Prebon Marshall Yamane has started brokering listed equity derivatives. Nicholas Ruddell, divisional managing director fixed income and securities in London, said the broker wants to offer these products in order to be a one-stop shop. Prebon already brokers over-the-counter transactions, which tend to be longer-dated, but many players use listed derivatives in shorter-dated transactions because they can more easily mark them to market and there is no counterparty risk. Prebon has been trying to broker trades on the London International Financial Futures and Options Exchange since the middle of last year when the bulk of equity products moved to screen trading, according to Ruddell. Screen trading made brokering listed products more attractive to Prebon because less infrastructure was required to start trading on the exchange.
The broker has established a relationship with ING Barings to clear trades through the bank's membership because regulatory complications prevent it from trading directly on the exchange. Having sorted out the clearing of trades on Liffe and finding the right team of brokers, it is ready to launch the service now.
David Heath, head of the equity derivatives desk in London, said clients want to put on volatility trades, for example, a six-month versus a two-year option. Adding the short end to the business will allow clients to do this with one phone call. The broker will start by offering index options, flex options, equity futures and single stock options on FTSE stocks, because that is where the team of brokers has experience. But Heath said it plans to do the same later in the year for the CAC 40 and DJ EuroStoxx indices.
Heath said Prebon Marshall Yamane hired a team of brokers from Hills Independent Traders because it wanted to start the service immediately rather than having to train individual brokers. Ian Backhouse, who heads the team, Simon Rayner, Jason Wells and Steve Dorking all started on Jan 2. An official at HIT declined comment.
