Standard & Poor's took negative ratings actions on three midsize brokerage firms on Friday, saying the European financial crisis could hurt their profitability for a prolonged period of time. S&P said it is monitoring the credit rating of GFI Group Inc, a cash and derivatives trading firm, for a possible downgrade. S&P also lowered the outlook for its ratings of investment bank Jefferies Group Inc and bond-trading firm Cantor Fitzgerald LP to "negative" from "stable."
GFI's current rating of "BBB-" is one notch above junk. S&P rates Jefferies and Cantor one notch above that, at "BBB." "We believe brokers with institutional sales and trading and investment banking businesses will be challenged by ongoing weakness in the financial markets - largely because of concerns about Europe's financial crisis and the impact that it is having on the European banking systems and economies," S&P, a division of McGraw-Hill Cos, said in a statement.
The European sovereign debt crisis has rattled capital markets for months, leading to weak profits, layoffs and bonus cuts across Wall Street. S&P also has a negative outlook on Wall Street giants Goldman Sachs Group Inc and Morgan Stanley, but the crisis has taken an even bigger toll on smaller trading firms, which do not have the same level of financial strength to weather the storm. Ticonderoga Securities, a small equities trading firm, closed its doors earlier in the week. That closure followed the demise of WJB Capital Group earlier in January.
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