Bank of China International, the investment banking arm of mainland banking giant Bank of China, is setting up an equity derivatives group in Hong Kong and expects to start trading over-the-counter and listed derivatives in two months. "This is part of an initiative to become a full-service investment bank," said Warren Kwan, head of equity derivatives in Hong Kong. Kwan joined last month from Deutsche Bank, where he was a senior equity derivatives trader in Hong Kong. The bank will hire seven traders and marketers to add to its five member derivatives team, which started in the last couple of weeks to establish the group. At the moment Bank of China offers interest-rate and foreign exchange derivatives.
Initially the bank will focus on offering products such as equity-linked notes, warrants and OTC options, but it will expand its focus to include index-arbitrage products within six months, according to Kwan.
Bank of China will target the Hong Kong and China markets, especially the mainland, where it has strong distribution capabilities. "We hope to participate in this market and offer a number of financial products to complement our underwriting business," added Kwan. He declined to elaborate on the products.
A rival equity derivatives marketer in Hong Kong, said "as a competitor, I'm not too concerned about their over-the-counter capabilities, but they do have an advantage as a warrant issuer with their large retail base in Hong Kong." Another added, "if they get the right people, they could be a formidable force." He noted this is likely as there are several equity pros looking for work at the moment because of cut backs or because they are dissatisfied at their current positions. He declined to give specific details.
