AIG forex under merger threat

AIG Trading’s foreign exchange group faces an uncertain future, as parent company Connecticut-based American Insurance Group (AIG) prepares to merge its AIG Trading and AIG Financial Products subsidiaries, sources close to the firm told RiskNews ’ sister publication FX Week .

A spokesperson at AIG in Greenwich declined to comment, but market sources said forex dealers at AIG are expecting the worst from the rumoured merger. One source close to the firm in London said: “The headhunters have got a lot of AIG CVs on their desk at the moment.”

Another source close to the situation in New York said: “Restructuring is taking place now, and people are very nervous – there is no stability.”

AIG Trading, which contains the foreign exchange group, is expected to suffer most as a result of a potential merger, sources said. That unit houses commodities and the energy desks as well as FX. Energy trading has already been transferred to AIG Financial Products, and FX and commodities traders are now awaiting news on their status, said a source close to AIG in London.

AIG Financial is seen as the more dominant of the two subsidiaries and therefore is unlikely to see any job cuts, market participants said.

A New York-based market source said: “AIG Financial Products makes multiples of what AIG Trading makes – it’s a triple A-rated subsidiary of the insurance arm.” But structured products traders from AIG Trading would be the most likely to be retained, he said.

AIG Financial Products works as principal in standard and customised interest rates, currency, equity and credit products with top-tier corporates, financial institutions, governments, agencies, institutional investors and high-net-worth individuals globally. It tends to focus on long-dated structured FX products. The unit was created after AIG merged with Drexel Bernham Lambert more than 10 years ago.

AIG Trading typically provides clients with short-term products, including FX spot and options, as well as risk management solutions and hedging products across FX, energy, commodities and commodity indexes.

The merger rumours follow a string of recent departures from AIG Trading, including Jim Fowler, formerly senior FX options trader in New York; and FX options sales dealers Peter Kend and Gary Taratunio, who are both set to join JP Morgan Chase in New York at the end of next month.

Gregory Van Laeken, Karthik Sankaran and Daniel Sigler – also New York-based traders – left to join Swiss bank Julius Baer’s new emerging markets FX desk in New York. And in London, the bank has lost James Ludlam, who worked in emerging markets; head of FX sales Quentin Smith; and chief spot dealer Jim Thomson.

But the bank has also been hiring heavily in foreign exchange in the past year, and any potential cuts to the forex group would represent a huge reversal of its strategy in the area.

Recent high-profile hires to the team include global head of FX options Don Lee, who manages forex at the Greenwich headquarters, and in London, former global head of FX sales at Saxo Bank Flemming Overgaard, who joined as vice-president, FX sales last December.