Hong Kong Shanghai Bank Sends N.Y. FX Options Manager To London

BANKS

Hong Kong Shanghai Banking Corp. (HSBC) sent Thomas Murphy, manager of foreign exchange options in New York, to London last week. The move, which follows the bank's decision to dismiss two of its currency options traders here, has sparked talk that HSBC plans to shut down its options desk in New York altogether. But officials at the bank, while acknowledging that the New York operation is merely a satellite of its London desk, say HSBC is still committed to the options market in New York.

"We are in the options business [in New York]. We are continuing the options pricing business in the direct market and the broker's market," says Antonio Bustamante, an executive vice president and head of foreign exchange trading in New York.

However, the bank, which has now reduced its options desk from five traders to two, is certainly taking a lower profile. Some sources at the bank say the decision comes as little surprise given its performance. "From a proprietary [trading] point of view, they never made any money, ever," says a trader at HSBC in London. However, bank officials deny the New York options desk lost money.

Murphy's reassignment was of particular concern among corporate and options traders on the desk since there appears to be no plans to replace him, leaving the desk without a manager. When Murphy ran the desk, he reported to Doug Brettler, HSBC's global foreign exchange manager in London. But with Murphy's departure, the two person options desk will report directly to Bustamante. The two options traders who remain on the desk will be retained, Bustamante says.

The bank decided to trim the desk because management believed it could adequately satisfy its options requirements with two traders instead of five, he says.

Interestingly, Bustamante maintains that the bank's decision to transfer Murphy reflects HSBC's commitment to the market. He says the move will supplement Murphy's experience in what they believe is a market of greater depth.

"New York is a satellite as far as options is concerned, and we think for Murphy to spend two years in London is a very good experience," says Bustamante. In London, Murphy joins a six person options desk and will be working under the tutelage of Doug Brettler.

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