Bank of America is planning to start trading equity derivatives from its London office early next year. The U.S. house has hired Jerome Drean from Banque AIG, a subsidiary of American International Group, to head up an equity flow derivatives sales desk. Drean is working in New York with Ben Wilkinson, global head of equity-linked trading, who also joined Bank of America from AIG (DW, 5/20/02). Drean is expected to return to London at the end of the month and will likely hire two further sales-traders to work with him. Liz Wood, spokeswoman at Bank of America in London, did not comment by press time.
In the new group, the U.S. house will likely only execute transactions on behalf of clients, which one insider said could give the firm a competitive advantage with clients who are wary of banks taking proprietary positions on the back of flow business.
Rivals said it may be difficult for Bank of America to attract clients because it closed its European cash equity business around two years ago. But Barclays Capital has shown this does not always hold true because it has built a successful derivatives business without a cash operation.
Another equity derivatives trader said BofA will not be able to rely on its New York model of innovation in trading strategies because trading in exotic instruments is not as important in Europe. The market is driven by the structured products industry. "If Bank of America doesn't have its finger on the pulse of the structured market, it could come unstuck," he predicted.