A future in futures?

Monday 1st October 2001

As share broking wallows in the doldrums, DF Mainland is hoping for richer pickings from its newly acquired futures, options and foreign exchange business

DF Mainland's website asks the question, "What makes us unique?" It answers: "DF Mainland has a powerful instinct for profit". It's talking about profits for clients, but it is that "powerful instinct" that has led the Auckland share broking and investment banking firm to turn its nose to the futures market. It reckons it can make more money selling forward-contracts on pork bellies and soy than on investors buying company shares.

Last month the 30-year-old New Zealand-owned firm completed its acquisition of Ord Minnett Jardine Fleming's futures and options business. The 28 new staff are about to shift in with DF Mainland's 45 employees in its refurbished Newmarket offices.

Managing director and company founder Stuart Cairns is confident DF Mainland's first foray into futures and options (the only New Zealand share broker to be doing so) will prove to be a far more profitable business than broking.

"It gives us a more diverse income stream," he says. "We are trying to build DF Mainland to offer a complete financial services package." DF Mainland was also the first Southern Hemisphere broker to offer an online real-time share trading service back in 1996.

The expansion follows last month's decision by JP Morgan to exit New Zealand. It had acquired the futures business earlier, through swallowing Ord Minnett. The latest move is one of many recent shake-ups in the local broking industry. And rumour has it that another major New Zealand player is about to go because its overseas parent is cash-strapped.

It took DF Mainland two months to stitch together the futures deal. Cairns wouldn't reveal the price, but it is a three-way ownership split: a third by DF Mainland, a third by the futures management and the remainder by former Bankers Trust treasury and money market supremo Jules Stephan. He retired last year when Deutschebank bought BT and closed the treasury operations down. Stephan is on the Ord/Jardine board but will not be involved in the day-to-day running of the futures business.

Operationally, the business is split: 65% foreign exchange transactions for clients and 35% futures. Clients for the latter are mainly institutions, plus a few speculators. "Our target clients are medium-sized businesses," says Cairns. A name change from Ord Minnett Jardine is likely next year when the dust has settled, he says. It is a fair bet that DF Mainland will feature in the new title.

As demutualisation of the New Zealand Stock Exchange pends, there has been a raft of sharebroking mergers. Forsyth Barr joined with Frater Williams and then Cavill White. ABN Amro merged its retail advisory business with Craig & Co then took over Merrill Lynch's retail broking business after Merrill's departure to Sydney. JP Morgan's exit followed an earlier decision to focus just on institutional broking. Macquarie New Zealand set up a local broking arm to complement its merger and acquisitions business, securing a number of JP Morgan's retail advisers, effectively closing its private client operation.

Denise McNabb
denise.mcnabb@xtra.co.nz

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