The Banking and Strategy Initiative

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Volcker, Job Cuts and Trading risk on

Paul Volcker, former head of the Federal Reser...

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With a new cycle for profitable trades, the depleted staff at investment banks may still be able to generate the revenues it has missed int he first 3 quarters though not more than 10% uptick from the 60% level of client and other trading revenues may be possible. Of course that means the European Tobin tax on each transaction (meant to discourage STT? or dispel that aura of bankruptcy arnd Treasuries nowadays?) meanwhile, it was fun to listen and read experts talking of 17 slices ( tests) on a daily worksheet for each trade to pass muster for requisite margining and capital base allocation in the banking system from here on.

Needless to say, it would apparently be unnecessary for most to read the regulation and more likely that each trading team will use the lay of the land to determine which trades to commit for their risk capital and earning opportunity. Sounds complicated and is apparently a reson why the top 4 investment banks and many boutiques are just waiting for even 2012 to pass by and thinning their ranks.

Now that Volcker is up for approval, noises against Volcker have died down a bit and our media just reporting the 10000 Wall Street jobs at risk for the quarter than the 100,000 banking and trading jobs being lost at the Top 20 banks, making a distinction from the European has beens just at the time their brand of regulation ( and regulatory failure) takes centre stage. The European situation has also crystallised on Greece else it would have been interesting to watch the interlinkages play out in the public domain vis-a-vis Volcker


Fixed-income revenue at Wall Street firms could shrink by 25 percent as a result of the Volcker Rule, estimated Brad Hintz, an analyst with Sanford C. Bernstein, according to Bloomberg News. Regulators will start issuing drafts of the rule on Tuesday(Dealbook/A Sorkin/Bloomberg)

The draft proposal, written by regulators including the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corp., forbids market-makers who trade debt securities for customers from amassing positions “in expectation of future price appreciation,” Hintz, of Sanford C. Bernstein & Co., wrote today in a note to investors. “Thus flow trading may be prohibited.”


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