Just a couple of years after launching operations, GCM Prime ceased trading after recording losses of over £3 million ($3.87 million). That’s according to a new report released by the firm on Monday via the UK’s Companies House service.
The prime of prime brokerage firm’s problems can be traced back to the first few months of 2017 when Gallant Capital Markets, a retail broker known as GCMFX, filed for bankruptcy.
Despite its similar-sounding name, GCM Prime had no connection to GCMFX. Unfortunately, rumors spread across the industry that there was indeed a connection between the two firms and that GCM Prime would be negatively impacted by the broker’s bankruptcy filing.
GCM Prime Stops Trading
In August of 2017, GCM Prime released a statement noting that it would be ceasing trading within a month. Monday’s report indicates that trading with clients was wrapped up by the end of September last year.
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“Regrettably,” the firm said at the time, “some recent industry events and the corresponding misinformation disseminated by a number of market participants has negatively impacted our firm’s relationship with a number of its key institutional clients as well as our liquidity providers.”
The impact of the rumors can be seen in the report released today. In 2016, in its first nine months of operations, GCM Prime reported losses of £269,315 ($347,719). Last year, in the wake of the turmoil surrounding GCMFX’s bankruptcy, the firm’s losses increased more than ten-fold to £3.43 million ($4.43 million).
These losses were not the result of a decrease in revenue but a huge uptick in expenses. Revenue in 2017 grew, by just under £13,000 ($16,784) to £2.10 million ($2.71 million). In contrast, expenses grew from £269,315 ($347,719) to $3.43 million – a nearly 13-fold increase.
What will happen to GCM Prime now remains to be seen. According to today’s report, the firm is in discussions with investors who may take control of the firm “in the medium term.”