Tricom Slashes Securities Lending To Assure Market
Sydney Morning Herald
Monday February 4, 2008
TRICOM EQUITIES is drastically scaling back its securities lending business in an attempt to restore market confidence in the troubled broker and margin lender.
It sent shockwaves through the Australian market on Tuesday when it become the first brokerage in more than 30 years to fail to settle its trades on time. Tricom's besieged managing director, Lance Rosenberg, yesterday tried to restore confidence in its reputation by announcing it would reduce its securities loan book from $900 million to $500 million within the next few weeks. He denied it was a "knee-jerk reaction" to the meltdown last week, as the broker's exposure to securities lending had fallen from $2.4 billion in June to $1.5 billion in late December.Instead the "recent market events" highlighted that Tricom's exposure was too great due to the market's volatility and the changing attitude to risk. About 100 securities lending clients have so far sought either to transfer to another provider or change their arrangements to margin lending. Late last week about 700 of Tricom's 800 securities lending clients had not refinanced, although this number will change rapidly as that part of the broker's business is reduced. Mr Rosenberg admitted that trading volumes from its standard broking business had fallen due to the fallout from last week but he said it had not resulted in any staff losing their jobs."Yes, some trading revenue is being reduced but I expect that to be short-lived and therefore don't expect any job losses," he told a briefing yesterday.The Australian Stock Exchange has forced Tricom to take strict measures to ensure its ability to meet future obligations, including on-site supervision by an exchange employee, daily reporting of its ability to meet its obligations, and independent auditing. The exchange has also restricted Tricom's ability to trade in warrants, options and interest rate products. Mr Rosenberg said Tricom had been in discussions with two of the "big five" accounting and consulting firms to take on the job of external adviser to look into the company's operating systems and controls.An adviser would be appointed this week. He also sought to reassure the market that Tricom was able to meet its financial obligations and had been working at the weekend to ensure "it's business as usual".But Mr Rosenberg deflected questions about whether the brokerage was expecting clients to start legal action, saying "we are just getting on with business".Clients had given their support and intended to keep their relationships with the firm, he said.
© 2008 Sydney Morning Herald