Deutsche Bank, UBS, RBS Said to Mull Selling Tradeweb Stakes

  • Buyers have approached all European bank owners, person says
  • Stake sales said to be possible first step to public offering

Deutsche Bank AG, UBS Group AG and Royal Bank of Scotland Group Plc are considering selling their minority stakes in Tradeweb Markets LLC, a bond and derivatives trading system, according to people familiar with the matter.

Thomson Reuters Corp. owns the majority of New York-based Tradeweb, while a group of banks have the rest. Potential buyers have approached bank owners based in Europe -- a group that also includes Credit Suisse Group AG and Barclays Plc -- about selling, according to one of the people familiar with the matter, who asked not to be named because the discussions are private. Deutsche Bank, UBS and RBS are trying to decide what to do.

The discussions are in the early stages and Tradeweb hasn’t hired bankers for advice, a person said. Stake sales could lead to an initial public offering of the company, the person said. Clayton McGratty, a Tradeweb spokesman, declined to comment.

Faced with negative interest rates, stiffer capital requirements and a collapse in trading revenue, European banks including Deutsche Bank have moved to scale back their operations in recent months, selling divisions and eliminating jobs as earnings slump. Seeking to staunch speculation about its finances, Deutsche Bank this week agreed to sell a U.K. insurance business.

Stricter regulations have targeted bond and derivatives trading, the areas most central to Tradeweb’s business. This worsening business environment is what’s leading the European firms to consider selling their Tradeweb stakes, according to one of the people.

Representatives of Deutsche Bank, UBS and RBS declined to comment.

Bloomberg LP, the parent company of Bloomberg News, competes with Tradeweb and Thomson Reuters in facilitating bond and swap trades between investors and banks, and in providing financial data and news to investors.

Tradeweb connects banks and their customers for electronic trading of government bonds, interest-rate and credit-default swaps, U.S. and European corporate bonds and commercial paper, among other assets. It also facilitates bank-to-bank trading with its Dealerweb unit.
Earlier this year it bought CodeStreet LLC to help bolster its bond trading.

The other banks that own stakes are Goldman Sachs Group Inc., JPMorgan Chase & Co., Morgan Stanley, Citigroup Inc. and Bank of America Corp.

Meant to improve the stability of banks, new rules put in place after the 2008 financial crisis require firms to set aside more capital to back their transactions, cutting into the profitability of the business. In derivatives markets, customer trades are now counted when determining a bank’s leverage, further cutting into bank revenue. In the bond market, it has become more difficult for dealers to buy and hold bonds until customers want them after rules to lessen bank risk-taking were passed.

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