NY Fed names Nomura as U.S. primary dealer

NEW YORK – The New York Federal Reserve on Monday named Japan's Nomura Securities International as a U.S. primary dealer of Treasury securities, effective immediately.

The addition of Nomura, a unit of Nomura Holdings, increases the number of firms that deal directly with the U.S. Federal Reserve to 18. Primary dealers are required to bid at Treasury auctions, and the Fed regularly consults with them as it gathers market intelligence.

Nomura's global presence has grown significantly since its acquisition of Lehman Brothers' Asian and European operations last year, which took its worldwide work force from 18,000 to 26,000.

Nomura has also been building its equity sales and trading teams in United States in a bid to expand overseas business, hiring about 250 people.

After the successful integration of Lehman Brothers in Europe and Asia, the build-out of the U.S. remains the final piece of the puzzle for Nomura, said Nomura Securities International's president and chief executive officer, Shigesuke Kashiwagi.

Becoming a primary dealer represents the beginning of our build-out in fixed income. We believe there are great opportunities for our firm in fixed income and will continue to hire professionals to broaden our product offering to better serve our clients on a global basis, he said.

Nomura had dropped its primary dealership in November 2007, saying it was focusing on its core operations in the U.S.

But the landscape has changed since then. The number of primary dealers fell to a record low in the network's 49-year history as the financial crisis took down a number of storied investment firms, making the field less forbiddingly competitive.

And the prospect of money to be made on a looming wave of huge government debt issuance to fund economic rescue programs has made primary dealer status an attractive proposition to a number firms.

In a February report, the Treasury Borrowing Advisory Committee said a larger primary dealer community would help to reduce the possibility of an undersubscribed auction.

The addition comes after approval of RBC Capital Markets earlier this month and mid-sized U.S. investment bank Jefferies & Co in June.

Other institutions are likely to be added to the exclusive network. Futures and options broker MF Global Ltd confirmed earlier this year that it was in talks with the Fed about becoming a primary dealer, but has given no updates since then.

Reuters has also reported that Toronto Dominion Bank is also in talks to become a primary dealer.

Potential dealers must qualify in terms of reputation, capacity, and adequacy of staff and facilities.

The list of dealers was decimated in the global financial crisis' dramatic reshaping of Wall Street.

Countrywide, which is now owned by Bank of America Corp; Lehman Brothers; Merrill Lynch, also now owned by Bank of America; and Bear Stearns all dropped off the dealer list during the crisis.

The number of dealers had peaked at 46 in the late 1980s.

(Editing by Leslie Adler)