Bigger fishIt’s has been confirmed WEBB Traders takes over Caerus. They have a lot in common. They are both start ups launched after the demise of Van der Moolen. WEBB is mainly active on the cash market, and Caerus is market maker in the derivative business.

No surprise

It doesn’t really come a a surprise. In the last couple of months we’ve seen brokers merge, exchanges and now traders are joining forces. Last year’s revenues have been disappointing all over the place, and at the same time running a trading operation isn’t getting any cheaper. Transactions costs are under pressure, but fast co-located connections to a dozen exchanges are pricey.

Merger makes sense

“Our operations are very complementary, and there’s a lot of synergy”, as confirmed by a stakeholder. Four years ago I couldn’t understand the rationale of the merger between two option market makers (All Options / Saen). This one makes sense. Lot of fixed costs to share and not having to fire half of the company. Caerus will leave their office at Beursplein 5 to move in with WEBB. Together the new combination will have a headcount of 30.

A gun shot wedding

On the other hand, let’s be fair : it’s also a shot gun wedding. When making millions, nobody would even consider selling the firm – no matter how much synergy to be achieved.

The road to consolidation isn’t over yet in the financial markets. Economies of scale is required to survive. Last year several tiny market makers decided to call it quits. Remains to be seen WEBB/Caerus can compete with the larger fish.

Jack