This year's withdrawal of large banks from derivatives has cast a spotlight on a market facing drastic change
2014 was the year when draconian rules on derivatives
started to bite, forcing banks to take tough decisions over
their future in derivatives, but what does the withdrawal of
the banks mean?
Barely a month of 2014 has passed without a bank cutting
back in derivatives.
In the past six months Bank of America Merrill Lynch,
Deutsche and UBS have shrunk their commodities units, JP Morgan
and Morgan Stanley have sold physical divisions and, most
recently, Barclays and RBS announced major cuts across fixed
The banks took these decisions for a number of reasons,
including tighter regulation on the commodity assets that banks
can own, tougher position limits on trading and a general
slowdown in the commodities market that has made it less
The bank withdrawals from commodities caught the headlines
but these moves are indicative of a broader trend in
derivatives that has seen many large, established providers
reviewing their fixed income, currency and commodity (FICC)
models in light of tough regulations and difficult market
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