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Citi Builds Fixed Income Arb Desk

Citigroup Global Markets has transferred a managing director to a new proprietary trading role, apparently as part of an effort to set up an arbitrage business reminiscent of the unit disbanded by Salomon Brothers in the late 1990s.

Citigroup Global Markets has transferred a managing director to a new proprietary trading role, apparently as part of an effort to set up an arbitrage business reminiscent of the unit disbanded by Salomon Brothers in the late 1990s. Shiv Chatterjee, managing director and head of mortgage-backed trading, has left the fixed income department and is taking on a new position in the firm's treasury group, according to Derivatives Week, a BondWeek sister publication. He declined to comment.

The firm is also looking to build up relative value arbitrage prop trading, according to official familiar with its plans. Tom Maheras, global head of fixed income in New York, who is understood to be leading the effort, did not return calls.

Chatterjee is within the firm's treasury group but it could not be determined whether other traders would work out of this department or be based in fixed income.

Salomon was the undisputed leader in proprietary trading during the 1980s and much of the 1990s and its fixed-income arbitrage group made huge profits, explains one pro. The operation, which had produced many of the best known quantitative traders in the industry including Long-Term Capital Management founder John Meriwether, was wound down in 1998. At its peak the unit boasted a balance sheet of around $100 billion, according to Citigroup statements.

CEO Sandy Weill closed the prop unit when his group merged with Salomon because of his intense dislike of earnings volatility, explains one former official. Charles Prince, who replaced Weill as ceo, has been looking to revive the prop trading effort, according to published reports.

Competitors say they are not surprised by the firm's change of heart, noting the move is necessary to keep up with more aggressive prop traders such as Goldman Sachs. "With tight credit spreads and low interest-rates, everybody is bumping up their prop desks to get better participation," notes one outsider.

 

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