GFI Group Inc. (GFIG) hired 32 inter-dealer brokers from rival Phoenix Partners Group LP, including the firm’s co-founders.
GFI, which arranges trades between banks in credit, commodity and fixed-income markets, “agreed to acquire certain assets” of Phoenix, including 32 brokers in New York and London and operational and management staff, the company said in a statement today. That includes Phoenix co-founders Nicholas Stephan, the broker’s chief executive officer, and Marcos Brodsky.
“This transaction presents numerous synergies and opportunities that we look forward to executing alongside our new colleagues,” Colin Heffron, chief executive officer of GFI, said in the statement.
The defections come as firms in the $639 trillion over-the-counter derivatives market adjust to regulations under the 2010 Dodd-Frank Act. GFI has said it intends to register as a swap-execution facility under Commodity Futures Trading Commission rules, though those regulations for how swaps can be traded haven’t been completed. In March, the company applied with the CFTC for approval to create a derivatives exchange.
Phoenix was co-founded in 2005 as trading in the privately negotiated credit-default swaps market was surging. The New York-based firm started an electronic trading system for the derivatives in March 2011 and has said it was seeking to become a swap-execution facility as U.S. regulators push more of the business away from transactions over the telephone and onto computer systems.
Bloomberg LP, the parent of Bloomberg News, has also said it plans to register as a swap-execution facility and could compete with GFI for transaction business. Other firms that have said they plan to register as SEFs include Tradeweb LLC, ICAP Plc, and Creditex, a unit of Intercontinental Exchange Inc.
GFI, which is hosting presentations for investors today in New York, named Heffron CEO on Feb. 15, replacing Michael Gooch, who will remain the company’s executive chairman of the board.
Volumes in credit swaps have diminished, with outstanding contracts shrinking 61 percent to $24.5 trillion from a peak of $62.2 trillion in 2007, according to data from the International Swaps & Derivatives Association and the Depository Trust & Clearing Corp. Banks often use inter-dealer brokers to lay off the risk of a transaction they have done with a customer, using firms such as Phoenix and GFI to arrange the opposite trade with another lender.
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