MARGIN FALL

There’s at least one area of banking where bonuses may get smaller

Obsession
Future of Finance
Obsession
Future of Finance

Wall Street is still making money, but at least one group of bankers—stock traders in particular—are on track to get smaller bonuses, according to year-end projections from consultant Johnson Associates. However, their colleagues in investment banking who underwrite bond and stock offerings may have more to celebrate about.

Humans, as well as machines, are making less money from trading this year amid a long dry spell in volatility. Traders often blame central banks like the Federal Reserve for the lack of price swings, citing their use of unconventional policies to ease financial conditions. They also point to post-crisis bank regulations as a reason why markets seem so placid (and unprofitable).

The so-called Volcker rule restricts banks from trading with their own capital. They can still do it, but as a service called market making. The idea is to help ensure bids and offers are available when investors want to make transactions, while at the same time limiting the amount of risk banks take. Wall Street says the rule is cumbersome and greatly dislikes the regulation. It’s also probably among the reasons the industry is less profitable than it used to be.

Traders could be in line for better bonuses in the future however, as the Trump administration reviews ways to overhaul proprietary trading rules. Wall Street banks have been asked by one of their watchdogs to offer feedback on how to revise the Volcker Rule.

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