Lehman had a reputation as a strong equity derivatives trading house during the bull run, underMalcolm Ritchie, head of index vol trading in London. Ritchie retired in February and three other senior traders have also left in the past year. Last June, Rachid Bouzouba was hired from Credit Lyonnais, where he was global head of exotics and European head of proprietary trading, to head structured products and correlation trading, which included some prop business
(DW, 6/2/03). Bouzouba declined comment.
Lehman Brothers is not alone in looking to take on more risk via prop trading. HSBC (DW, 5/2), Swiss Re (DW, 5/2), Credit Suisse First Boston (DW, 3/7) and Citigroup
(DW, 2/22) have all made plans in the last couple of months to bolster revenues through prop trading. Some firms, including Deutsche Bank, are setting up internal hedge funds to help retain profitable traders, but Lehman is understood to have previously experimented with an internal hedge fund and decided against it.
The move by Lehman would be in keeping with the increased appetite for risk among the top derivatives houses, noted officials. "When the markets turned, a lot of prop desks reinvented themselves as flow shops," said one trader. "The tide seems to be turning again," he added. "People are looking for more risk now," noted one rival, who explained several other houses have been looking to beef up their prop desks over the past 12-18 months.
