Why is Fixed Income Trading capital intensive?
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Also depends on the specific context... For example, for a large, established HF, fixed income (not including credit) is likely to actually be less capital intensive than equities.
I was just reading the news today about many BBs are winding down / shrinking their FICC practice and will focus on less capital intensive businesses like interest rate trading. So I am just wondering why FICC would be considered capital intensive by these banks. Are there any capital requirements for FICC trading?
It's a dealer market. BB buys the bond and then sells it to you instead of just acting as a broker where they take no risk and just earn a commission.
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