Former Cowen execs teaming up to launch new U.S. prime brokerage business

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Prime brokerage launch

Three former managing directors who recently ran Cowen’s U.S. prime brokerage business have all popped up at the same firm. Douglas Nelson and brothers Michael and Nicholas DeJarnette have been hired by trade execution and clearing specialist INTL FCStone to launch the Fortune 500 company’s first-ever prime brokerage business. The trio expects to add at least a dozen new members to its team across the U.S. in the coming months.

Nelson and the two DeJarnettes have been working with each other since 2005. They joined Cowen in 2017 following its $100 million acquisition of Convergex Group, where Nelson was the CEO of its prime services division for over a decade. Nelson and Michael DeJarnette were named U.S. co-heads of prime brokerage at Cowen at the completion of the acquisition but left the firm alongside Nicholas in June of 2018 after only a year on the job. They started at INTL FCStone last week following four months of gardening leave.

Known mostly for its role in commodities and energy markets, FCStone is banking on the trio to leverage their relationships with hedge funds and other institutional clients to launch a full-scale prime brokerage offering. Nelson pointed to FCStone’s existing infrastructure and the industry’s gradual transition to a cloud-based service model as part of the rationale behind the move. He said the new unit will look to bring on 12-15 new hires at its base in Atlanta as well as in New York and along the West Coast. The hiring will be split across sales and trading operations.

Prime financing execs have done quite a bit of moving around over the past few years as some banks looking to reduce their leverage have cut back on the capital-intensive yet potentially highly lucrative business. Credit Suisse and Deutsche Bank have been scaling back their prime brokerage units while BNY Mellon, Standard Bank and TD Securities have been launching new offerings. Meanwhile, Bank of America has completely retooled its prime services division this year following an internal investigation into alleged sexual harassment that coincided with at least nine departures. Other financial services firms like Cowen and FCStone are now looking to grab market share in a business that has been historically dominated by traditional banks.

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