As banks scale back in their fixed-income businesses, Societe Generale SA is hiring for a new group that trades U.S. government-backed mortgage bonds.
France’s second-largest bank added four traders, hiring from Goldman Sachs Group Inc., BNP Paribas SA and Royal Bank of Canada for the New York team this year, after recruiting former UBS AG mortgage-securities executive Brian Cohane in October to manage the desk, said Tae Park, who was tapped to create the group after making bond investments for the firm. It will next bring on dedicated salesmen, with some already identified, he said.
With banks such as Barclays Plc, Royal Bank of Scotland Group Plc and Morgan Stanley making cuts in fixed-income trading amid new regulations and a slump in volumes, Societe Generale’s bid to become a player in the $5.4 trillion agency mortgage-bond market is being bolstered by the reductions, Park said.
“As others are retrenching, we feel that there is room for a new entrant,” Park, a managing director, said yesterday in a telephone interview. “It should be easier to grab market share. And it definitely hasn’t hurt our effort to build a desk, especially on the sales side, that most desks are scaling back, or in hiring freezes, and very conscious of their headcounts.”
The initiative is expanding the Paris-based company’s presence in the U.S. debt market, where its SG Americas Securities LLC unit was named in 2011 as one of the primary dealers required to bid at Treasury auctions and able to trade with the Federal Reserve.
The team partly reflects the bank’s desire to move away from activities such as proprietary trading with its own money amid new rules, in favor of “flow businesses that cater to our clients,” Park said. It plans to have a “full-fledged mortgage desk,” dealing in bonds known as pass-through securities and collateralized mortgage obligations, Park said.
Cohane joined Societe Generale after taking time off following his work at UBS’s investment arm Dillon Reed, the Swiss bank and predecessors between 1987 and 2007, according to regulatory records. Brian Snyder arrived last month from Goldman Sachs, where he had worked since 2000, the records show.
Other hires include Scott Mooney from BNP, Richard Liao from RBC, and Rahul Krishnan, who last worked at hedge fund Cello Capital Management LLC and previously traded for Credit Suisse Group AG through 2012, Park said. The group also includes three junior traders who already worked at the bank in different areas, he said.
Societe Generale has dedicated the resources to comply with new rules such as trade disclosures and margin requirements that “have erected something of a barrier to entry,” Park said.
While the Fed’s debt purchases are helping to lower trading volumes by suppressing volatility, that dynamic should change as the central bank finishes its buying later this year, he said. In the meantime, any activity that Societe General sees represents growth.
“We’ve begun from scratch,” Park said.