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Derivatives

Dresdner Equity Pros Reportedly Consider Jumping Ship

Several of Dresdner Kleinwort Wasserstein's 20-strong Tokyo equity derivatives team are reportedly considering abandoning the firm after DrKW recently announced it will close its cash equity business in Japan and cut 1,500 jobs, mostly in Asia. "There's no good news built into this at all," said a market official in Hong Kong. However, rival banks are unlikely to be falling over themselves to cherry pick DrKW's Asian equity derivatives team because of tough market conditions and hiring freezes. A spokesman at DrKW said the bank remains committed to equity derivatives. He declined further comment

"People aren't happy," said a market official. He continued that Dresdner had one of the best equity teams in Japan in previous years before the failure of a merger attempt with Deutsche Bank decimated the cash side as several researchers and traders left for other banks. In the aftermath, revenues were said to be down significantly, prompting management to consider closing the operation.

An equity derivatives official at DrKW said other strategic decisions, such as further cuts, would likely be made in the coming weeks. He added it was only natural to feel some apprehension. "I'm waiting for all of the facts before I make a decision [on leaving]," he said, adding that although trading volumes have dropped, the firm's equity derivatives operation is having a relatively successful year, compared to competitors. He continued that equity derivatives could continue without the aid of a cash equities desk, "just look at KBC Financial Products," he added. An official at KBC, which runs an equity derivatives operation without a cash presence, declined all comment.

A rival banker thinks the restructuring makes sense, even if the firm loses professionals as a result. He explained cash equity operations are expensive to run, produce low margins and it is hard for banks to differentiate themselves. He added cash equity research is "a dime a dozen."

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