Pinching the Banks a Little More
Matt is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The Wall Street Journal's article highlighting the fact that currency trading is getting squeezed for banks is a good reminder of what's a near-constant threat for many bank businesses: transparency.
And the explosive growth of electronic trading has brought transparency to a roughly $4 trillion-a-day market, making buyers and sellers less reliant on big banks to pair them up.
We've of course seen this in a big way with stocks -- $10 trades anyone? But it's been a bit slower to happen in other areas of the market, like FX and bonds, but, as WSJ is reminding us here (well, and the banks' results are reminding us) it is happening.
WSJ highlighted Deutsche Bank (NYSE: DB), Barclays (NYSE: BCS), and Commerzbank as struggling with the falling FX trading income. Thinking about that bigger picture though, if we think about the big trading profits at IBs like Goldman (NYSE: GS) and Morgan Stanley (NYSE: MS), that's thanks in large part to the opacity of the markets that are being transacted in and the banks' traders' ability to navigate those markets.
Efficiency and transparency may be good for the markets and good for customers, but it's a constant threat for banks.
TMFKopp owns shares of Barclays PLC (ADR) and Morgan Stanley. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend Goldman Sachs Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!