Los Angeles-based regional brokerage B. Riley is taking a bigger bite out of the Big Apple.
In a bid to take advantage of the growing pool of available trading talent and get exposure to the area’s plethora of money managers, the firm is beefing up its New York City trading desk.On the heels of acquiring competitor Caris last December The firm recently hired two trading veterans to help run the Midtown-based trading desk and get the initiative off the ground.
More hiring is in store, Bryant Riley said.
“We’re going to expand in NYC but we want to be opportunistic,” Riley said. “If we can find a group to bring onboard we’d be open to that. We’ll see what’s out there and what makes sense. We have no set number.”
With the acquisition of Caris, B. Riley & Co. added four sales traders: Tony Kiniry, Todd McWilliams, Jason Buttles and Colin Butler. Also, Caris founder Darren Caris joined B. Riley in the new position of director of capital markets at the time of the purchase.
[See Traders Magazine’s Coverage of Caris]
Just last week, the firm announced it brought on Tom Shapero as managing director of sales trading and Herve Francois, managing director of New York institutional equity sales. Both will co-head the desk.
Shapero was formerly with Sanford C. Bernstein & Co. in New York where he was senior vice president and head of U.S. sales trading from 2005-2013. Earlier at Bernstein, he launched the firm’s NASDAQ dealer desk and acted as its head of NASDAQ sales and trading from 2002 through 2005.
Prior to that, Shapero was at D.E. Shaw & Co., where he started and headed the institutional block trading desk. He also worked as a member of the Spear Leeds and Kellogg program desk.
Francois was executive director, head of U.S. sales at Mizuho Securities USA prior to joining B. Riley.
The addition of Shapero and Francois brings B. Riley’s NYC-based headcount to eight people, still less than 10 percent of its total workforce. This brings the headcount to eight people or less than 10 percent of the firm’s workforce.
Currently the firm has 85 total employees, with 35 to 40 in Los Angeles, 15 people in San Francisco, 15 in Orange County and now eight in New York. It also has offices in Boston and Atlanta.
It has two sales traders in New York, two in San Francisco and four in Los Angeles.
Having been in New York since mid-2000 but never in any appreciable numbers, Chairman Bryant Riley told Traders Magazine that the time was ripe to expand while other firms were downsizing.
“We had been in New York City for 6 -7 years but never had a big presence,” Riley began. “Then we saw value in acquiring Caris & Co. in 2012. They had a NYC presence and that kicked us off.”
Riley conceded that NYC had been a difficult place for the firm to grow given its hyper-competitive nature and mobility of its workforce when compared to California. But now, he added, those dynamics are changing and with B. Riley growing amid the disappearance of brokers as a result of shrinking commissions, people would be attracted to the firm.
“As a boutique, I think we can get more traction now,” Riley said. “We are committing capital. If you give people stability and a good platform, that’s what they appreciate. That’s what we now can offer.”
B. Riley isn’t the only California brokerage expanding in NYC. JMP Securities is also bulking up its Gotham trading desk. Traders Magazine reported in May that JMP plans to triple its market share of institutional commissions in the next five years by growing its presence in New York.
“To meet our goal, we need to build our sales and trading presence in the greater New York marketplace and improve our corporate access product and its delivery while continuing at the same time to grow the number of companies under coverage by around 30 percent to 450 to 500 names,” a JMP exec said atthe time. “We must also continue our efforts to increase the institutional relevancy of the companies we cover from the standpoint of market cap as well as liquidity.”
JMP has started to build up its operations in New York, hiring Tom Wright as director of equities from Sanford C. Bernstein & Co. in March. Wright was global head of trading at Bernstein. At JMP, he is responsible for both trading and research sales.
Other firms such as FBR Capital Markets and Janney Montgomery are also setting up larger shops in Gotham.
By purchasing Caris back in December 2012, B. Riley added large-cap research to its stable of equity research offerings. It already had a strong presence in covering small- and mid-cap companies. B. Riley now has 16 researchers.
Knut Grevle, B.Riley’s Los Angeles-based head of equity trading, told Traders Magazine that the desk offers algorithms to clients from several vendors and that the firm reviews their performance quarterly to assess effectiveness and provide best-execution for clients.
“We base our trading off those that give us best ex obviously,” Grevle said. “There are so many algo providers, we need to review them constantly.”
He added the desk selectively uses dark pools also given the firm’s small-cap research bent and difficultly in sourcing liquidity in some of these less-frequently traded stocks in the public markets. Dark pools are also reviewed quarterly for slippage and information leakage.
“We go where the liquidity is regardless if one venue is slightly more expensive than another,” Grevle said of the dark venues he uses.
One dark venue he is very interested in is IEX, a buyside-owned and sponsored ECN that is opening up very shortly. IEX is currently signing up broker-dealers to trade in the venue before its launch.
[See Traders Magazine’s Inside Peek at IEX]
“We’re planning on signing up with IEX. They have a good liquidity base set up,” Grevele said. “It’s a very clean dark pool that institutions will be interested in.”
