FICC Revenues due to regulation
Hi
We know that revenues took a hit with new regulation as FICC (which was the major driver of top line) got hit badly by the regulation. Can anyone shed light on why exactly it was FICC that took the most brunt in the face of new regulation and why not equities? Also, based on recent quarterly earnings we see FICC is on a bounce back path (may be a little far fetched but revenues are increasing). What could the reason be for the new spurt in FICC? Is it the expected increase in Fed rates?
Firstly, it's because FICC is highly levered, by design. Secondly, it's because regulation specifically targeted FICC, due to it being kind of an epicenter of the crisis. Finally, and somewhat related to the previous points, because of high leverage, FICC can become very capital intensive with relatively small tweaks.
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