JPMorgan to close proprietary trading

Jeremy Hobson Sep 1, 2010
HTML EMBED:
COPY

JPMorgan to close proprietary trading

Jeremy Hobson Sep 1, 2010
HTML EMBED:
COPY

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.

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.