Three years ago, U.S. giant ConAgra Foods Inc. (CAG) decided it needed a brokerage firm to hedge its commodity risks. Some 24 firms that execute and clear big futures trades pitched for the job, and ConAgra sent a team to Chicago to review the bidding. The winner, surprisingly, was not one of the brokerage industry heavyweights but a French company called Fimat that had entered the business just 13 years earlier. Now, Fimat is not only a big U.S. futures trader--it is the biggest. In the fourth quarter of last year, Fimat USA Inc. captured the No. 1 spot on each of the two largest U.S. futures exchanges--the Chicago Board of Trade and the Chicago Mercantile Exchange--based on the number of trades executed.
Paris-based Fimat's spectacular success in the U.S. has only enhanced its position as the world's top futures broker. For several years it has held the top ranking at Europe's two derivatives markets, Frankfurt-based Eurex and the London International Financial Futures & Options Exchange. Last year, Fimat's profits soared 54%, to $34.5 million, on revenues that rose 13%, to $222 million. Profits are up more than sixfold in four years, while revenues have jumped 81%. "We've grown faster than the market," says Marc A. Breillout, Fimat's chief executive since 1999.
How has Fimat gone so far so fast? One answer is that it walks the extra mile to win new clients. Wielding his marker on a big drawing board during a presentation to ConAgra, Fimat USA Executive Vice-President Timothy O'Shea furiously charted how Fimat could help the company handle the risk of procuring commodities from around the world. Fimat offered ConAgra a customized risk-management system and a quarterly reporting system that was in sync with the company's accounting process. "We were impressed that Fimat actually provided us with innovative ideas, unlike some of the others," says Shannon C. Kennedy, ConAgra's director of procurement systems.
For France, Fimat is a rare bird--a home-grown international brokerage firm. French bank Soci?t? G?n?rale started Fimat in 1986, following the creation of the French futures and options exchange, and it's still a wholly owned subsidiary. The firm thrived, but by 1997, its European business was maturing as Europe's exchanges began merging, and the introduction of the euro promised to hurt its lucrative foreign-exchange operation. So Fimat looked west, putting Breillout in charge of beefing up the U.S. operation, which had begun in 1989.
The challenge was daunting. Fimat was virtually unknown in the U.S., and being a French firm, there was lots of skepticism to overcome. "Not only did we not have name recognition," says Patrice E. Blanc, the current chairman and president of Fimat USA. "But we were from France, which is not considered a major financial market." Hiring top-notch brokers was especially difficult, but it added 100 staff members in just one year. Now, Blanc notes, Fimat boasts 450 employees in New York, Kansas City, Houston, and Nashville, as well as Chicago.
Bearish markets and economic uncertainty have fueled Fimat's growth. The reason: When markets are volatile, financial-services customers lay off a portion of their risks in the futures markets. Fimat traded 71.8 million futures contracts in the U.S. last year, up 109% from 2000, and by the end of this year's first quarter it had already traded 25.2 million contracts. In 1997, its U.S. business contributed only 10% of Fimat's profits; now it's 45%.
Still, Fimat must be vigilant, given the cutthroat nature of the business. Some larger firms are bulking up their futures operations: Rival Refco Group Ltd. acquired three smaller brokers last year. And the intense price competition shows no sign of abating. In the past 10 years, the price of clearing a trade has fallen 50%, while the charge for executing a trade has dropped from $1.50 to just 50 cents. But Fimat is betting that it's big enough to handle the shrinking margins. The firm says it can make its money on volume, and by customizing services. Besides, Fimat is trying to guard against any downturn in the futures business by transforming itself into a full-line broker. It already gets 29% of its U.S. revenues from stock-and-bond trading. Make no mistake, however. With its No. 1 ranking and escalating profits, Fimat's future is in futures. By Pallavi Gogoi in Chicago