Mr Costas took over UBS’s investment bank in 2001 and spun off the proprietary trading desk to form Dillon Read in 2005. Zurich-based UBS shut down the unit in May 2007 and said it accounted for $3 billion of the $19 billion in losses the bank reported that year. Mr Hutchins, 53, was president of Dillon Read and previously headed the debt unit of UBS.

Dillon Read Capital Management was created to enable UBS’s wealth management clients to make certain investments, the report said.

Mr Costas, Mr Hutchins and Matthew Johnson, who was also a trader at Dillon Read, plan to open a boutique firm that will have a broker-dealer and also take bets with its own capital, according to three people who declined to be identified because their plans are private. The preliminary name for the firm, which may be changed, is VinsonForbes, two of the people said.

Calls to Messrs Hutchins and Johnson in New York weren’t immediately returned. Mr Costas, a former bond trader for Credit Suisse Group, declined to comment.

Using UBS’s balance sheet and investing in corporate debt, treasuries and mortgage securities, Dillon Read earned $720 million in profit in 2006, according to people familiar with the profits at the time. In November 2006, Mr Costas launched Dillon Read Financial Products, a $1.3 billion hedge fund.