a**i
发帖数: 608 | 1 市场急需 CRASH 一把来提高点人气，
否则很多机构和短线 trader 包括 day trader 都要死掉了。
Wall Street Equities Traders Face Worst Year Since 2006
By Michael J. Moore | Bloomberg
Wall Street banks' equities-trading units aren't getting much relief from
the strongest stock rally since 2009, as sinking volume and already thin
margins threaten to make their annual performance the worst in six years.
Third-quarter equities-trading revenue probably fell 14 percent from the
same period in 2011, the fifth straight drop of more than 8 percent,
according to estimates by Kian Abouhossein, a JPMorgan Chase & Co. (JPM)
analyst. Full-year revenue at the five largest U.S. investment banks may be
the lowest since 2006, UBS (UBSN) AG's Brennan Hawken wrote in a Sept. 19
note to clients.
Equities trading, which generated $40 billion for the nine largest global
investment banks last year, has been an attractive business because capital
requirements aren't as strict as those threatening fixed-income returns.
Lower volumes have damped that optimism as investors remain skeptical about
the global economy, which may lead to job cuts.
"It's already a business that was being run on quite thin margins," said
Richard Staite, an analyst at Atlantic Equities LLP in London. "Now you need
to see more banks dropping out. The marginal players will have to or are
already looking at these business lines and whether there is any
justification for remaining in them."
Stock Surge
Royal Bank of Scotland Group Plc said in January it was exiting cash
equities, the trading of common shares on public exchanges, and failed to
find a buyer for its European unit. Citigroup Inc. (C) and London-based
Barclays Plc (BARC), which have the smallest market shares among the nine
investment banks, lost ground over the year ended June 30, while Goldman
Sachs Group Inc. and New York-based Morgan Stanley (MS), the biggest, gained
.
Equities, which account for about a quarter of total trading and investment-
banking revenue, includes commissions and gains from buying and selling
stocks, futures, options and other equity derivatives, as well as fees and
interest income from providing services and lending to hedge funds.
The estimated drop in third-quarter equities-trading revenue came even as
the Standard & Poor's 500 Index (SPX) rose 5.8 percent in the three months
and the Stoxx Europe 600 Index (SXXP) climbed 6.9 percent. The S&P 500 is up
15 percent so far this year, which would be the biggest annual increase
since 2009.
The rally isn't enough to stem the decline in volume. Average daily volume
for U.S. equities was 6 billion shares in the third quarter, the lowest
since at least 2008 and about half the 10.9 billion average in the first
quarter of 2009. The figure has dropped year-on-year for 12 of the past 13
quarters. Volume on the London Stock Exchange fell 11 percent from the
second quarter and is up 2.6 percent from a year earlier, according to data
compiled by Bloomberg.
Lower Volatility
Outflows from equity mutual funds and lower volatility have helped depress
volumes. Money has exited U.S. equity funds in 2012, the sixth consecutive
year of outflows, Richard Ramsden, a Goldman Sachs analyst, wrote in a
report last month. The Chicago Board Options Exchange Volatility Index (VIX)
, or VIX, has averaged 18.13 so far this year, down from 22.09 for the same
period in 2011 and 23.65 in 2010.
Banks' revenue also is reduced by the continued move to electronic trading,
which accounts for as much as 70 percent of transactions on the Nasdaq Stock
Market and generates lower margins than voice orders. Institutions pay an
average of 2.05 cents per share for orders that require handling compared
with 1.08 cents for those entered through algorithms, according to Tabb
Group LLC.
BlackRock, Vanguard
The drop in volume and margins isn't hurting all financial firms. Asset
managers including BlackRock Inc. (BLK) and Vanguard Group Inc. benefit from
paying lower spreads and stand to gain from the third-quarter rally.
BlackRock, the world's largest asset manager, gets more than half its base
fees from equity products and is expected to post its highest adjusted
earnings per share since 2010 when it reports third-quarter results this
month, according to the average estimate of 19 analysts surveyed by
Bloomberg.
Even firms with the most market share are hurting. Goldman Sachs (GS)'s
third-quarter equities-trading revenue may have fallen 23 percent from a
year earlier to $1.8 billion, estimated Chris Kotowski, an Oppenheimer & Co.
analyst in New York. Revenue at Morgan Stanley may have dropped 11 percent
to $1.2 billion, according to Credit Suisse Group AG (CSGN)'s Howard Chen.
Spokesmen for Goldman Sachs, Morgan Stanley, Citigroup and UBS declined to
comment. The companies will report third-quarter results later this month.
‘Under Pressure'
Banks are suffering from equities markets driven largely by macroeconomic
and political events, such as Europe's debt crisis, said Keith Davis, an
analyst at Farr, Miller & Washington LLC, which manages about $800 million.
"It's going to be a continued environment of risk-aversion and really quick
trigger fingers on the part of portfolio managers to protect gains," said
Davis, who is based in Washington. "It will be quite some time before there
are money flows into hedge funds and you have aggressive money going after
aggressive returns like the old days."
Banks including Zurich-based UBS and Morgan Stanley have cut their fixed-
income trading units as new rules force them to hold more capital against
complex securities. Equity products haven't faced the same increases, as
most trade on exchanges.
Equities trading "has been overlooked for some of the deeper cuts given the
attractive capital-light profile," consulting firm Oliver Wyman and Morgan
Stanley analysts wrote in a March report. "As a result, the economics of
these businesses are likely to continue to be under pressure as banks fight
tooth and nail for market share."
Job Cuts
The number of front-office equities employees, who produce about half as
much revenue per person as fixed-income salesmen and traders, has climbed 1
percent since 2009 at the 10 largest investment banks, while the ranks of
their fixed-income counterparts have dropped 8.9 percent, according to data
from industry analytics firm Coalition Ltd. That may change as companies are
forced to respond to the volume drop, Staite said.
"With these volumes, you can't just get paid for being there, for polishing
the handle on the big brass door," said James Glickenhaus, general partner
at New York-based asset manager Glickenhaus & Co. "These banks are beginning
to see that they're going to have to start being more efficient, and I'm
not sure they're all going to do so well at that."
Nomura Holdings Inc. said last month that it's folding cash equities outside
Japan into its Instinet unit, the brokerage it acquired in 2006. That may
result in 200 job losses, according to a person briefed on the plans. ING
Groep NV, the biggest Dutch financial-services company, said yesterday that
it will cut 130 jobs as it closes its emerging European equities operation.
‘Strategically Important'
UniCredit SpA, Italy's largest bank, said in June it would scale back its
central and eastern European equities business. RBS in April agreed to sell
most of its Asia-Pacific cash equities unit to Malaysia's CIMB Group
Holdings Bhd.
While there are too many firms with equities units given the current volume,
investment banks are reluctant to exit the business because it's seen as
necessary to securing underwriting deals and advisory assignments, said
David Trone, an analyst at JMP Securities LLC in New York.
"In a normal business industry, there would be rationalization," Trone said
in an Aug. 29 interview on Bloomberg Television's "Market Makers" program. "
But you don't have that happening because it's a strategically important
product to be in. It's very hard to do these other things, like M&A, if you
don't have an equities business."
Prime Brokerage
Amid the decline, the top equities-trading banks have suffered less than
smaller players. Goldman Sachs, which generates the most revenue from
equities, captured about 22 percent of the total for the top nine firms in
the year ended June 30. That was more than 3 percentage points higher than
in the previous 12 months. Credit Suisse, Morgan Stanley and New York-based
JPMorgan, which ranked second through fourth in equities trading revenue in
2010, all gained share over the four quarters through June.
The top four firms have benefited from having the biggest prime-brokerage
units, according to 2012 rankings from hedge- fund magazine Absolute Return
& Alpha. Morgan Stanley Chief Financial Officer Ruth Porat has said the
business, which provides services to hedge funds including trade processing
and securities lending, helps drive other equities-trading revenue as
clients are more likely to trade with the firm.
Citigroup, UBS
Citigroup and UBS had the biggest drops in revenue market share as trading
losses exacerbated the industrywide decline. New York-based Citigroup shut
its equities proprietary-trading unit in January after 2011 losses and
changed management following what CFO John Gerspach called derivatives "
underperformance."
UBS said it lost 349 million Swiss francs ($372 million) in the second
quarter tied to Facebook Inc. (FB)'s initial public offering. The Swiss firm
has promised legal action against Nasdaq OMX Group Inc., which UBS said
performed a "gross mishandling" of the IPO. The bank has the top market
share in European equities trading, according to a Greenwich Associates
survey of institutional investors released last month.
Earning commissions and spreads from trading common shares on public
exchanges accounted for about 40 percent of investment banks' equities
revenue last year, according to Coalition data. Less than a quarter came
from equity derivatives, which include exchange-traded funds and uniquely
structured bets on market volatility. An additional 30 percent came from
prime brokerage, and about 10 percent from futures and options.
In 2007, derivatives accounted for about 40 percent of the total, while cash
equities generated 29 percent and prime brokerage 24 percent. Options and
futures contributed 7 percent.
‘New Reality'
Equities trading also may have been hurt by a lack of confidence in market
structure after $862 billion was erased from stock values in 20 minutes in
the so-called "flash crash" of May 2010. This May, Nasdaq was overwhelmed by
order cancellations and trade confirmations were delayed on the first day
of trading in Facebook shares. In August, Knight Capital Group Inc. (KCG)
was rescued by an investor group after a computer malfunction caused a $440
million trading loss.
Each incident has hurt retail investors' willingness to trade, Glickenhaus
said.
As long as the economy continues to struggle, "these businesses are going to
be slow to get to their former form," said Davis of Farr, Miller &
Washington. "Unfortunately, that's the new reality." |
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