(In third paragraph corrects team name to "Equity Strategic
Risk Group" from "Equity Principal Strategies Group")
By Nishant Kumar
HONG KONG, March 3 Nomura Holdings Inc
has hired former Barclays trader Pradeep Swamy to start a new
proprietary trading team in Hong Kong.
The move comes as Wall Street banks retreat from the
lucrative proprietary trading business after regulatory changes
put in place after 2008 curbed banks from making bets with their
Swamy, a former Hong Kong-based managing director in the
equities division of Barclays Plc, joined Nomura last
week to lead the new Equity Strategic Risk Group.
Swamy, who earlier also worked for Credit Suisse and hedge
fund Och-Ziff Management in London, started at Nomura on Monday.
The group will run equity long/short, convertibles and
volatility strategies to make money for the bank.
Fred Lam, Swamy's former colleague at money manager Cheyne
Capital, has also joined the team.
A Nomura spokesman confirmed the two appointments.
The move marks a new trend that is making Asian financial
institutions from China and Korea to Japan grabbing talent freed
from Western banks and strengthening their trading activities.
Proprietary traders made hundreds of millions of dollars in
revenues for Wall Street banks through bets similar to those by
hedge funds, but have seen their fortunes fade in recent years.
Most of these desks have shut down as the Volcker Rule
framed in the United States after 2008 mandated regulation that
curbs risky proprietary trading by financial institutions.
The rule also applies to foreign banks with branches in the
United States, but provides an overseas exemption. That allows
banks like Nomura to use a highly profitable tool to add
alternate sources of revenue, a trend likely to catch up in
"For the non-U.S. banks, the big exemption that they have is
that they have the ability to still operate with less
restrictions solely from outside of the United States a prop
trading desk," said Paget Dare Bryan, a foreign legal consultant
at Clifford Chance in Hong Kong.
However, such trading should not "generally involve parties
and transactions with the residents of the United States" and no
decision making, execution or financing should take place in the
United States, Bryan added.
Proprietary traders draw capital from banks when they see
investment opportunities. This flexibility sometimes gives them
an edge over hedge funds which must remain invested.
(Reporting by Nishant Kumar; Editing by Michael Flaherty, Matt
Driskill and David Holmes)