Vertical Crossings.com, the last major independent Internet-based securitized bond trading firm, is shutting its operations after its co-founder Patrick Downes and three senior colleagues resigned to join futures powerhouse Fimat USA to launch a structured products trading group. Harry Kaplan, co-founder at VCross, could not be reached for comment. Kaplan recently sent a letter to VCross stockholders, a copy of which was obtained by DW sister publication BondWeek, elaborating on the "severe financial difficulties" of VCross that prevented it from Òcontinuing as a going concern." The letter said Kaplan will oversee the wind-down as the sole director. A former VCross insider says the wind-down largely involves finding a buyer for the firm's Internet auction technology.
From his new office at Fimat, Downes, who will be running the firm's trading group, says, "Fimat offers us the opportunity to put capital behind our secondary market trading business, as well as leveraging off the large futures and derivatives customer trading base." He says the firm will start off trading secondary asset- and mortgage-backed securities, including CMBS, and hopes to get approval from the firm to do origination in these sectors. Downes declined to comment on his reasons for leaving VCross or its status.
Joining Downes at Fimat is Angus Duncan, Chip Montgomery and Bill O'Connor. Downes says Duncan will be responsible for trading, Montgomery will run sales and O'Connor will be in charge of new business development. Downes says he is confident that he will grow this group "sharply in the coming months," but declined to offer a specific hiring target.
A person familiar with the situation says that a good month for Vertical Crossings in terms of gross revenue was USD350-500,000, which had dropped sharply after Doug Conrod and Ken Clisham left for U.S. Bancorp Piper Jaffray.
