Investment Technology Group Inc. (ITG:US) plans to eliminate an unspecified number of jobs as part of cost reductions that will also include reducing the fees it pays for market data and other administrative outlays.
The changes are necessary because of “continued weakness in institutional equity trading volumes,” according to a statement from the New York-based broker. U.S. equities volume averaged 6.5 billion shares a day this year, a 34 percent decline from 2009, according to data compiled by Bloomberg.
ITG closed (ITG:US) at $8.85 today, down 0.6 percent. The stock has retreated 28 percent from its 2012 high of $12.24 on March 26.
“Given the difficult business environment, we examined every aspect of our cost structure across all businesses and geographies,” Chief Executive Officer Bob Gasser said in the statement. “While the staff reductions were a difficult decision, they are a necessary step to ensure the long-term competitiveness and profitability of ITG.”
The changes are expected to produce a pretax savings of about $20 million next year, or 32 cents per share after taxes, ITG said. The company will have pretax charges in connection with the plan of about $8.5 million, or 14 cents per share after taxes, in the fourth quarter, according to the announcement.
The broker had net income of $200,000 in the third quarter, or 1 cent a share, compared with $10.5 million, or 25 cent a share, in the same period in 2011, it said in a statement on Nov. 1. Revenue fell 20 percent to $119.6 million in the three months ending Sept. 30, from $149.4 million a year earlier. U.S. operations accounted for $77.8 million in revenue or $1.2 million net income in the quarter, versus $98 million in revenue or net income of $6.9 million a year before.
“Market conditions were similarly difficult in our international operations,” Gasser said Nov. 1. The company’s international business had revenue of $41.9 million or a net loss of $1 million in the third quarter compared with revenue of $51.4 million or net income of $3.6 million one year earlier, according to its earnings statement.
“There are certainly areas throughout the firm that I think can be adjusted to reflect overall lower and slower market activity, and that goes for, obviously, the global footprint of the firm,” Gasser said on the Nov. 1 conference call.
ITG acquired two research providers since 2010 to generate commissions from asset managers and hedge funds paying for reports and analysis about companies. It bought Ross Smith Energy Group Ltd., a Canadian research provider, for $38.5 million in cash in 2011, according to data compiled by Bloomberg. It acquired Majestic Research Corp. for $56 million in cash and stock a year earlier.
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