Photo: Syunosuke via flickr
It’s not just hedge funds that are profiting by taking the other side of JP Morgan’s losing billion dollar trade. Dozens of banks including Goldman Sachs and Bank of America have collectively made between $500 million to $1 billion from the bank’s blunder too, the Wall Street Journal reports.Some banks made money off JP Morgan’s positions by trading directly with Bruno Iksil by buying protection on the Investment Grade Series 9 10-Year Index from the bank.
But other banks were able to make a windfall because they they had bought into the positions to sell to clients—who didn’t want them. So it was a stroke of chance that ended with heavy profits for the banks. From the WSJ—
Others acted as intermediaries between their clients and the J.P. Morgan unit, according to traders and people close to the matter. Some of these banks purchased positions from J.P. Morgan intending to sell them to clients but weren’t able to, according to traders and people familiar with the matter. These banks ended up with a serendipitous windfall when the swaps rose in value, leaving J.P. Morgan’s trades with losses.