Piper Jaffray is getting out of the collateralized mortgage obligation structuring business and plans to realign its focus elsewhere within structured finance. Michael Effron, managing director and head of fixed-income trading in Minneapolis, said the firm is eliminating a handful of CMO-related jobs in New York as a result of the shift. "The dynamics are such that it is dominated by the large Wall Street dealers," he said of the new issue CMO market. Effron noted firms associated with a mortgage lender such as Countrywide Securities or those with bank balance sheets such as UBS have an inherent advantage over other players. "We felt it was something where we would not be able to offer a differentiating product," he said of the reason behind the change. He stressed Piper Jaffray will still run a three-strong CMO trading book.
On the flip side, the firm sees an opportunity in analytical and research-intensive parts of structured finance, such as aircraft finance, manufactured housing and collateralized debt obligations. Effron declined to say whether the firm is planning to ramp up its CDO trading capabilities, as one market official speculated, except to note it believes it can carve a niche in structured products "and CDOs are at the forefront of that." As a result, the firm is looking to add a structured finance trader in New York.