London-based proprietary trading firm Mako has announced it will close its cash equities trading division after years of underperformance. The move marks a significant strategic shift for Mako as it refocuses on its core strength – derivatives trading. According to Financial News London (F.N. London), the decision to exit equities was not taken lightly. It follows a prolonged period of losses, with the division posting negative results for three consecutive years, putting pressure on Mako’s overall profitability.
Mounting losses and FCA fine
The equities retreat comes in the wake of a £1.7 million fine imposed by the UK Financial Conduct Authority (FCA) over controversial “cum-ex” transactions. These complex dividend arbitrage trades have sparked investigations across Europe and led to fines and reputational damage for multiple financial institutions.
For Mako, the penalty not only dented its public image but also highlighted the rising risks and costs associated with maintaining a cash equities business under tightening regulatory scrutiny. Analysts note that in today’s environment, the return on capital from equities trading often fails to justify the operational and compliance burdens.
Restructuring staff and refocusing on derivatives
As part of its restructuring, staff from the equities division will be reassigned to Mako’s derivatives unit. The company emphasized that this transition is designed to retain experienced talent and redeploy their skills in a more dynamic and profitable segment of the business.
Derivatives have long been Mako’s flagship offering. Since the early 2000s, the firm has built a reputation as a leading market maker in options and futures, with derivatives consistently generating the bulk of its revenue and profits.
A changing trading landscape
Mako’s pivot occurs amid a broader shake-up in the proprietary trading industry. Many firms are re-evaluating their business lines as compliance costs rise, competition intensifies, and investor behavior evolves. In contrast, derivatives markets continue to grow, buoyed by institutional demand for hedging and strategic trading opportunities.
Industry observers see Mako’s move as part of a larger “shrink to strengthen” trend, where firms exit unprofitable areas to concentrate resources on core competencies. For Mako, derivatives are not just familiar territory but also a sector where it holds a competitive edge in technology and execution.
Maintaining a strong European presence
Despite withdrawing from cash equities, Mako says it will remain an active participant in Europe’s and the U.S.’s major derivatives markets. The firm is expanding its product range to include interest rate options, equity index futures, and other complex derivatives instruments.
With its advanced trading technology and a team of experienced derivatives traders, Mako is well-positioned to scale up operations. Consolidating staff and capital from the equities division could enhance risk management, increase trading volumes, and improve profitability.
Implications for the prop trading sector
Mako’s decision underscores that even established proprietary trading houses are not immune to restructuring pressures. It also sends a signal to newer or retail-focused prop firms that product diversification alone does not guarantee profits. Success hinges on focusing on areas of true competitive advantage.
Moreover, the shift reflects a global trend where professional prop firms increasingly prioritize derivatives and highly liquid markets, where technology, speed, and sophisticated strategies are key to success.
The future of Mako
With this strategic shift, Mako aims to solidify its position as one of Europe’s leading derivatives trading firms. The company has stated it will continue investing in technology, trading infrastructure, and top-tier talent to expand its market share.
If successful, Mako’s exit from cash equities could prove to be a pivotal moment – a “rebirth” that allows the firm to strengthen its competitive edge in a rapidly evolving global financial landscape.
