Jan 30, 2012
Citi confirms date for prop desk closure
Citi has confirmed that its
Principal Strategies proprietary equity trading division will close in a week
as a result of the impending introduction of the Volcker rule.
Derek Bandeen, global head of
equities, told Citi employees in a memo obtained by theTRADEnews.com that 6
February would be the last day of operation for the Principal Strategies group,
adding that the unit’s staff had been winding down positions over the last few
months.
In its Q3 2011 earnings call,
Citi had announced that the closure of the group – which is the firm’s only principal
trading business – was two-thirds complete.
Sources suggest that Sutesh
Sharma, who led the proprietary trading unit, will be setting up a hedge fund
following his departure from Citi.
Citi joins the likes of J.P.Morgan, Goldman Sachs and Morgan Stanley in closing or divesting proprietary
businesses in light of the Volcker rule.
Introduced as part of the
Dodd-Frank Wall Street Reform and Consumer Protection Act, the Volcker rule
will prohibit the ability of US deposit-taking institutions to engage in
proprietary trading and limit their investment in hedge funds and other private
equity vehicles.
A draft Volcker
rule proposed by the Federal
Deposit Insurance Corporation, Federal Reserve, Office of the Comptroller of
the Currency and the Securities and Exchange Commission is currently out for
industry comment until 13 February. Derivatives watchdog the Commodity Futures
Trading Commission proposed its version of Volcker on 12 January.
Each US
authority must provide a version of the Volcker rule that will be enforced for
those firms it regulates. Currently, Dodd-Frank has set a 21 July effective day
for the Volcker rule.
Anish Puaar
+44 (0)20 7397 3817
anish.puaar@thetrade.ltd.uk