2013 saw significant progress in terms of implementation of the strict provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Referred to as the “Volcker Rule”, a key section of the Dodd-Frank Act prohibits “proprietary trading” but allows activities such as underwriting, market-making, risk-mitigation, and hedging for trading activities for third parties. The entire Act is complex in nature, and standard practices still remain to be finalized. Financial firms deriving significant revenues from trading divisions, including large global investment banks, felt the heat from these regulatory restrictions on trading, and as a result, trading revenues took a dip.

With these developments as a backdrop, let’s look at how some of the top trading firms performed in recent past and which made it to the list of top trading firms (based on the trading revenues). Most trading firms remain a part of larger global investment banks, and details specific to trading revenues have been sourced from annual reports or other sources, as available.

  • Barclays PLC (BCS): Although the London-based Barclays does not directly report trading revenues, its annual report does provide insights. Based on the available “Investment bank daily trading revenue” histogram, the trading turnover for Barclays comes to GBP 10.66 billion or $17.6 billion, securing it the topmost position in the list of trading firms for 2013.
  • JPMorgan Chase & Co. (JPM): One of the largest investment banks, JPMorgan managed to secure total trading revenues of $20.26 billion, with $15.5 billion coming from fixed income, currency, and commodities (FICC) trading and the remaining $4.76 billion from equities trading. JPMorgan remains one of the only trading firms that marginally improved on trading revenues compared to the previous year, with a gain of approximately 2%.
  • Citigroup, Inc. (C): Citigroup managed revenues of $13.1 billion in FICC trading and $3.02 billion in equity trading, totaling $16.12 billion for 2013. Like most other trading firms, it had a marginal decline of around 2.8% in trading revenues.
  • Goldman Sachs Group, Inc. (GS): The financial giant was known to generate a significant portion of its revenues from trading activities across equities and FICC, however, this has declined considerably from 78% to just 45% between 2009 and 2014.

Overall trading generated $15.7 billion in 2013 for Goldman Sachs. Comparing year-to-year, Goldman leads the pack for having the biggest decline in trading revenues, around 15% between 2012 and 2013. 

  • Bank of America Merrill Lynch (BAC): Formed by mega merger of Bank of America and Merrill Lynch, this firm had trading revenues reported to be $13.59 billion in 2013, a decline of around 4.8% compared to 2012.
  • Deutsche Bank AG (DB): German-based Deutsche Bank reported total sales & trading revenue of €9.6 billion (approximately $13.15 billion). Trading revenues of debt and other products contributed €6.9 billion, while equity sales and trading accounted for €2.7 billion.
  • Morgan Stanley (MS): The New York-headquartered Morgan Stanley is an established investment bank with significant revenues coming from trading. Overall trading revenues for 2013 were $10.81 billion, a dip of around 2.7% compared to the previous year.
  • HSBC Holdings plc (HSBC): London-based HSBC reported net trading revenue of $6.921 billion, leading to a net trading income of $8.69 billion.
  • UBS Group, Inc. (UBS): In 2013, the Switzerland-based investment bank UBS reported trading revenues from equities of CHF 4.03 billion; revenues from foreign exchange, rates, and credit of CHF1.59 billion; and total trading revenues of CHF 5.69 billion (approximately $ 5.058 billion)
  • Credit Suisse (DHY): The top-ten trading firm list ends with another Swiss investment bank. Credit Suisse reported trading revenues of CHF 2.75 billion (approximately $2.475 billion).

The Bottom Line:

Because of its significant contribution to overall revenue generation, trading continues to remain the most attractive stream of business among global investment banks. As stricter regulations come into effect every day, trading business and revenues are bound to take a hit, as has been the case for banks like Goldman Sachs. Going forward, trading firms and respective trading divisions within large global banks will have to take innovative approach to maintain their lead in trading.