People: JP Morgan veteran Ina Drew quits after $2 billion trading loss

Losses in London-based chief investment office claim first casualty, JP Morgan drafts in fixed income co-head to steady the ship; Coutte becomes latest senior figure to leave SG CIB's fixed income and forex business; LCH.Clearnet creates CRO role; forex reshuffle at Barclays

Ina Drew, chief investment officer at JP Morgan in New York since 2005, became the first high-profile casualty of the bank’s recent $2 billion trading loss when she quit her position in mid-May.

Her departure brought to an end a 30-year career at JP Morgan. Further departures from the chief investment office (CIO), the unit responsible for the losses, are expected in the following weeks. However, sources at the firm indicate that any resignations or firings have been put on hold pending the findings of an internal investigation into the CIO’s strategy, which Dimon called “flawed, complex, poorly reviewed, poorly executed and poorly monitored” in a May 10 conference call to reveal the losses.

The problems arose from outsize synthetic credit positions taken by the CIO. Few specifics have been released by the bank, but it appears to have bought and sold protection at different points on Markit’s CDX North American Investment Grade index of credit default swaps, ending up a big net seller of protection. Unexpected losses on these positions in the first quarter of the year forced the CIO to ditch its newly introduced value-at-risk model – in use since the start of the year – and return to an older, more accurate model.

Although he lambasted the risk management of the trade, Dimon praised Drew’s work at JP Morgan. “Ina Drew has been a great partner over her many years with our firm. Despite our recent losses... Ina’s vast contributions to our company should not be overshadowed by these events,” he said in a statement.

Drew will be replaced as chief investment officer by Matt Zames, who moves from his position as co-head of global fixed income and head of capital markets. Zames joined the firm in 2005 from Credit Suisse First Boston, where he was head of US rates trading. His fellow fixed-income co-head, Daniel Pinto, will now be sole head of global fixed income, and continues as JP Morgan’s co-head of investment banking and chief executive for Europe, the Middle East and Africa.

In the aftermath of the losses, commentators have stated the CIO’s trades were proprietary bets rather than the macro hedges the bank claims – and have argued in favour of strict implementation of the Volcker rule, part of the Dodd-Frank Act that would bar proprietary trading. In an interview with Risk in September last year, Pinto criticised the rule – which aims to restrict proprietary trading – on the grounds that it would also curb market-making and hedging activity. Shutting down pure prop trading would not be a problem for the bank, he said: “Our culture is not that kind of culture” (Risk September 2011, pages 34–37, www.risk.net/2101659).

The CIO will undergo further changes, with Rob O’Rahilly joining from JP Morgan’s investment bank risk management team as its head for Europe, the Middle East and Africa. Marine Nouire will become the CIO’s chief financial officer, and Chetan Bhargiri has been named as the unit’s new chief risk officer.

 

Christophe Coutte, global co-head of flow fixed income and currencies at Société Générale Corporate & Investment Banking (SG CIB), has left to pursue other opportunities, Risk understands.

Coutte’s departure is the latest in a number of senior exits from the bank’s fixed-income and foreign exchange business, now under almost entirely new management. Since November 2011, the bank has parted company with Coutte’s former co-head, David Knott, as well as Richard Bailey, global head of forex trading, Dan O’Sullivan, who had been Bailey’s co-head in New York, and Mike Burton, global head of forex sales.

Coutte assumed the role of global co-head of flow fixed income and currencies with Knott in March last year, following the departure of then-global head of fixed income and currencies, Chico Khan-Gandapur. Prior to that, he had been deputy global head for the business. Coutte has also been director of euro swaps at Deutsche Bank.

On April 2, SG CIB reorganised its fixed-income and currencies, treasury and interest rates and forex derivatives activities into a single unit headed by Danielle Sindzingre. It also appointed Paris-based Gian-Luca Fetta as head of foreign exchange, responsible for trading within the newly created fixed-income and currencies business.

Sindzingre was formerly global head of treasury and repo, a position she assumed in 2008, having first joined the bank in 1997 from Banque Indosuez Group. During her time at SG CIB, Sindzingre has held a number of roles within the treasury business, becoming deputy head of bank treasury activity, repo and arbitrage for the debt platform in Europe and Asia in 2005.

 
LCH.Clearnet has made Dennis McLaughlin chief risk officer – a newly created role. McLaughlin will be based in London, reporting to chief executive Ian Axe. He will sit on LCH.Clearnet’s executive committee and its independent group risk committee, and chair its executive risk committee.

McLaughlin joins from Aon, a risk management, insurance and reinsurance brokerage, where he was chief executive officer for innovation and analytics. Prior to this, he was global head of capital and balance-sheet management at Merrill Lynch and director of capital at Citi’s global consumer group.

LCH.Clearnet recently split its default fund in two as part of a revamp of its entry, membership and risk and default management criteria. After this ‘restrike’, the clearer will have three different default funds: one for SwapClear, one for its foreign exchange clearing service ForexClear, and a third to cover EquityClear plus the clearing house’s futures, cash bond and repo services. As a result, members that only clear equities and futures, for instance, will not be exposed to loss mutualisation if a member of the SwapClear service defaults. The change was made in response to a Commodity Futures Trading Commission rule that cuts the amount of capital LCH.Clearnet can require its members to have (Risk May 2012, page 6, www.risk.net/2172410).

Adrian McGowan, managing director and head of foreign exchange trading for Asia-Pacific at Barclays in Singapore, is set to replace David Shannon as the bank’s London-based global head of forex options. McGowan will retain his global responsibility for forex forwards, and takes on regional responsibility for the G-10 foreign exchange business in Europe. Tim Cartledge, head of forex spot and e-commerce trading since 2011, will replace McGowan in Singapore.

McGowan took up his current role at Barclays in July 2008 after nine years at Deutsche Bank, leaving there as global head of complex risk and euro bloc flow options trading. Shannon joined the bank in June 2004 as head of rates for Asia-Pacific in Singapore, and now moves positions to become head of market risk for rates, forex, commodities and treasury, based in London. Barclays declined to comment on the changes.

Bank of America Merrill Lynch has hired Stephan Wenger as head of G-10 short-term interest rate trading in Hong Kong. Wenger joins from macro hedge fund Balyasny Asset Management, where he had been a portfolio manager since October 2010. Prior to this, he worked at Citi from 2003 to 2006, where he also headed short-term interest rate trading.

Ayad Butt, a Singapore-based G-10 forex derivatives trader at Credit Suisse in Singapore, has taken up a similar role at Citi. Butt left Credit Suisse in April after a five-year stint at the bank, which he joined as an analyst in New York in 2007. In Singapore he reported to Tom McNee, Credit Suisse’s head of developed markets forex options trading for Asia.

Post-trade processing technology provider Traiana has appointed Andy Coyne as its next chief executive. Coyne joins Traiana from Citi, where he was head of foreign exchange prime and G-10 electronic commerce in London. He resigned from the bank in mid-May and will succeed Gil Mandelzis at Traiana, following the latter’s promotion earlier this year to chief executive of the EBS trading platform. Both Traiana and EBS are owned by interdealer broker Icap.

Coyne will be responsible for all aspects of Traiana’s global business across asset classes, including foreign exchange, exchange-traded derivatives, equities, equity derivatives, fixed income and rates. He will remain in London and will report to Mandelzis, who is based in New York.

Coyne had been with Citi since January 2006 and played a key role in building the bank’s foreign exchange prime-brokerage business. He has also been involved in a number of key industry initiatives, having served on the board of both CLS Aggregation and FXall. Prior to joining Citi, he was head of forex prime brokerage at Deutsche Bank, and held a number of management positions at Bankers Trust, before it was acquired by Deutsche in 1998.

Following Coyne’s departure, Citi has promoted Sanjay Madgavkar to global head of foreign exchange prime brokerage. Madgavkar has been with Citi for more than seven years, most recently as head of forex margin trading in New York.

The Depository Trust & Clearing Corporation has appointed Michael Dunn, former commissioner at the Commodity Futures Trading Commission (CFTC), as non-executive chairman of its New York-based US swap data repository.

Dunn served two terms as a CFTC commissioner, and was also acting chairman for four months in 2009. In his new role, he will report to incoming president and chief executive Michael Bodson, who was named to succeed Donald Donahue in July.

“Commissioner Dunn is a seasoned regulator who has demonstrated a significant understanding of how our business works to reduce risk and increase transparency, especially during the last few years of market volatility and industry change,” Bodson said in a statement.

 

The US Securities and Exchange Commission (SEC) has appointed James Burns as deputy director in the division of trading and markets. He will oversee a number of regulatory functions, including market oversight and operations, derivatives policy and trading practices, and chief counsel and enforcement liaison. The role also involves assisting with the overall management of the division and contributing to the ongoing implementation of the US Dodd-Frank Act.

Burns has been on the staff of SEC chair Mary Schapiro since 2010, with his most recent role being deputy chief of staff. He has advised Schapiro on the development and execution of rule-making within the SEC, along with advising on the policy agenda and other key initiatives. Burns has also worked on issues including the 2010 flash crash and a variety of market structure and Dodd-Frank related rule-makings, studies and programmes.

Before joining the chair’s staff Burns was counsel to commissioner Kathleen Casey, advising her mainly on investment management and enforcement issues. Prior to joining the SEC in 2008, he worked as a securities lawyer in private practice, focusing on investment management and broker-dealer regulatory and enforcement matters.

He replaces James Brigagliano, who has left the agency to join Washington, DC law firm Sidley Austin as a partner in the securities and futures regulatory practice. Burns will assume his new role at the end of May.

Dunn will be replaced as SEC deputy chief of staff by Erica Williams, who has been part of Schapiro’s staff since February 2011, focusing on enforcement and regulatory issues.

Before joining Schapiro’s staff, she worked as assistant chief litigation counsel in the enforcement division’s trial unit for seven years. Before joining the SEC, Williams was a commercial litigator in private practice.

 

Kevin Nixon is joining the Institute of International Finance (IIF) as deputy managing director with responsibilities for regulatory policy and IIF member relations. Nixon will be providing strategic direction for the IIF’s regulatory efforts. He assumes his new role on July 11.

Nixon will report to IIF managing director Charles Dallara in this new role, which was created after the departure of senior director Paul Wright. He will work alongside Andrés Portilla, director of the IIF regulatory affairs department, and David Schraa, regulatory counsel at the IIF.

Nixon moves from his role as executive director and head of regulatory reform at Westpac Banking Corporation in Australia, which he joined in March 2010. His responsibilities there included focusing on the international regulatory reform agenda and liaising with regulators, associations and other interested parties.

Prior to Westpac, he worked as director of markets at the Australian Financial Markets Association from 2008–10.

The IIF is an international industry lobbying group with more than 450 members.