JPMorgan Said to End Proprietary Trading to Meet Volcker Rule
September 2nd, 2010Hmm. This is hard to believe. I smell a swindle in here somewhere, but I can’t point to anything specific. Are they really going to roll this up?
Note how the article states that they’re firing between 50 and 75 employees. For a firm like Morgan, this means that room fulls of black box developers and the related IT staff will remain. What are they going to be doing?
My guess is that a cutout will be created via some loophole in the legislation. Bob’s Flash Crash and Bucket Shop will open up down the Street—or in the Caymans—and meet the new boss, same as the old boss.
Via: Bloomberg:
JPMorgan Chase & Co. told traders who bet on commodities for the firm’s account that their unit will be closed as the company, the second-biggest U.S. bank by assets, starts to shut down all proprietary trading, according to a person briefed on the matter.
The bank eventually will close all in-house trading to comply with new U.S. curbs on investment banks, said the person, who asked not to be identified because New York-based JPMorgan’s decision hasn’t been made public.
Closing the proprietary trading desk for commodities affects fewer than 20 traders, one in the U.S. and the rest in the U.K., the person said. The unit is based in London, and traders there were given notice on Aug. 27 that their jobs were at risk as required by U.K. law, according to the person. Proprietary traders in fixed-income and equities, who account for 50 to 75 employees, will need to find jobs when those desks are shut down, this person said.
Congress passed restrictions on financial firms this year designed to prevent a recurrence of the 2008 credit crisis, which almost caused the banking system to collapse. Proprietary trading involves transactions made on behalf of the bank rather than its customers. The curbs are known as the Volcker rule, named after former Federal Reserve Chairman Paul Volcker, who campaigned for limits on risk-taking by lenders.
The Volcker rule may cost JPMorgan as much as $1.4 billion in annual profit, analysts at Barclays Capital led by Jason Goldberg estimated in a June 28 research report.
