A $100 million trade shows how Credit Suisse is embracing the latest Wall Street trend to win business from top funds

Associated Press

Tidjane Thiam, Credit Suisse CEO

• Credit Suisse is amping up risk by offering bigger equity trades to clients. It's managing this risk through a brand new, so-called central risk desk.
• One notable trade in Europe this year was above $100 million, which is very large for the Swiss bank.
• "Punting around and crossing your fingers, that's not what we want to do," said Mike Dilorio, head of EMEA equities at Credit Suisse. "Yes, bigger risk trades are part of that strategy, but the goal here is to provide more liquidity."

In a cut-throat race to snag the biggest stock trades, Wall Street banks have been taking on more risk to compete. Credit Suisse had chosen to stay on the sidelines of one increasingly popular trading strategy - until now.

The Swiss bank in the last 12 months has introduced a so-called central risk book, or CRB, a desk where technology pools risk across dozens of traders so it can be better managed. The new CRB, rolled out this year in Europe after debuting last year in the US, is another sign that the Swiss bank has growing ambitions and is increasing the amount of risk it's taking in equities trading.

One notable trade on the European risk book this year was above $100 million, a person familiar with the trade said. While a $100 million trade is a large amount for a single transaction at any bank, at Credit Suisse it was especially so.

The size of that trade was unusual enough to cause nervousness among some of the bank's traders, because of the risk that it could easily go the wrong way, the person said. By comparison, a large US investment bank might do trades that large, or even larger, every two weeks or so, separate people familiar with those trades said.

The CRB is a big part of Credit Suisse's European equities strategy under Mike DiIorio, a managing director in the global markets division, who joined the bank from Barclays in the summer of 2017.

"Punting around and crossing your fingers, that's not what we want to do," DiIorio, based in London, said in an interview. "Yes, bigger risk trades are part of that strategy, but the goal here is to provide more liquidity by facilitating more business and taking more risk on behalf of clients. We're relatively new, and we're going to build into that." He declined to comment on any specific trades.

Credit Suisse's equities division has made a number of senior hires in the last 12 months, including Stuart McGuire, EMEA Head of Trading, Guy Dunning, EMEA head of sales trading, Sophie Bridge, equities COO, and Hippo Agkpo, global head of structured trading based in London.

Getting creative

As Wall Street firms have tussled for supremacy in stock trading, 20 years of shrinking commissions have forced them to get creative. In the early days, firms embraced electronic trading and dark pools, or used more balance sheet, to woo clients and wrest business from rivals.

But as technology became commoditized and new rules made it more expensive to hold inventory, firms came up with ever more innovative solutions. One of those, the central risk book, is now taking hold across the industry.

Other banks including Goldman Sachs, JPMorgan, Citi, Barclays, and Bank of America all have central risk desks.

The push at Credit Suisse comes amid the new leadership of Mike Stewart, who joined the bank from UBS last year as the head of equities. Under Stewart, Credit Suisse is betting that as active managers look to beat benchmarks and as volatility picks up, clients will want to take large, concentrated positions in stock markets. As they do that, they'll look to the bank to shoulder the risk of sourcing and delivering a large block of stock, or take a large block of stock off their hands - thereby taking on the potential risk that the price may decline.

"There has been an increased need for active managers to take large positions to prove value and differentiate themselves," Stewart told Business Insider in June.

Dakin Campbell and Alex Morrell contributed to this article.

Also read:

• Inside the power struggle at the top of Citigroup's equities unit that's a window on the latest Wall Street fad
• Credit Suisse is doubling down on hiring human traders as the rest of Wall Street embraces the robot revolution