Tuesday, October 25, 2016 Stamford, CT USA — Before 2008, revenues and profits on bank trading desks were so high that costs didn’t really matter. Those days are over. Today, sell-side trading desks are suffering from a dangerous combination of low trading volumes, new regulations and climbing costs. 

To help banks navigate these challenges, Greenwich Associates today published a new report, based on interviews with several thousand market participants through 2016, featuring 10 recommendations broker-dealers can take to keep their trading desks relevant. 

“When sell-side trading desks were generating amazing profits and returns on equity, banks didn’t have to worry much about efficiency,” says Kevin McPartland, Greenwich Associates Head of Research for Market Structure and Technology, and author of The Transformation of the Trading Business.  “The changes banks are implementing today are painful in the short-term. But becoming leaner and meaner now will mean long-term success once the cyclical economic factors eventually improve.”

While some of the headwinds facing trading desks are cyclical in nature, waiting for market conditions to become more favorable won’t be enough.  How focusing on profitable rather than high revenue clients, finding your niche, carefully managing your reputation, moving away from legacy technology, and making other changes to process and culture can ensure long-term viability are all examined in detail.

While some of the headwinds facing trading desks are cyclical in nature, waiting for market conditions to become more favorable is not enough.  “Sell-side trading desks have been upended by structural and cyclical changes,” says McPartland. “Becoming leaner and meaner now will mean long term success once the cyclical economic factors eventually improve.”