JPMorgan Chase & Co., the biggest U.S. bank by assets, plans to consolidate its electronic trading system for corporate bonds with other asset classes in the early part of this year as lenders seek to adapt to regulatory changes and reduce costs.
“We’re trying to figure out how our customers would like to execute,” Scott Wacker, the London-based head of FX Sales EMEA at JPMorgan, said today in a telephone interview. “Our target is the end of the first quarter, maybe into the second quarter that we intend to start to offer the ability to execute online for fixed-income products.”
JPMorgan, the most-active underwriter of dollar-denominated debt, is beginning the effort as Wall Street’s biggest banks have pared their corporate-bond inventories by 76 percent since the 2007 peak with new risk-curbing regulations forcing them to reduce their roles as market makers. Firms are capitulating to the growing use of electronic systems to broker bonds that traditionally were bought and sold over the counter with traders as middlemen.
Clients are already using the web-based platform, JP Morgan Markets, for purposes including trading currencies and commodity futures and accessing research, according to Wacker.
Last week, Citigroup Inc., the third-biggest U.S. bank by assets, announced the start of an electronic bond-trading service.
Goldman Sachs Group Inc. spent a year developing an electronic trading system for corporate bonds called GSessions that started operating in 2012.
The profitability of Wall Street firms is being challenged by regulations requiring that they hold more capital as a buffer against potential losses from assets such as corporate debt.
Holdings of company debt at the 21 primary dealers that trade with the Federal Reserve shrank 74 percent to $56.4 billion as of Jan. 9 from the end of 2007, according to the Federal Reserve.