(In third paragraph corrects team name to "Equity StrategicRisk Group" from "Equity Principal Strategies Group")
By Nishant Kumar
HONG KONG, March 3 (Reuters) - Nomura Holdings Inc has hired former Barclays trader Pradeep Swamy to start a newproprietary trading team in Hong Kong.
The move comes as Wall Street banks retreat from thelucrative proprietary trading business after regulatory changesput in place after 2008 curbed banks from making bets with theirown money.
Swamy, a former Hong Kong-based managing director in theequities division of Barclays Plc, joined Nomura lastweek to lead the new Equity Strategic Risk Group.
Swamy, who earlier also worked for Credit Suisse and hedgefund Och-Ziff Management in London, started at Nomura on Monday.The group will run equity long/short, convertibles andvolatility strategies to make money for the bank.
Fred Lam, Swamy's former colleague at money manager CheyneCapital, has also joined the team.
A Nomura spokesman confirmed the two appointments.
The move marks a new trend that is making Asian financialinstitutions from China and Korea to Japan grabbing talent freedfrom Western banks and strengthening their trading activities.
Proprietary traders made hundreds of millions of dollars inrevenues for Wall Street banks through bets similar to those byhedge funds, but have seen their fortunes fade in recent years.
Most of these desks have shut down as the Volcker Ruleframed in the United States after 2008 mandated regulation thatcurbs risky proprietary trading by financial institutions.
The rule also applies to foreign banks with branches in theUnited States, but provides an overseas exemption. That allowsbanks like Nomura to use a highly profitable tool to addalternate sources of revenue, a trend likely to catch up inAsia.
"For the non-U.S. banks, the big exemption that they have isthat they have the ability to still operate with lessrestrictions solely from outside of the United States a proptrading desk," said Paget Dare Bryan, a foreign legal consultantat Clifford Chance in Hong Kong.
However, such trading should not "generally involve partiesand transactions with the residents of the United States" and nodecision making, execution or financing should take place in theUnited States, Bryan added.
Proprietary traders draw capital from banks when they seeinvestment opportunities. This flexibility sometimes gives theman edge over hedge funds which must remain invested. (Reporting by Nishant Kumar; Editing by Michael Flaherty, MattDriskill and David Holmes)
Barclays (BARC)
