Prop traders who have been ousted from US banks take note: Nomura is rumoured to be building a prop trading business in London.
The bank isn't commenting on its alleged endeavours, but two headhunters claim this to be the case.
"Nomura are building their risk trading business," says one equities focused consultant. "They've got a big balance sheet, so it makes sense for them to move into prop trading."
"I've heard from a few people in the market that Nomura are working on building a proprietary trading business," the head of another search firm admits.
Last May, Nomura hired Jay Glasser, a well known Citigroup prop trader. And in 2009 it opened a prop trading business in India.
The US Volcker rule bans banks from being involved explicitly involved in proprietary trading (if not related to market making) in the US. However, it
authorizesinternational banks to conduct proprietary trading and fund activities solely outside the United States.
The Japanese Bankers Association has recently asked the US regulators to produce an explicit statement to the effect that the rule doesn't apply to the operations of non-US banks outside the United States.
This should leave Nomura free to develop its prop business in London. Banks such as Mizuho are rumoured to be contemplating something similar.
Nomura could definitely benefit from building prop trading. The bank's advisory business has made a loss for the past two quarters, with only the markets area driving profitability. When it works, prop trading can be pleasantly profitable. Analysts at JPMorgan estimate that the end of prop trading at US banks will reduce ROE by an average of 1.3 percentage points.
In the long term, however, prop trading as a career may still be dead. "A lot of these prop traders are just being hired to run algorithms," says another recruiter. "I spoke to someone I placed the other day who's now running various different systems. Prop trading is being done by machines."