HSBC, often considered to punch below its considerable weight in the financial markets, is preparing a major push into foreign exchange that it expects will see its structured fx business double to USD50 billion (notional) in the next 12 months. Mike Powell, treasurer and head of global markets-Europe, said it will roll out structured products that have worked in Asia and broaden its global product range.
HSBC has hired Andrew Baxter, global head of packaged foreign exchange fund products and quantitative fx program trading at Deutsche Bank in London, to be a director in fx derivatives and head of private client structured products and program trading globally, as part of the effort. Baxter is on gardening leave and will likely start early next year.
Some 80% of the firm's business comes from Asia, but to hit self-set targets it plans to increase the volume of structured products it sells in Europe and the U.S. six-fold within a year and set up a foreign exchange hedge fund.
The firm started reviewing the foreign exchange business after Powell andStuart Gulliver, chief executive of corporate, investment banking and markets, moved to London from Asia earlier this year. Powell and Gulliver have both wanted to beef up HSBC's fx business since the products took off in Asia and are now in a position to do it, noted Powell. The two are credited with growing a successful business in Asia and a rival foreign exchange head predicted that they would be able to replicate that in London. This is largely because of the firm's strong distribution capabilities through its private and retail bank.
Powell said it plans to hire a further four or five structurers to work with Baxter within the next six months. At the same time it will also hire a further seven or eight as either flow traders or structurers for institutional clients.
The first step will be to issue simple structures, such as deposit accounts, and then Baxter will work on structuring more complex instruments. Deposit accounts give a yield kick in exchange for selling an embedded option. This means the investor may receive their money back in a different currency.
Baxter will also be responsible for developing a foreign exchange hedge fund. Powell said Baxter will likely take six months to develop and test the hedge fund. It will roll out the fund to private clients globally and retail clients, where regulation permits.
Baxter will report to Matt Desselberger, global head of fx options in London. Baxter reported to Neehal Shah, global head of fx options at Deutsche Bank in New York. Shah declined to comment on whether the firm would be recruiting externally or internally to replace Baxter.