JPMorgan Is Shutting Down All Prop Trading Desks
Aug. 31, 2010, 3:00 PM
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JPM Sep 2 2010, 04:15 PM EDT
CNBC just reported that under 20 commodities traders in London were told to apply for jobs elsewhere inside the bank.
They say the move will take around one to two months.
JPM told traders who bet on commodities for the firm’s account that their unit will be closed as the company begins to shut down all its proprietary trading, according to a person briefed on the matter.
The New York-based bank will shut proprietary trading in fixed-income and equities later, the person said.
Banks right now are changing the roles of their prop traders because of new regulations imposed on them by the FinReg bill.
There were rumors a few weeks ago that Goldman would shut down its prop trading units. Since then, those rumors have reversed.
But other banks - like Citi and Bank of America - have already made moves to change the roles of their prop traders.
The announcement about JPMorgan is different because they apparently plan to shut down ALL prop trading desks. News has only emerged about one or a number of prop trading desks closing at other banks.
But shutting down prop trading desks actually might resemble just changing the name of prop trading, not the practice. Prop traders are no longer "prop traders," and many have been moved to client-based desks.
(For a prime example of how the role of prop traders is changing, look how Citi changed one of their star prop traders's, Sutesh Sharma's, role at the firm.)
Proprietary trading can easily become related to client operations and very closely resemble the prop trading done on strictly defined "prop trading" desks.
Thanks to a line in the Volcker Rule which specifies trading "operations unrelated to customer operations," as long as the "prop trading" is done for client-related purposes, it's OK.