Bank of America and Citigroup have suspended all stock trading with Segantii Capital Management, due to banks’ concerns about the hedge fund’s bets on selling large blocks of shares, according to multiple people with knowledge of the matter.
The two banks informed Hong Kong-based Segantii, run by Blackpool Football Club owner Simon Sadler, that it had been cut off from trading in shares and various other financial instruments, according to the people.
BofA ceased trading with Segantii on all financial instruments, while Citigroup suspended its equity trading relationship with the fund but continued to trade with it on other products such as derivatives.
News of measures taken by banks to reduce their exposure to Segantii – one of the most active hedge funds in Hong Kong stock markets – comes as US authorities have launched a probe into block trades at several institutions. Wall Street financials.
Segantii is usually one of the first points of call when bankers are looking to trade large blocks of stocks in Asia, according to several bankers and traders.
The fund has not been accused of any wrongdoing and it is unclear whether Segantii has been contacted by US authorities regarding any of its transactions. Media reports earlier this year said US authorities had sought communications between Morgan Stanley, which is at the center of the block exchange investigation, and a former Segantii employee.
Segantii did not respond to requests for comment.
The fund was launched in 2007 by Sadler, which made it a global powerhouse with offices in Hong Kong, New York and London. It had $6.1 billion in assets under management as of October last year, according to HSBC. In 2019, Sadler, who lives in Hong Kong, bought his hometown club Blackpool FC after it entered insolvency proceedings.
Segantii is “everyone’s first call on pricing risk, they’re a big liquidity provider in Hong Kong, they’re in all the deals,” said a portfolio manager at a global asset manager .
A prime broker for a European bank in Hong Kong called Segantii a “high street priority client” in Asia.
One of the people familiar with the matter said that BofA’s market surveillance team in the United States had issued a global directive to “cut” Segantii in early 2021, with regard to transactions by the fund around blocks of shares that had been placed on public markets by others. banks. The decision was made before scrutiny of Wall Street’s block trading activities hit the headlines earlier this year.
Citigroup “stepped away” from Segantii more recently, according to a second person with knowledge of the matter. “When the headlines [concerning the probe into block trading by some Wall Street institutions] At first they said ‘risk free,’” the person said, referring to the process by which a bank reduces its exposure to a customer.
A number of other major banks, including Goldman Sachs, are still negotiating with Segantii, according to a person familiar with the matter.
Bank of America, Citi and Goldman Sachs all declined to comment.
Additional reporting by Ortenca Aliaj
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