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March 1, 2011

SocGen to Beef Up U.S. Equities and Derivatives Trading

By James Ramage

Societe Generale plans to grow its U.S. equities business with a strategy that focuses on its strengths--program trading and derivatives.

Tim Gee

The mid-tier firm is the U.S. brokerage arm of the giant French bank of the same name. SocGen wants to leverage its expertise in risk and derivatives into client-facing businesses, such as algorithms and other electronic trading products. In addition, a full-blown fundamental research product is on the way.

Leading the charge is Timothy Gee, who was hired in September to run equities execution services in the Americas--primarily the cash business--in a newly created position. Gee is responsible for growing the business and plans to do that by bringing in more clients and by offering them better trading products, including a crossing network.

Brokerage firms of all stripes are adding products and services to raise their profile--and, they hope, revenues--among institutional clients. And last year's decreased commission spend has heightened competition on Wall Street. Consequently, firms are facing the choice of either delivering more to clients or becoming less important to them.

SocGen will build on its strengths, Gee said. Those include its U.S. risk business; its U.S. derivatives business; its large U.S. prop desk, from which to leverage electronic trading technology; and its international cash businesses in Europe and Asia, comprising single-stock, programs and derivatives. It also plans to hire analysts, traders and sales traders for both low-touch and high-touch desks.

"We recognize that we are viewed in the Americas as somewhat of a specialty firm with a focus on derivatives and European and Asian cash," Gee said. "But we know we are in a position to offer our clients more. We have a story to tell."

For starters, its beefed-up cash and electronic trading business is slated to be in place during the first half of the year. That should broaden SocGen's revenues and client base, Gee added. From there, it will be easier for the firm to walk into an institution to sell its more complex products, such as structured derivatives and tailored solutions.

Will expanding business lines on the back of SocGen's expertise in understanding and managing risk work? It can if the risk business is part of a larger set of product offerings, said a director of program trading at a large bank and a veteran in the portfolio trading business.

"You can't just be a risk player," he said. "If you're in the risk business, it's very difficult to look at it as a stand-alone business. To consistently make money in it is very difficult."

In the U.S. bank hierarchy, SocGen fits just below the top tier, Gee said. And below the bulge bracket level--which is primarily driven by the model of banking, prime brokerage or research--finding a niche becomes paramount.

 

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