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December 2, 2013

Broker Bites Into Big Apple

B. Riley of Los Angeles is opening a New York office in order to take advantage of the growing pool of trading talent and tap Manhattan's money managers

By By John D'Antona Jr.

Los Angeles-based regional brokerage B. Riley is taking a bigger bite out of the Big Apple.

In a bid to take advantage of the growing pool of available trading talent and get exposure to the area's plethora of money managers, the firm is beefing up its New York City trading desk. On the heels of acquiring competitor Caris last December, the firm recently hired two trading veterans to help run the Midtown-based trading desk and get the initiative off the ground.

More hiring is in store, chairman Bryant Riley said.

"We're going to expand in NYC, but we want to be opportunistic," Riley said. "If we can find a group to bring on board, we'd be open to that. We'll see what's out there and what makes sense. We have no set number."

With the acquisition of Caris, B. Riley & Co. added four sales traders: Tony Kiniry, Todd McWilliams, Jason Buttles and Colin Butler.

The firm has 85 total employees, with 35 to 40 in Los Angeles, 15 people in San Francisco, 15 in Orange County and now eight in New York. It also has offices in Boston and Atlanta.

It has two sales traders in New York, two in San Francisco and four in Los Angeles.

Bryant Riley told Traders Magazine the time was ripe to expand while other firms were downsizing.

"We had been in New York City for six or seven years but never had a big presence," Riley said. "Then we saw value in acquiring Caris & Co. in 2012. They had an NYC presence, and that kicked us off."

Riley conceded that New York City had been a difficult place for the firm to grow, given its hypercompetitive nature and mobility of its workforce compared with California's. But now, he said, those dynamics are changing, and with B. Riley growing amid the disappearance of brokers as a result of shrinking commissions, people would be attracted to the firm.

"As a boutique, I think we can get more traction now," Riley said. "We are committing capital. If you give people stability and a good platform, that's what they appreciate. That's what we now can offer."

By purchasing Caris in December 2012, B. Riley added large-cap research to its stable of equity research offerings. It now has 16 researchers.

But more research might not lure the buyside to execute at B. Riley or the other new entrants. Nanette Buziak, head of equity trading at ING Investment Management in New York, said the expansion of these firms makes sense in that they can acquire local talent that might not be available in their home cities. However, with equity trading volumes and commissions lower, getting order flow could still prove difficult.

"You can have all the talent in the world, but without that order flow, they can see little to no volume transpire from the buyside," Buziak said.

Many of these new firms also fall low in the buyside's broker vote, which Buziak said can also can also negatively impact them. The buyside would rather trade with the broker of its choice and pay for research via commission-sharing arrangement than establish a new trading relationship with smaller firms such as B.Riley or other new broker entrants.

"These smaller firms would need to gain a lot of in broker votes to really warrant garnering actual trading business through their trading desk," Buziak said. "Unless of course these small firms really become active in order flow and offer the buyside tremendous liquidity, I think it's going to be very challenging. They will need to really move up in the broker voting ranks to justify the buyside's business."


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