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TD Securities deepens hedge fund coverage

Date: Friday, February 8, 2008
Author: Andrew Willis, Globe & Mail

TD Securities is using the coming retirement of a star trader to revisit both the way it covers hedge fund clients, and the way the dealer invests its own capital.

At the end of April, TD Securities head of proprietary trading John O’Sullivan plans to leave the firm, fulfilling a career plan he outlined to partners more than 12 years ago while co-founding Newcrest Capital. While parent Toronto-Dominion Bank doesn’t break out numbers, the TD Securities prop trading desk is known for being extremely profitable.

Johnny O, as he’s known on the Street, has been a top trader for two decades, and is known for both making money and being a true gentleman to work with. He’s also a man who plans ahead: Mr. O’Sullivan has always said he would retire and travel with his wife once his children finish high school. The veteran of Gordon Capital and BMO Nesbitt Burns will be 49 when his youngest child heads to university in the fall.

As part of succession planning in its proprietary group, which invests the house’s money, TD Securities named Bruce Barker co-head of the team. He will work alongside Mr. O’Sullivan for the next three months. Mr. Barker joined TD Securities eight years ago and is currently responsible for managing the prop desk’s convertible debenture and warrant portfolios.

The prop traders also recently welcomed Bill McGill, who moved over from TD Securities investment banking team to pursue trading strategies in the North American media and telecommunications industry.

In a move that’s unrelated to the leadership change, TD Securities is physically shifting its proprietary trading group away from the rest of the equity sales and trading team, a relocation that fits with the thinking of compliance departments these days. Dealers are all sensitive to the issue of keeping client orders separate from any trading on the house’s behalf. Both equity and credit proprietary trading professionals are now located together, in a different arm of TD Securities’ head office.

At the same time the reins are passed in proprietary trading, TD Securities is beefing up its coverage of hedge funds, with 11 professionals now working in this unit, three of whom arrived in the last two months.

Convertible trader Tom Grant joined the team from CIBC World Markets and will be responsible for leading the firm’s agency convertible bond business and for covering clients on risk arbitrage and event-driven business.

Brian Morrison moved over from the TD Securities research department to cover special situations from the institutional equity desk, with an emphasis  on short-term trading ideas, such as long-short strategies.

And analyst Chris Rankin arrived from Canaccord Capital to focus on the firm’s on-desk research product, focusing on risk arbitrage and event-driven opportunities, such as potential break-ups or restructurings.