Trader Talk

Pisani: LaBranche Skyrockets on Sale

Specialist business continues to consolidate: LaBranche trades up 30 percent after the close, as they announced they were selling their designated market maker business (DMM: the old specialist operations) to Barclays...for $25 million.

This will make Barclay's DMM far and away the largest DMM at the New York Stock Exchange: they will control almost half of all the listed issues at the NYSE.

Remember, Barclays themselves got into the specialist business when they bought Lehman Brothers last year. And Lehman got into the specialist business because Van der Moolen essentially walked away, and they bought them...

The sale reflects the greatly diminished value of specialist operations. Those specialist operations used to be the core of LaBranche's operations, but it has been sold for $25 million; not only is it a pittance compared to what the operation was worth a few years ago, but it is only a fraction of LaBranche's $146 million market cap.

How big has the decline in the specialist business been? In 1977, there were 75 specialist firms on the floor of the NYSE. Today, there are four left: Barclays, Speer Leeds (Goldman Sachs) , Bank of America, and Kellogg.

LaBranche will keep its ETF trading business, its options market making operations, as well as the market making operations in London and Hong Kong.

Its biggest single asset: NYSE Euronext stock, which it acquired when the NYSE switched from a mutual ownership to a stock ownership status in 2006 (LaBranche was a large seatholder).




Questions?  Comments?