Best Trade: Todd Edgar says Goodby to Bank Prop Trading

Barclays Capital has been forced to layoff off its star commodity trading team because of Dodd-Frank legislation reports Patrick Jenkins at the Financial Times last night. Edgar became somewhat of a celebrity trader after my team at Trader Monthly discovered his talents for reading global macro trends and parlaying them into a killer gold trade in 2007. A ballsy bet that earned him best commodity trade of the year.

Edgar caught the eye of BarCap in 2009 and they offered him and his team of four prop traders an alleged pay package of $50 million to break their contracts with JP Morgan and come join the UK Bank. JP Morgan got really pissy about the Brits stealing their talent and I always thought they leaked the news in 2009 on Team Edgar’s pay just to be dicks about the whole thing. Edgar, an Aussie native who lives between London and his surf shack in the Hamptons, has fulfilled his two year deal with Barcap and because of the U.S. regulatory ban on commercial banks and prop trading Barclays had to lay the team off.

Edgar, a former trader for hedge fund legend Paul Tudor Jones, will surely land on his feet though. The FT thinks he’ll be starting a hedge fund of his own but Edgar hasn’t confirmed that for us yet. (Personally I was hopping he’d quit making other people money off his trading ideas and start a surf camp.)

London’s Evening Standard appears to have miss-understood the situation and is incorrectly following the FT’s story with a lede that Edgar has bailed on the bank to start a hedge fund when in fact he’s been laid off. I can’t tell if the writer just likes to make stuff up when he can’t source a story on his own or is not familiar with how bank trading works but I find it irresponsible when news gets twisted like this. Even Business Insider has the facts wrong headlining Edgar single handily got $50 million from BarCap to leave JP Morgan two years ago, when we can all read the FT story and understand that payout wasn’t only for one year and it was divided by at least five people.

I can confirm the FT report is spot on but what I never understood is why the people of London were so upset Edgar’s stellar trading team got a paypack that is at least three times less then what they could have made trading gold and silver for a hedge fund. In 2009 BarCap couldn’t predict prop trading would be banned in its stateside operations so what I really want to know is how much profit Team Edgar has returned for the bank in the last two years. Heck in 2007 alone myself and Leah McGrath Goodman reported at Trader Monthly he’d made JP Morgan at least $100 million betting the right way on gold prices. Lesson here is we don’t know all the facts to determine if BarCap broke even on its return on investment ( or is red faced from wasting money to attract short term talent) but we can see Edgar knows how to trade himself in and out of all kinds of situations.

UPDATE 8-18-2011: There are a few inaccurate reports coming out on how many people are in Team Edgar. I can confirm there were 5 total who left JPM and one joined latter. That means 6 people would be spliting the $50 million paypack. What we don’t know is how that got divided. Unfortunatley, it looks like the re-write reporters over at Business Insider are having a hard time reading reports like this one from The Telegraph because they would have you think Team Edgar split the paypack between 11 people. On a positive note we are finally seeing more journalist figure out the real story here is that BarCap can’t afford prop trading. No commercial bank that wants access to the Fed’s discount window can because congress thinks they can’t handle risk management. So for now we see the big money, risk taking traders head back out to hedge fund life and the banks loose a potential big revenue stream.