(Bloomberg) — Paul Hamill has left UBS AG to joinCitadelLLC as the global head of fixed income, currencies and commodities for execution services as the hedge fund expands its role in fixed-income trading.
Hamill, 39, who served as the global head of currencies, rates and credit execution services at the Swiss investment bank, will start early next year atCitadelSecurities LLC, Jamil Nazarali, head ofCitadelExecution Services, said in an interview. The $24 billion hedge fund founded by Ken Griffin filed to become a swaps broker in March and hired Yanfeng Chen from Credit Suisse Group AG to help in its quest to become a market maker in interest-rate swap trading.
Citadelwas one of the most outspoken defenders of the Dodd-Frank Act and the reforms it made to the $691 trillion over-the-counter derivatives market, including the mandate that most swap trades be backed by a clearinghouse and traded electronically. The fund is now positioning itself to compete with JPMorgan Chase & Co. and other banks that reap tens of billions of dollars in annual revenue from derivatives.
Citigroup Inc. analysts in October estimated that about 35 percent of global bank revenues from FICC are attributed to derivatives such as swaps. That equates to about $13.6 billion from just the five largest Wall Street banks in the first nine months of the year, when total FICC revenue for the firms was $38.8 billion.
Market Making
Hamill didnt respond to a message left on his mobile phone. Karina Byrne, a UBS spokeswoman, confirmed Hamill left the bank. We wish him well, she said in an e-mail. We will continue to drive forward with our long term business plan with support from bank executives in the currencies, rates and credit businesses, she said.
With Dodd-Frank mandating clearing and electronic trading of these products it provided us a unique opportunity to make markets, Nazarali said.Citadelrecently began sending prices to swap execution facilities owned by Tradeweb Markets LLC, ICAP Plc, Cie. Financiere Tradition SA and Bloomberg LP, parent company of Bloomberg News, Nazarali said. It is already in the top 10 providers of client liquidity on Bloomberg in U.S. dollar rate swaps, he said.
OTC Derivatives
Used by corporate borrowers to convert floating-rate loans into fixed and by institutional investors to bet on economic growth and central bank policies, interest-rate swaps make up the bulk of the OTC derivatives market. They are the largest segment of OTC swaps, with $421 trillion of notional value of such contracts outstanding as of June, according to the Bank for International Settlements.
While at UBS, Hamill helped the bank shift toward electronic execution of swap trades that historically were done with clients over the phone. He worked on the Price Improvement Network in credit-default swaps and the Neo platform that aggregated UBS customer trades that were then sent to swap- execution facilities, the new trading system for swaps set up under Dodd-Frank.
Citadelhas been laying the groundwork to enter the swaps business ever since Dodd-Frank was enacted in July 2010. Starting that December, Randall Costa, then-operating chief of the technology group, and Adam Cooper, the firms top legal officer, held more than 30 face-to-face and telephone meetings with the SEC and the CFTC, according to the agency websites.
The firm joined with Getco LLC and others to push regulators to adopt a central-clearing process for swaps. With the establishment of central clearinghouses, all of the dealers that wrote swaps would commit billions in cash and securities to protect against default of any one contract, allowing smaller entrants to compete with banks on price rather than size and credit rating.
