CSFB Barrier Options Group Bolts To Lehman Brothers

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CSFB Barrier Options Group Bolts To Lehman Brothers

Credit Suisse First Boston's barrier options trading group, a main staple of Donaldson, Lufkin & Jenrette's equity derivatives group before it was acquired by CSFB in 2000, has bolted to Lehman Brothers, according to a company official. Market professionals said the group was a "money-making machine" for DLJ, grossing more than USD200 million annually. It made up 90% of the profits brought in by DLJ's equity derivatives group, according to one former member. The market professionals added that picking up the DLJ group will move Lehman Brothers into the top five equity derivatives firms, from about eighth.

The group, which had about seven traders, marketers and structurers, as well as approximately 15 back office staff, began moving to Lehman late last year. Jerry Guthrie, managing director of barrier options marketing and the most senior member of the group joined Lehman at the beginning of the month. Guthrie made the move with Kevin Daly and Gordon Williams, both marketers. None of the three returned calls.

"This was a group that was unique to DLJ. It marketed options to small and medium-size hedge funds. It made a ton of money," said one equity derivatives trader. "This is an obvious bid by Lehman to become a bigger player," he added. David Bizer, managing director and head of structured sales for equity derivatives at Lehman in New York, is heading the group. Bizer did not return calls.

Since the merger CSFB has moved away from the barrier options market because it is not seen as part of the firm's core business. "Lehman had a real interest in the business and making it grow. CSFB began de-emphasizing the group almost immediately after the merger was complete. It was content with just letting it go to Lehman," the official said. Paul Calello, global head of equity derivatives at CSFB, who reportedly gave the final nod to the group leaving for Lehman, referred calls to Victoria Harmon, CSFB spokeswoman. Harmon confirmed that the group has left for Lehman Brothers but declined further comment.

Frank Hohmann, head of DLJ's equity derivatives group, who oversaw the barrier options operation, retired on Jan. 2. He could not be reached by press time. An official at Lehman also confirmed the move.

 

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