The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Banking

Proprietary trading: Safer figures against prop trading

Prop trading large part of revenues; Volcker Rule needs to go further

So proprietary trading does not add much to the bottom line for banks and the Volcker Rule will have little impact? The banks are not being entirely accurate in making this suggestion, according to data produced by a group of economists in the US.

Safer (the economists’ committee for stable, accountable, fair and efficient financial reform) released a paper in February disputing claims by US investment banking franchises that prop trading contributes only a small proportion of revenues.

Goldman Sachs is reported as claiming that its prop trading is just 10% of revenues.

Gerald Epstein, coordinator of Safer and a professor of economics at the University of Massachusetts, suggests that some banks are using the wrong figures to defend their claims. "They are pointing to principal transaction revenues as a percentage of total revenues, but using net revenues instead makes much more sense." The difference results in proprietary trading accounting for twice the percentage that banks claim. Principal transactions in 2008 for Goldman Sachs were 15.11% of total revenue, but 36.43% of net revenue. Morgan Stanley’s principal transactions were 5.09% of net revenues for 2008 compared with the 2% of total revenues that the bank has been highlighting.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree