Peter Schmidt-Fellner has resigned from J.P. Morgan Securities "to take a break and spend more time with his family," according to an internal memo obtained by BondWeek. He was co-head of high-yield origination and co-head of sales and trading for both investment-grade and high-yield. The memo also announces that the firm is combining its high-yield cash and credit default swap (CDS) trading desks and that it has made other managerial changes resulting from Schmidt-Fellner's resignation. J.P. Morgan is believed to be the first bulge-bracket firm to combine high-yield cash and CDS trading businesses in the U.S.
J.P. Morgan officials say the high-yield cash and CDS trading businesses are increasingly interdependent and the decision to combine them is aimed at getting them to work more closely together. Jonathan Gray, now sole head of credit sales and trading, declined comment. He had been co-head with Schmidt-Fellner.
Officials at rival firms and the buy-side offered different hypotheses for J.P. Morgan's decision to combine the two businesses. One high-yield trading head speculates that the move may be an attempt by J.P. Morgan to increase the use of high-yield CDS, for which there is only a small market at present in the U.S. A portfolio manager believes that the move relates to a J.P. Morgan product called HYDI, which is a basket of credit default swaps that may require coordination between the bond and derivatives desks. A sales head at another rival thinks the move may just be related to internal firm politics and have no real business reason.
Schmidt-Fellner, a 22-year veteran of Wall Street, was one of the founders of the high-yield business at Chemical Bank. He continued to manage the unit through subsequent mergers with Chase Manhattan and J.P. Morgan. J.P. Morgan combined its high-yield and investment-grade desks in January, a move that was interpreted by some people close to the situation as one that minimized Schmidt-Fellner's role at the firm. Schmidt-Fellner could not be reached.
Peter Wilson and Angie Long become co-heads of the high-yield cash and CDS trading businesses, according to the announcement. Wilson is a cash trader and Long trades CDS, and while they are believed to have managed those desks individually before becoming co-heads of the merged unit, that could not be confirmed.
Other moves include the appointment of Geoff Sherry, a high-yield and crossover trader, to run the high-grade desk, and Scott Dolph to oversee a distressed debt business that will be "newly focused," in the words of the memo.