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March 2, 2012

Oppenheimer Returns to Chicago

By John D'Antona Jr.

After a 20-year hiatus, Oppenheimer & Co. has reopened its doors in Chicago and is launching a new trading desk the firm hopes will expand its business in the Windy City and throughout the Midwest.

Manning the desk are former Jefferies & Co. veterans Donald O'Shaughnessy and Daniel Stahlschmidt. The formal announcement of the new desk came via an advertisement in the program at the Security Traders Association of Chicago midwinter conference in January.

Cheryl Cargie, veteran head trader at Ariel Investments, which manages $5 billion in equities, said Oppenheimer's new desk is good news for Chicago. For the most part, firms have contracted their desks in recent years. "We love to see institutional brokerage come back to the city," Cargie said.

One head of sales trading in New York said a Chicago office makes sense. First, it cements a firm's traders more firmly into the community and allows them to know the clients better. "It's a different relationship and conversation when you become part of their world and are ingrained in the community," he said.

Also, a Chicago office gives the firm a Midwest presence, providing a springboard to build relationships and expand business with accounts in the region, the head trader said. The downside with this move, however, is that it can affect current coverage: If a sales trader doesn't move to the new office, that sales trader will often lose an account.

Prior to Chicago, Midwest clients were serviced by the San Francisco, New York, Boston and London offices.

Donald O'Shaughnessy

Spearheading the Midwest initiative centered in Chicago is sales trader O'Shaughnessy, who joined the firm in October as head of trading. O'Shaughnessy, a 20-plus-year veteran and Jefferies alum, might be the perfect fit for the task of starting the desk: He's covered the Midwest for two decades. He reports to Peter Feinberg.

"Opco thought it was important to have regional coverage for this important set of clients," O'Shaughnessy said.

The strategy is simple. The firm hopes to leverage off the Opco name, known for its retail branch network throughout the Midwest, to grow its institutional equity business. The desk's goal has been to re-engage clients and get the Opco name out there, O'Shaughnessy said.

"The first 100 days we did road shows," he said. "Now the next phase is to get out with our research sales team and tackle one city at a time. We want to blanket the clients and let them know they have seamless coverage."

O'Shaughnessy said his desk does not have an electronic platform to offer clients, so all trading will be high-touch. The firm will commit capital for those clients that need it.

"The brand strategy is about monetizing the firm's research product and handling with care the small- and micro-cap orders we get," he said.

Its quest is to increase its small- and micro-cap trading volume, which is between 30 to 40 percent of total volume. These lesser liquid stocks are the ones Opco can best capitalize on with its research, he said.

Joining O'Shaughnessy for the task at hand is Stahlschmidt, a two-year pro and sales trader who also hails from Jefferies. Chicago is now home to three research salespeople, one convertible research sales analyst and one support person. Though lean and mean for the moment, the desk will look to expand when trading volumes pick up from current levels.

"We absolutely have plans to bring more people on board," O'Shaughnessy said. But the reality is, with the current contraction of brokers like Pali and Ticonderoga, Opco is trying to be as conservative in its hiring as possible.

 

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