Global market intelligence provider and advisory services Greenwich Associates
said that fixed- income dealers who thought market conditions could not
get any worse this year have been proven wrong.
According to Greenwich Associates, in the current market environment,
dealers retaining scale and smaller, potentially more nimble competitors
managed the best in terms of market share or gaining new customers.
In its 2014 Greenwich Share Leaders in Overall U.S.
Fixed-Income research, it said that the two main factors that
contributed to the tough year are: Low rates and new regulations. Low
rates and a lack of volatility kept fixed-income trading volumes
distressingly low and left a number of dealers and investors on the
wrong side of the market as rates declined.
"The bottom line for fixed-income dealers: revenues are down and costs
are up," says Greenwich Associates consultant Frank Feenstra.
New, tougher capital reserves requirements made the balance sheet the
biggest issue and dealers are more constrained than ever as to how much
inventory they can carry and how much liquidity they can provide. New
regulations have also sharply increased compliance costs as banks were
forced to hire hundreds of compliance officers and upgrade IT systems. ......................