A prominent bond trader who was hired to revitalize Morgan Stanley’s trading business but whose division racked up sizable losses has left the Wall Street firm.
The trader, Glenn Hadden, was head of global rates, an important operation that trades government bonds and other instruments. He left Morgan Stanley on Monday after three years at the firm, according to a company memo. Morgan Stanley’s senior management asked Mr. Hadden, one of the bank’s highest-paid executives, to resign, according to a person briefed on the matter.
“After three years at the firm, Glenn Hadden will be leaving Morgan Stanley to pursue other opportunities,†said a company memo written by Michael Heaney and Robert Rooney, the executives who oversaw Mr. Hadden. “We would like to thank Glenn for his contributions to the Global Rates business and wish him well in his future endeavors.†Mr. Heaney and Mr. Rooney head up Morgan Stanley’s fixed-income business, which generates large amounts of revenue from trading bonds and other instruments.
Mr. Hadden’s departure closes an intriguing chapter in Morgan Stanley’s efforts since the financial crisis to strike the right balance in its fixed-income operations. After bond trading became the source of enormous losses during the crisis, Morgan Stanley immediately dialed back its risk-taking in the division. Not long after that retreat, however, the bank made efforts to reassert itself, in part because fixed income can produce hefty profits when markets aren’t in a state of high stress.
Mr. Hadden’s hiring was meant to play an important part in this rebuilding. Under his leadership, the global rates division increased business with clients and posted some strong financial results, particularly in 2012.
But Mr. Hadden, known for his ability to consume copious amounts of Gatorade at work, also brought controversy and trading losses.
Before joining Morgan Stanley in early 2011, Mr. Hadden worked for many years at Goldman Sachs. In 2009, Goldman put Mr. Hadden on leave after it had concerns about some of his trading. This included trading in Treasury futures that took place in December 2008 and was later found to violate CME Group rules. Last year, the CME Group, which runs exchanges where interest rates and bonds are traded, fined Mr. Hadden $80,000 and suspended him from CME trading for 10 days. Goldman was ordered to pay $850,000.
A disciplinary action of this nature would not normally be enough to lead to the departure of a prominent trader. But Mr. Hadden’s operations also produced losses that most likely weakened his position at the firm.
In 2011, Mr. Hadden’s division was hit by a wager on United States inflation expectations that led to a loss of tens of millions of dollars, according to people briefed on the transactions. After that, Morgan Stanley executives stepped up their supervision of Mr. Hadden’s activities. Even so, in the first half of 2013, his division was hurt by losses that exceeded $200 million.
Like other Wall Street firms, Morgan Stanley is trying to improve its profitability, as measured by a metric called return on equity.
Two fixed-income executives, Jakob Horder and Mitch Nadel, have immediately replaced Mr. Hadden as the co-heads of global rates.
“In their new roles, Jakob and Mitch will focus on aligning the strategy of Global Rates with the other business units in Fixed Income, with an intense focus on return on equity,†Mr. Rooney and Mr. Heaney wrote in their memo.
Susanne Craig contributed reporting.
