Despite an excellent first quarter, traders have generally taken it on the chin for a full decade now. The onslaught of regulations and risk-averse corporate strategies have done more than just result in thousands of pink slips for traders. The job has gotten more boring and less lucrative as well. But a reprieve may be in sight. Volcker 2.0 is coming, and it just may jazz up the workdays of sell-side traders.
The much-anticipated overhaul of the Volcker Rule, which bans proprietary trading and other risky practices, will drop a stipulation that bars banks from making trades that are held for less than 60 days, with the assumption that those trades are speculative and therefore inherently risky. The change is one of many that will be included in a new draft of the rule expected to be made public by the end of the month, according to Bloomberg.
Allowing short-term trades won’t bring back prop trading desks, but it should allow banks and traders to be less conservative and, at the very least, do less sitting on their thumbs. The move should also provide the market with more liquidity, which every trader enjoys.
Still, some industry voices are saying the changes won’t have all that much of an effect because banks are already exploiting loopholes in the rules. Eliminating the subjectivity of Volcker 1.0 and making the language more clear-cut may enable regulators to actually police the rule, says a Bloomberg columnist, who notes that just one enforcement action has been taken against banks since the original rule was penned. Then there is the Goldman Sachs junk-bond trader who earned more than $100 million in 2016 trading distressed corporate debt even though he was acting as a market maker and not taking prop risk as defined by Volcker. He did nothing against the existing rules but found a way to tap into pre-crisis profits (and risk) by holding illiquid securities for days and even weeks while he wanted for buyers and sellers to match-up. It appears traders will have to take a wait-and-see approach on the incoming rule changes.
Elsewhere, two senior UBS bankers have found an ingenious way to avoid the bank’s new mandate that requires managing directors to attend a staggering 250 face-to-face meetings, at minimum: they’ve found new jobs. Severin Brizay, the firm’s head of M&A in EMEA, is headed to Bank of America. As too is Laurent Dhome, a managing director for financial sponsors in Europe.
For the record: the mandate surely had nothing to do with their departures, which were likely already in-the-works. But not be required to visit a client every day isn’t a bad supplementary bonus.
J.P. Morgan investors reelected the bank’s entire board and approved its executive compensation for 2017. CEO Jamie Dimon will keep the entirety of his $29.5 million. However, the annual investor meeting reportedly got a little crazy when the floor was opened to commentary from the public. (Reuters)
New York Democratic Senator Kirsten Gillibrand has suggested that the economic collapse may have been avoided if more women were in positions of power in banking. “If it wasn’t Lehman Brothers but Lehman Sisters we might not have had the financial collapse,” she said. (Daily Caller)
Define irony: Daniel Loeb’s favorite charity ended up funding a 250-person protest aimed at the hedge fund manager and his colleagues that happened to be staged right outside of his front door. (WSJ)
Thompson Reuters is planning to move its foreign exchange derivatives trading from London to Dublin due to Brexit. The company’s $100 billion-per-day spot trading market will remain in London, however. (FT)
Hedge fund managers are limiting their donations to the Republican party because the Trump tax cuts favored corporations over hedge funds. (Vox)
Coinbase will soon become the first major U.S. cryptocurrency exchange to cater to high-speed traders. (WSJ)
Barclays created a new position of chief compliance officer at its investment bank just days after its CEO was fined nearly $1 million for using backchannels to try to identify a whistleblower. Daniel Hodge, Barclays’ former group treasurer, started on May 8. (FN)
The Justice Department and other regulators are no fans of the anonymity provided by cryptocurrencies. They are planning new rules (NY Post)
If you want to feel more peaceful at work try meditating in the office bathroom. (Quartz)
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