Credit Suisse First Boston is pumping up its proprietary trading operation and has hired Alexander Soloviev, a convertible arbitrage trader at Lehman Brothers in New York. Michael Clark, former global head of equities in New York, took over as head of proprietary trading toward the end of last year and has been building the operation since then, according to Victoria Harmon, spokeswoman in New York. Clark did not return calls and Soloviev declined comment.
CSFB is one of several dealers expanding its proprietary trading activities to enhance revenues and stem the outflow of traders and senior staff to hedge funds. David Hendler, senior analyst at CreditSights in New York, noted that while CSFB was an active prop player in the 1990s this changed when John Mack, ceo, took over in 2001 and took a less aggressive stance. The firm has struggled, however, to maintain revenues in traditional investment banking because of the downturn in lucrative areas such as mergers and acquisitions, explained Hendler.
The recent uptake in traditional investment banking as well as last year's fixed income rally may have given CSFB the confidence to take more proprietary risk, Hendler said. But he thinks it is a riskier strategy for CSFB than some prop houses, such as Morgan Stanley, because other prop shops have better maintained their traditional revenues and therefore would be better able to cushion any prop losses.
