Brokerage Trims British Dealing : Security Pacific Unit Pulls Out of Securities Markets

Security Pacific Hoare Govett Holdings Ltd. said today that it is joining the growing list of major financial companies reducing operations in London’s securities markets.

The broker, a unit of Los Angles-based banking giant Security Pacific Corp., said it is withdrawing from the dealing of British government bonds (gilts), Eurobonds and Japanese equities. The withdrawal from those businesses will eliminate 140 jobs.

“The economics of these businesses have become unattractive and are likely to remain so for the next three to five years,” Hoare Govett’s chief executive Peter Voss said in a statement.

The decision follows withdrawals by several other major gilts market makers, including Citicorp and Morgan Grenfell Group last year.

Other Operations Unaffected

Security Pacific said its other equities and banking operations would be unaffected.

Further pullouts from the highly competitive gilts and Eurobond markets have been widely forecast since Morgan Grenfell announced its withdrawal from all U.K. market making last month, eliminating 450 jobs.

Hoare Govett is the seventh primary dealer to cease trading in gilts since the London markets were deregulated in the 1986 Big Bang. Many brokers over-staffed in anticipation of faster growth in the London market, whose trading volume is down sharply since the October, 1987, crash. There are now 22 gilts market makers in a market that some analysts say can support only half that number.

About half of Security Pacific’s 140 job losses are in the debt trading area. They include 20 gilts traders, 18 Eurobond traders and 16 futures dealers, Voss said.

The bank will continue to raise money for its clients in the capital markets through medium-term notes, private placements and syndicated loans, Voss said.

Describing the gilts, Eurobond and Japanese equity and warrant operation, he said, “It does not make money, did not make money and cannot in 1989 through 1992.”

He declined to give a figure but said the firm’s 1988 trading losses were a fraction of $18 million in losses estimated at Morgan Grenfell.