Nomura cuts 25 jobs in US electronic equities unit

* Instinet eliminates 4 pct of staff

* Cuts follow layoffs in Europe last year

* Stock trading hurt by low volume, shrinking commissions

By Jed Horowitz

Feb 10 (Reuters) - Nomura Holdings Inc. laid off about 25 employees at its Instinet electronic brokerage unit this week, the latest sign of stress caused by low stock trading volume in the United States.

The cuts represent about 4 percent of Instinet's worldwide staff and comes amid a swathe of layoffs on Wall Street that have hit brokerages that execute stock trades for hedge funds and other active traders particularly hard.

In January Ticonderoga Securities and WJB Capital Group - equities brokers in New York that together had about 175 employees - closed their doors as costs rose and the number of customers declined. Susquehanna Financial Group, a unit of options market-maker Susquehanna International Group, laid off about 15 percent of its staff in January and Gleacher & Co, a small investment bank, shuttered its equities business in August.

Instinet, which Tokyo-based Nomura bought in early 2007 for $1.2 billion from private equity firm Silver Lake Partners, cut about 10 percent of its 170 European staffers last April. It has about 600 employees worldwide, with most based in six U.S. offices.

An Instinet spokesman declined to comment on this week's cutbacks, which were confirmed by several traders and consultants within and outside the firm.

SHRINKING ORDERS, LOWER COMMISSIONS

Agency brokers such as Instinet, which match buyers and sellers but do not risk their own capital on filling trade orders, have been depleted by U.S. stock trading volumes that fell 13 percent in 2010 and another 8 percent in 2011 as many hedge funds closed their doors and the price volatility that stimulates trading weakened.

To build a bigger share of the shrinking pie, many of the brokers have added services such as research, algorithmic trading formulas and trade-cost analytics in recent years, raising their fixed costs in a business where profit margins have long been thin.

Trading commissions paid by mutual funds and other institutional traders, known in Wall Street argot as "the buy side," have slipped from about 15 cents a share in the 1970s to less than a penny a share today over electronic systems.

"With commission spending lower, the buy-side trading function is getting leaner and more selective, and the sell side is experiencing the crunch," Instinet Managing Director Alison Crosthwait wrote in a research report last month. "Simultaneously, the cost of technology and regulatory compliance has skyrocketed."

Crosthwait, who joined Instinet in September 2010 as director of global trading research, was among those laid off this week. The cuts affected salespeople, traders and support people worldwide but the firm's senior executive ranks were not touched, the sources said.

Nomura will continue to operate Instinet autonomously from its own branded U.S. equities businesses, the people said, despite hints from the Japanese bank last year that it might integrate the offerings to achieve cost-savings.

Nomura has been aggressively selling prime brokerage services to hedge funds by offering high-speed trading equipment, trading floor access and cut-rate commission commitments but does not market access to Instinet as part of its marketing pitch, said people close to the operation and potential clients.

Nomura also has been modifying Instinet's Chi-X business, which competes with stock exchanges worldwide. The U.S. brokerage sold its London-based Chi-X Europe business and last October reduced its stake in Chi-X's Asian and Canadian operations.

Nomura is not the only firm from outside the United States to be retrenching. Royal Bank of Scotland Group, which is controlled by the U.K. government, said last month that it was closing its cash equities operations worldwide as part of 3,500 layoffs through its investment bank. (Reporting By Jed Horowitz; Editing by Richard Chang)