Levine on Wall Street: Bored Traders Become Former Traders
You're all fired.
The news is not good for traders at investment banks:
For the 10 largest global investment banks, trading revenue for fixed-income, currencies and commodities, or FICC, units in the first quarter plunged 15.7% from the same period a year earlier, according to data from research consultancy Coalition. The number of FICC traders, researchers and salespeople, meanwhile, fell just 4.8% over that period.
The consensus here seems to be "thousands of layoffs" rather than, say, reducing trader pay, because of course what you want in a trader is someone willing to take the risk of being laid off in slow times in exchange for the upside of getting paid a lot if she's good. One could imagine a trading business that selects for a slightly different personality type (could one?), but that does not seem to be the business that exists.
You're also all bored.
Meanwhile in equities, "Trading volume on the major U.S. exchanges last month tumbled to its lowest level for May since the financial crisis," but the equities traders aren't just sitting around waiting to be laid off. The trick is to use slow periods for learning and marketing. One "uses the down time to send market-related tweets or works on posts for his firm's stock-market blog"; the tweets include such vital market intelligence as "Another completely dead day," and oh boy do I sympathize. If current trends continue, by next week this linkwrap is going to consist solely of that sentence.
BNP is fine, it promises.
Here's sort of a sad story about a BNP Paribas internal memo telling its bankers to "tell clients that the U.S. 'is still clearly a strategic market' for France’s largest bank and 'BNP Paribas is doing everything it can to guarantee that impending decisions won’t have a negative impact on our clients and counterparties and won’t hinder their business activities.'" I feel like if you're a client transacting in dollars through BNP Paribas you're maybe taking some of your own steps to continue your business activities if BNP Paribas can't transact in dollars? And those steps are not principally about listening to your BNP Paribas banker's script? Meanwhile the Justice Department has to keep bidding itself up on banking fines, since people keep "seeing that a $1 billion, $2 billion or $3 billion fine is not necessarily material or fatal to these organizations," and complaining about that, so the fines keep getting more material and perhaps more fatal. And François Hollande is not a fan of the "fatal" idea for BNP, which argues that the "at least five opinion letters from law firms advising on the transactions" saying that it could go ahead and violate U.S. sanctions prove that it was acting in good faith.
The Serious Fraud Office will get one yet.
Here's sort of a funny story about how much the U.K. Serious Fraud Office admires its counterparts in the U.S. and wants to grow up to be like them, in the sense of successfully prosecuting financial crime. David Green is the SFO director:
Mr. Green moved fast to try to bolster the demoralized agency when he took over a little more than two years ago. He stopped guaranteeing organizations that they could avoid prosecution if they self-reported their violations, which he said amounted to free legal advice. “We are not confessors, nor are we advisers or educators,” he said.
On the other hand, neither are they, well, American prosecutors:
The cultural differences between American and British prosecutors are profound. Mr. Green noted dryly that there was no tradition of perp walks and inflammatory news conferences on courtroom steps. Cutting deals is also frowned upon.
“We do not revel in what we do,” he said. “We are not after publicity.”
Perhaps if you want to get $10 billion fines you need to revel at least a little bit in prosecuting banks.
What's up with Valeant?
Jesse Eisinger is unimpressed by its business model of buying drug companies and slashing research and development, though he is perhaps unusually unsympathetic to financial engineering (and tax avoidance). Efficient allocation of capital won't cure cancer, but it might, um, allocate capital to something that will cure cancer. On the other hand he quotes Bill Ackman saying "Superficially, Valeant has some of the indicia that are suggestive of a short, but when you study the facts, you realize that it is a great company," and really saying that you thought about shorting it and didn't isn't the most ringing endorsement. Here are some Pershing Square slides about Valeant and Allergan that are more enthusiastic.
The Beige Book is boring. The blue sheets are inaccurate. "The deli actually grew still." A Pimco guy quit to run a croque monsieur truck. But your Lloyd will never leave you. Matt Stoller is not a fan of Tim Geithner. And if you like linkwraps, now you can read Today in Tabs on the web.
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