Investors calling their investment banks to place an equities’ order

should not be surprised if the call is not returned. After

Spitzer, the equities’ brokerage business is looking patently

lacklustre. The great research engines that the banks built just cannot

be kept firing on meagre broking commissions. Without the allure

of corporate finance, they are looking distinctly expensive

propositions.

The answer, it seems, is to use all that wonderful research for the

banks to place their own bets. Proprietary trading, which goes in and

out of favour depending on whether it is racking up profits or losses,

is back in vogue in a big way.

Proprietary trading has another appeal for banks. For a while now their

best traders have been walking off to join hedge funds, where they make

a ton of money for themselves. By keeping them in-house, some of those

profits should come through to the bottom line … as well as the

occasional spectacular loss, of course. But the bad publicity and

interference cannot be worse than what has been heaped upon them by

Spitzer.

Brian Caplen

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