RBC Capitals Markets’ deal to buy a New York boutique broker-dealer would give it access to technology and expertise that it says will give it a leg up in prime brokerage.
The New York corporate and investment banking arm of Royal Bank of Canada announced Wednesday that it had agreed to buy Carlin Financial Group, which is known for its trading and execution services and proprietary algorithms.
Greg Mills, the head of global equity sales and trading for the RBC unit, said in an interview Wednesday that it would get an electronic trading platform to serve emerging hedge funds and professional traders. The deal is expected to close in the first quarter.
The company has done business with hedge funds in the past, Mr. Mills said, but “when it comes to smaller hedge funds, that is not a space we traffic in a lot.” “This acquisition builds out our small U.S. prime brokerage operation to support and align with emerging hedge fund managers,” he added.
At Carlin Financial, the deal is a return of sorts for chief executive Jeremy Frommer, who spent the early part of his career at RBC Capital Markets. Carlin’s electronic trade execution platform trades about 35 million shares daily.
Royal Bank of Canada has been an active buyer in the United States for the past six years, spending more than $6 billion.
“This is consistent with what RBC has been doing, and they will probably do more of it,” Brad Smith, an analyst at Blackmont Capital in Toronto who covers the company, said in an interview Wednesday. “Our thesis on the Canadian banks is that they will deploy a lot of capital to acquire U.S. institutions over the next several years as growth rates and prospects in domestic markets diminish. … Most Canadian banks have penetrated all of the core segments in Canada.”
Mr. Mills said that, though no deal looms “immediately on the horizon,” he believes there could be more to come for RBC Capital Markets in the United States.
“The first step is to get this firm integrated and do that properly and then we will keep our eyes open for other opportunities from there,” he said.
“We will continue to look for ways to profitably grow and expand this business. That has been an ongoing strategy here. We will look for individuals, teams, or — as in this case — firms that can help us execute our strategy. We are not in full-blown acquisition mode.”
Mr. Mills would not disclose the deal’s terms; RBC Capital Markets has been negotiating it since late May or early June, he said.
