In 1995, the Canadian Imperial Bank of Commerce began a widely publicized hiring binge in order to pursue its goal of becoming a global derivatives powerhouse. The firm reportedly enticed a number of senior dealers from other firms with extravagant two-year, guaranteed-bonus contracts. Now, two years later, some of the original hires appear to have left the bank in a huff.

Their resentment was captured in a wire service story by Roger James of Bridge News entitled "CIBC Exodus Bodes Badly for Derivatives Unit.” "An all-out attack on global derivatives markets launched by Canada's CIBC Wood Gundy three years ago is petering out, as a recent trickle of defections from its New York derivatives team becomes something of a flood,” James wrote. The story anonymously quoted a number of former employees who charged that CIBC's derivatives business collapsed after Michael Rulle, former head of the bank's derivatives group, was promoted to head CIBC's head corporate banking efforts. They also charged that Rulle made no effort to rally the troops in the face of recent defections and, furthermore, that the bank lacked a focused derivatives strategy.

The story quoted one former employee who claimed the new performance bonuses in offered to people in the group simply weren't enough to entice them to stay and build the business. "To get 5 percent–10 percent of an expected profit of very little is no incentive,” the dealer told Bridge.

Although the story didn't name names, it alluded to eight marketers in a group of 12 who were hired in 1995 at vice president or director level and who shared many responsibilities. One of the eight mentioned left more than 18 months ago, three left earlier in the year and another four have defected since the middle of July. The eight marketers in question are Alex Garbuio, Steve Magyary and Serge Marquie, who left to join Deutsche Morgan Grenfell; Terry Ganser and Tim Steele, who moved to the Union Bank of Switzerland; Sara Lee, who moved to Bear Stearns; and Alexandra von Schroeter, who transferred out of the derivatives unit to a job in CIBC's Toronto office.

Rulle was surprised that anybody would characterize the personnel shifts in the group as anything more than routine. He also says the headcount at the group is increasing. It now has 430 people worldwide, up from 390 a year ago, and eventually plans to hire until it has 500 or more employees. "The article gave the impression that all these people left because of bad business planning,” says Rulle. "But this is all normal stuff from our perspective. Some people were good and we wished they didn't go, and other people went to different locations for personal reasons. Two or three or four left because of a strategy shift relative to different responsibilities we gave them. The remainder is normal statistical turnover.”

He also noted that revenue is up 74 percent this year-to-date over last year, with approximately 200 over-the-counter transactions booked every day. "Things are moving along quite well,” he said. "If anything, I'm superstitious that things are going better than anticipated. Obviously some of the people who left are not happy, but somebody is being willfully at odds with the truth.”

Maybe so. But some of the defectors defended the Bridge story, arguing that although worldwide revenues and headcount may have increased, CIBC's attempt to grow a global all-market derivatives business has failed, and that it has retreated to a few niche businesses.

"I must say I was surprised at how honest the other people were,” said one of the eight dealers who did not cooperate with the Bridge story. He contrasted CIBC's efforts to buy global market share to that of Deutsche Morgan Grenfell's, which has similar ambitions. "DMG is approaching it from a totally different angle,” he said. "Rather than trying to set up a standalone derivatives business, it has built up its existing capital markets operation and is working to integrate it with an enhanced derivatives effort.”

"From a strategic point in New York,” says Rulle, "we've made a concerted effort to focus away from the vanilla interest rate and currency swap business and much more toward the value-added businesses such as equities, commodities, structured and exotic products, and credit derivatives.”

• Ernst and Young named Donald T. Vangel partner in its risk management and regulatory practice group. He formerly served as senior vice president of the bank supervision group at the Federal Reserve Bank of New York…
• Thomas L. Marin has been appointed president and chief executive officer of Strategics…
• Denise Hubbard has been named assistant vice president to the Latin American desk of Sakura Dellsher. She moves from Dean Witter International Futures, where she developed courses to assist multinational institutional clients in understanding and developing options and futures strategies…
• Victor Makarov has been appointed senior vice president of market risk management for the Americas at Radobank. He previously served as vice president of client risk management serivices at Chase…
• Dale Prouty, Ph.D., a venture investor and early-stage business consultant, was named to the board of directors at C*ATS Software…
• The Chicago Mercantile Exchange appointed William Jenks senior vice president and chief information officer. He previously served as vice president of information systems and chief information officer at Space Systems/Loral…
• Harry Fry was promoted to managing director at Prebon Yamane…
• Michael Shumrak was promoted to vice president in charge of the analytics business unit at SS&C Technologies. He previously served as a managing director at the firm's actuarial consulting group…
• Jeanette Jin, Ph.D., has joined Peter Vinella and Associates as executive vice president. She previously served as vice president at Chase Securities…
• Castlebridge Partners hired Dena K-Karras, former senior product manager at the Chicago Board of Trade, to develop integrated risk structures using traditional insurance and capital market products.

Another In-House Firm Succeeds

I read with interest the letter from Jeremy Evnine ("In-House Systems Can Succeed,” July–August). I work for an "internal consultancy,” or what the letter refers to as a "firm within a firm,” and I would disagree that it does go some way to deliver IT on a competitive basis—the business can choose to use our organization or go outside.

I would like to raise some points based on my experiences. The first relates to supportability. It is not enough to ensure that systems developed meet certain constraints on data format and responsiveness. It is essential to ensure that these systems are supportable both operationally, day to day, and for future enhancements as the business needs change.

The second is not to underestimate the size of the audit requirements to ensure that the systems developed in this way provide the correct information, risk, profit and loss, and so on, "in the right place at the right time,” as Mr. Evnine puts it. In my experience, this is an area not fully addressed or even considered when a distributed IT approach is taken by an investment bank.

A competitive free-market approach to the delivery of IT is an important step in ensuring that it is both cost-effective and responsive, but care must be taken to ensure that all of the correct controls are in place.

Andrew Marshall
project manager
ABN-AMRO Information Technology Services