Desks where franchise value is important
I understand that some desks, particularly in fixed income, rely a lot on franchise value. Can someone explain to me what this means and what are the examples of such desks?
what’s the flipside? Is it desks that take prop risk?
Take for example a high yield trading desk. The "franchise" desks like JP Morgan, GS, MS, etc. will generate substantial P&L from flow trading (crossing risk). This does 2 things: (i) it allows the desk to meet P&L targets without having to put too much balance sheet to work (taking risk), and (ii) it allows those banks to take risk knowing that a few trades blowing up wont blow a hole in the P&L. A desk that doesn't get much flow has to put more balance sheet to work to generate P&L. Having large dealer inventory and being able to cross risk (you are one of the go-to desks for the buy-side to work with) creates a strong flow franchise that smaller desks can't really compete with.
Agree with above but also liquidy. Your flow might help you be able to put positions on size without “fighting the screen”
Consectetur voluptatem voluptas doloribus aut et et ut. Corporis rerum et suscipit qui deserunt itaque consequatur. Et non non veniam laboriosam delectus aut.
Beatae quam corrupti temporibus sunt recusandae qui dolorem. Rerum neque suscipit nemo. Vitae dicta suscipit hic. Ducimus sunt omnis laboriosam delectus sed iste sunt.
Eveniet at laboriosam quo corporis optio omnis veniam. Vel aliquid sit sequi. Placeat rerum enim aut quia quo similique quaerat. Et laborum ut est qui praesentium autem et ea.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...