The Wall Street Journal
, key U.S. brokerage house -
E*TRADE Financial Corporation
) - has decided to shutter its business in United Kingdom (UK).
This move by the brokerage giant comes on the heels of the
slowdown in trading activities in the market due to the
reluctance of investors in betting their money attributed to the
continued ambiguity surrounding the prospects of the Euro Zone.
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Though E*TRADE has earned huge profits through trading in the
share market, yet at the current level, European dealers are
scrambling to maintain profit levels. European share trading for
the year has recorded its lowest level since 2009.
Reasons for Closure
Bearing the brunt of Europe's sovereign debt crisis and slow
economic recovery, funds managers are striving hard to make
profits in European countries. Therefore, to focus on core
operations in U.S., they have come up with the decision of
terminating their international operations.
E*TRADE has come up with the closure of London-based E*Trade
Securities Ltd. The company has intimated clients to transfer
their accounts to another company or get their positions
liquidated and retrieve funds.
Over the last few years, E*TRADE has been selling off its
businesses in places like India, Germany, the Nordics and Canada.
The company's move follows the impact of US mortgage crisis and
the subsequent heavy losses. In the third quarter of 2012, the
company's troubled mortgage portfolio waned 19% year over year
and 5% sequentially to $11.1 billion.
Last week, E*TRADE reported a slump in Daily Average Revenue
Trades (DARTs) in October. According to the monthly market
activity report for October, E*TRADE's DARTs were 124,246,
declining 21% from October 2011 and 10% from September 2012.
Moreover, during the third quarter of 2012, E*TRADE reported
DARTs of 129,000, down 7% sequentially and 22% year over year,
reflecting investors' aversion to trading.
Among peers, last month,
The Charles Schwab Corporation
) came up with the closure of the European arm of its derivatives
trading unit, OptionsXpress.
TD Ameritrade Holding Corporation
) restricted the opening of new accounts and new business
transactions in some foreign countries. Accounts will be closed
down in Italy and Belgium, while some European countries will be
constrained with certain types of transactions over the period.
In recent months, among others,
Deutsche Bank AG
Nomura Holdings, Inc.
), reorganized their European equities units with huge layoffs.
For quite some time now, investors have been incurring massive
losses in trading. If this continues along with mounting
regulatory pressure, it would deliver a huge blow to investors in
the ongoing economic situation.
If the European crisis continues to linger, it will have
significant impact on worldwide capital markets. On the other
hand, the extremely low interest-rate environment is another
manifestation of this uncertain macro backdrop.
Concerns about the European finances and soft U.S. growth
prospects have made treasury instruments the choice of safe asset
class. As a result, the yields on benchmark treasury bonds are
hovering at low levels.
We don't expect the potency of the sector to return to its
pre-recession peak anytime soon. The economic intricacies are
apprehended to lead to further disappointments in the upcoming