Despite the attempts by the Treasury Department and the Federal Reserve to prop up Wall Street’s existing firms and structures, the market is moving in another direction: toward smaller partnerships and away from large publicly held mega-corporations.
Bloomberg treats this as a back to the future story:
Wall Street bond trading is heading back to the 1980s, when private partnerships and independent firms dominated the market.
Jon Bass, who traded debt five seats from Salomon Brothers Inc. Chairman John Gutfreund and later helped run fixed income at UBS AG, joined equity broker BTIG LLC to help start its credit operation last month. BTIG, with a pool table and gym adjoining its seventh-floor midtown Manhattan trading room, is one of more than 50 credit dealers seeking to take advantage of the widening gap at which securities are bought and sold.
Smaller firms are emerging from the wreckage of the world’s largest financial companies, which are conserving capital following more than $1.2 trillion of writedowns and credit losses since the start of 2007. They’re luring traders with a shot at $500,000 commissions for two days’ work as banks that accepted federal bailouts retrench and slash bonuses.
Regionalism. Partnerships. The future is being made on the margins. We need to tread carefully with any new regulations to make sure we don’t stomp these innovations while they are still in their cribs. For more on this trend, check out Larry Ribstein.