge funds that require speed.
Analysts think the strategy could work.
"Instinet has a solid reputation as a truly independent execution only broker," said Rebecca Healey, a senior analyst at the Tabb Group consultancy company.
WAVE OF LAYOFFS
Stock trading has become increasingly tough for investment banks to sustain, as euro zone worries cause trading volumes to plummet and a move to electronic trading erodes margins in a market that is increasingly looking overcrowded.
Across the industry, many others are expected to either come up with new models, fall by the wayside, or at the very least cut costs by slashing jobs - with a wave of equities layoffs likely to hit in the coming weeks at many firms.
Italy's UniCredit abandoned its own western European equities sales and trading business last year, instead handing French brokerage Kepler Capital Markets the right to service its clients.
France's Credit Agricole is going down a similar route, and is in talks to sell its Cheuvreux brokerage unit to Kepler, while being a strategic shareholder in the new group.
Britain's state-owned Royal Bank of Scotland bit the bullet altogether, scrapping most of its equities business earlier this year to focus instead on its debt unit.
Nomura insists equities can be profitable, however, and banks are wary of cutting back too dramatically in an area that is still seen as a core building block of investment banking, and which will recover.
"Equities as an asset class is going through a tough cycle. The firms that get through the cycle and, importantly, reorganise their business in a way to benefit from it, will be glad they did it and it's our intention to be one of those," said John Phizackerley, chief executive of Nomura in Europe, the Middle East and Africa.
Nomura will still offer some equities-related services, including research, which banks use to entice investors into trading with them. The bank will also advice on stock listings and continue with its equity derivatives and prime services, which lends to hedge funds.
(Editing by Douwe Miedema and Elaine Hardcastle)