A team of top proprietary traders at JPMorgan Chase & Co is set to launch what is likely to be one of the largest hedge fund start-ups in 2012, the Financial Times reported on Sunday.

London-based Mike Stewart, JPMorgan's global head of proprietary trading and former head of emerging markets, is expected to start his own hedge fund, Whard Stewart, in the second quarter, the FT cited people familiar with his plans as saying.

Stewart's emerging-markets trading team at the bank is expected to join him, the newspaper said.

JPMorgan had chosen Stewart to head a new Alternatives Unit within the bank's asset management business. Fifty traders from JPMorgan's three major proprietary operations were set to move to the unit as the operations faced closure because of the Volcker rule, the FT said.

U.S. regulators have said the Volcker rule, which cracks down on banks trading with their own money, is unlikely to be finalized by a July deadline, but the threat of its implementation has encouraged some proprietary traders to set up their own funds.

JPMorgan's global head of equity proprietary trading, Deepak Gulati, is now considering setting up his own fund, the paper cited people with knowledge of his thinking as saying.

Gulati was expected to move into JPMorgan's asset management business with his team later in the year and officially his plans have not changed, the FT said.

The report added that Stewart is understood to be leaving JPMorgan on amicable terms but the bank will not invest in his new fund.

JPMorgan was not immediately available for comment.

A similar high-profile Volcker-rule-related spin-out was conducted in 2010 by two prominent proprietary traders at Goldman Sachs , Pierre-Henri Flamand and Morgan Sze, who raised $1 billion each, the Financial Times said.

(Writing by Nadia Damouni in New York and Clare Kane in London; Editing by Dale Hudson)

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