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JPMorgan to close proprietary trading

The JPMorgan Chase building is seen in New York City.

TEXT OF INTERVIEW

BILL RADKE: Speaking of financial regulation, JPMorgan Chase is shutting down its proprietary trading desks. These are the places where JPMorgan trades on its own behalf -- instead of on behalf of clients. Marketplace's Jeremy Hobson joins us now live from New York to explain. Good morning.

JEREMY HOBSON: Good morning, Bill.

RADKE: What's JPMorgan saying about this?

HOBSON: Well they're not saying anything. But a source familiar with the situation tells Marketplace that indeed, the operations are being shut down. Now, this is something that all the U.S. banks are going to have to do to comply with the part of the financial regulation bill that's aimed at keeping banks from taking huge risks with their own money. I spoke with Brad Hintz, a bank analyst at Sanford Bernstein. He says this is a big deal.

BRAD HINTZ: Wall Street makes somewhere between 10 and 15 percent of its revenues in trading from proprietary trading, and you'd rather act quickly on this because if you don't, the traders are going to leave the firm.

By acting quickly, he says, banks can shift top talent to other parts of the firm or perhaps spin them off into a hedge fund.

RADKE: But if this kind of trading is such a big business -- what will its demise mean to the banks?

HOBSON: Brad Hintz says it means they'll face stiffer competition from European banks, which can still do proprietary trading. But he says that U.S. banks will also use more of their money not to trade for themselves, but to lend -- which is still, after all Bill, one of the main things banks are supposed to do.

RADKE: Bank lending, something we have been hearing so much about. Marketplace's Jeremy Hobson, thank you.

HOBSON: Thanks Bill.

About the author

Jeremy Hobson is host of Marketplace Morning Report, where he looks at business news from a global perspective to prepare listeners for the day ahead.
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