Who’s Doing It ?

WSJ Section C1, yesterday, upper right corner. Under the heading "Trading Places" a chart of the 6 year bear market in FI trading at GS, MS, C, BofA and JPM. Goldman and Citi vaporized the largest shares of FI trading with MS making a bold 2011 attempt to ramp up that was quickly aborted. Interestingly, the gist of the article was on increased scrutiny by the SEC to disclose more about their trading ops and revenues. "Hey, we realize you don't do this anymore, so could you now shed some light on it ?!"

The real question is, if these heavily regulated institutions are no longer in the business, who exactly is ? The market for FI is bigger than ever. Anything with a yield north of 1 is considered attractive by default. (see what I did there?) The truth is for all the whining about equity "dark pools", FI trading - from Uncle Sam's stuff to the sketchiest junk - is performed by a cabal of private low profile operators. Central Bank quantitative measures provide pedestrian cover to the activities. Ask John Q. who buys FI and he'll quickly tell you, "The Fed."

Witness the evaporation in JGBs of late and the regulatory reduction in Big 5 FI trading feels a little more scary. When bond prices fall, it seems no one is still "in the business."

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