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SIA, BMA Quiet About Merger; Some Open Questions Remain
June 19, 2006
Three years after a failed attempt at a merger, the Securities Industry Association (SIA) and Bond Market Association (BMA) are giving it another shot. This time, their constituents in the equity and fixed-income markets are confident they will pull it off.
The two bodies issued a joint statement on April 5 endorsing a merger, but there is no definitive deal, so they are not publicly discussing specifics before their boards' scheduled June 28 votes. The union must then be approved by a vote of the full memberships, which could take place by the end of July.
Plenty of details still need to be worked out, including what the new organization will call itself, how many staffers will be retained and where it will be based. The BMA and SIA have offices in New York and Washington, D.C.; the BMA also has a London office. Still, a dozen broker-dealer and bank members of the trade groups contacted by Securities Industry News agreed that the likelihood of a marriage is far greater than it was in 2003. At that time, neither the SIA nor BMA gave any reason for their failure, but sources close to both say that control over the combined organization became a sticking point. The SIA has 31 board seats, the BMA 37.
Sources say that executives active in the SIA--notably people at Goldman Sachs & Co. including its CEO and Treasury secretary-designate Henry Paulson--want a merger to better reflect the industry's corporate structures and to boost its lobbying clout. Multi-asset-class trading and the need for enterprisewide views and calculations of risk have forced a blurring of traditional lines separating equities, bonds and derivatives trading and operations. "The desire for a unified front will outweigh any differences the firms have," says an industry consultant.
The SIA has about 600 members and the BMA has a total of 717 (140 full members, 65 associate and 512 affiliate). About 75 companies that belong to both organizations would stand to benefit from lower membership fees. Edward Frost, Goldman Sachs' chief administration officer, is chairman of the BMA, and James Gorman, head of global group wealth management at Morgan Stanley, chairs the SIA.
Officially, the SIA and BMA declined to comment for this article beyond reiterating their April board-level endorsements of the "concept of merging," adding that "leaders from both organizations" have been working for several months to design a combined organization that could represent the member companies.
Speculation about a merger had been circulating for months along with talk that retiring Rep. Michael Oxley, R-Ohio, chairman of the House Financial Services Committee and co-author of the Sarbanes-Oxley Act, may be in line to head the new organization. A spokesperson for Oxley says he is "currently not participating in any discussions regarding post-congressional employment."
Historical Partnership
The SIA and BMA have been under the same roof before. The BMA was an offshoot of the Investment Bankers Association of America, which in 1972 merged with the Association of Stock Exchange Firms to form the SIA. The BMA was spun off as the Public Securities Association in 1976 and changed its name to the current one in 1996. With the 1999 repeal of the Glass-Steagall Act, the need to separate underwriting and brokerage businesses was eliminated, making a merger of the SIA and BMA more practical.
