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Foreign Exchange Infrastructure: Yesterday, Today and Tomorrow

In this exclusive to Traders Magazine, John Turney, Global Head of Outsourced FX at Northern Trust, discusses the evolution of the fx infrastructure and what is to come.

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December 2, 2013

Building Up

Despite lower trading volumes, Philadelphia-based Janney Montgomery Scott is expanding its trading and research desks.

By By Gregg Wirth

Given the weak trading environment and steadily declining volume, as well as the uncertainty over the strength of the market and the economy overall, it may seem like an odd time for a financial firm to be ramping up its equities trading group.

But that is exactly what Philadelphia-based Janney Montgomery Scott LLC is doing. Further, this is no jump on the electronic trading bandwagon, but rather an old-school buildup of seats on the trading and research desks.

The 180-year-old firm has added sales traders, sector traders and research analysts and has designs on competing at the top level for trading business and client assets, said Greg Voetsch, one of the architects of Janney's expansion. Voetsch joined Janney Capital Markets as head of equities in January. And interestingly, he came not from some staid brokerage, but from KCG Holdings (formerly Knight Capital Group), where he was head of global equities.

Despite his background in Knight's bailiwick of electronic execution and high-frequency trading, Voetsch hasn't brought the Knight trading model to Janney. "We're not going to be in the electronic business or the program business," Voetsch said. "We just want to be a traditional, full-service firm with a focus in research and sales and trading of cash equities."

To that end, Janney has added to its institutional equity effort, boosting the sales/research side to 27 professionals, from 19; increasing its sales and trading desk to 27 pros, from 15; its research unit, from 25 to 30 published analysts; and, in sector trading, from two to six traders. More specifically, the firm made the following moves:

* In mid-March, Janney Capital Markets added 12 professionals-including nine from KCG-in sector trading, sales trading and research sales. The hires allowed the firm to increase its footprint in New York, Boston and Philadelphia, and open a new office in Atlanta.

* In April, the firm promoted Andrew Maddaloni to the role of director of equity research. Maddaloni, a 15-year industry veteran, held equity research sales positions at Banc of America Securities, Credit Suisse and William Blair.

* In late June, Janney hired three new senior equity research pros, covering the sectors of life sciences technology, REITs and forensic accounting.

This growth spurt has pushed up business revenue in the equity business 28 percent, year over year, even at a time when brokerage commissions have come down as much as 15 percent across Wall Street, Voetsch said. "So, we've had a good move."

David B. Weiss, a senior analyst with Aite Group, said that over the past few months he's observed the trend that mid-tier firms are picking up newly available talent shed from larger firms. "It may be opportunistic at the mid-tier level, because I don't see a lot of external reasons to be hiring traders now, given the market," Weiss said.

Janney Montgomery isn't the only firm bulking up right now. Cantor Fitzgerald has grabbed a team of exchange-traded funds traders from KCG Holdings; and BMO Capital Markets, the North American investment banking arm of BMO Financial Group (the Bank of Montreal), recently brought on a new head of U.S. equity sector trading and several new sales trading pros, picking talent from Barclays, Citigroup and Goldman Sachs. Additionally, several midsize firms cherry-picked many of the professionals cut loose by Nomura Holdings when it shuttered its entire equities trading business last October.