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NEW YORK (
UBS(UBS - Get Report) rogue trader Kweku Adoboli worked in an extremely complex and difficult-to-define area that was seen as the next great growth opportunity for Wall Street investment banks.
Dubbed "Delta One," it is apparently "the future of equity trading," according to
Financial Times writer Izabella Kaminska, even though its ranks include another infamous rogue trader, Jerome Kerviel, formerly of
Like Chuck Norris' Uzi, weapons of Wall Street's Delta traders include swaps, repos and warrants.
Adoboli's profile on
LinkedIn describes him as Director, ETF and Delta1 Trading at UBS.
According to an April 11
blog post by Kaminska,"Delta one equals ETFs, sector swaps, dividend swaps and thematic baskets. It can include warrants and options too. Anything really, providing it involves returning a one-to-one performance to your client."
Kaminska added that "Delta one is just as much about repo, securities lending, funding and centralised execution as it is about the products themselves. It's flow, but it's also prop."
Delta one is near-impossible, in other words, for lay people to understand, but if it is seen as the future of equities trading, as a panel discussion in Amsterdam that Kaminska attended in April called "The rise and rise of Delta One," would seem to suggest," it is not too far a leap to call it the future of Wall Street.
That's because equities, especially equity derivatives, are Wall Street's best growth opportunity, or so wrote
JPMorgan analyst Kian Abouhossein last year. Abouhossein also mentioned Delta One in his report,
according to Kaminska.
Abouhossein singled out UBS, along with
Credit Suisse(CS), as leaders in the equities trading business, with
Goldman Sachs(GS) and
Morgan Stanley(MS) not far behind. Now, following the rogue trading debacle, Abouhossein is calling for UBS to
radically shrink its investment banking business.
Its growth prospects stymied by the bursting of the securitization bubble and new rules that place strict limits on other lucrative areas such as proprietary trading and principal investing, Wall Street has been looking around for a way to replace the lost revenue. If Delta One is indeed the answer, it will have to get past a growing image problem.
Written by Dan Freed in New York.