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March 9, 2009

Ex-Citi Exec Heads New Firm

By Nina Mehta

Robert Moore, a former head of U.S. equities trading at Citigroup Global Markets, has been tapped to run the trading desk of Concept Capital Markets, a soon-to-be-launched agency brokerage that will be part-owned by Sanders Morris Harris Group. SMHG, a Houston-based regional investment bank, said in January it would spin off Concept Capital, its prime brokerage division, in the second quarter.

Concept plans to expand its existing agency business by building out a research offering and hiring 15 or 16 high-touch traders to cater to large institutions. The firm currently focuses on small and midsize hedge funds, with about 20 percent of its business coming from traditional asset managers. The company provides prime brokerage and hedge fund services, including agency execution, connectivity, risk analysis and client reports.

Now, Concept is counting on buyside firms' growing skepticism about the ability of bulge bracket firms to service them effectively to grow its business. Moore, managing director and head of trading at Concept, noted that the reign of bulge bracket firms is shakier than it's ever been. "Demand within the bulges to use their balance sheet and to increase the amount of proprietary trading they were doing has put them on the same side of the fence as accounts, so they're competing with accounts that they're supposed to be servicing," he said. Moore, who joined the firm in December, said institutions aren't happy about the conflicts.

Concept expects to reel in more business as the buyside shifts some of its flow away from the bigger firms and toward smaller houses. "The reason clients were doing business with large firms for the last several years is that they used an enormous amount of capital, and [brokers] had an incredible calendar of new deals and secondaries," Moore said. "Those two important pieces of the puzzle have been taken out. There's very little capital being used on the Street, and there's virtually no calendar."

Moore left Citigroup in 2004, after a two-decade career that commenced at Smith Barney, because big banks, in his view, were increasingly treading the same turf as their clients. During those years, Moore ran listed and Nasdaq trading, as well as e-commerce businesses, and was head of trading in Citigroup Global Markets' U.S. equities division at the end of his tenure there. After that, he worked in private equity for several years.

Michael S. Rosen, a managing director at Concept, said the firm will be renamed Concept Capital Markets once it's an independent company. The firm currently uses SMHG's broker-dealer license but intends to acquire an existing license. SMHG, which will have a 50 percent stake in Concept Capital Markets, is also spinning out its investment banking division to Siwanoy Capital, a new firm formed by executives at several SMHG units and Pan Asia China Commerce Corp. SMHG will own 20 percent of that firm.

By the end of the year, Rosen predicted, Concept will triple its sales and trading effort to two dozen traders. But, he said, new buyside business will be won first and foremost through a strong research offering. Concept last month was in talks with several independent research firms about the possibility of acquiring one of them, Rosen said.

Moore agreed that a strong research platform is key to building Concept's trading desk. "When funds are down 30, 40 or 50 percent, they want idea generation," the trading exec said. "It starts there, and then is about trading and sales. If clients are not using bulge bracket research, they'll look elsewhere to get new ideas."

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