Beware the coming cull in equity derivatives

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We've warned about big cuts in equity derivatives before. It now seems those cuts have either come already or are coming very soon.

Rumour has it that JPMorgan has trimmed various senior members of its equity derivatives team, including Neil McCormick, global head of its equity exotics and hybrids and hedge fund-linked business, David Choukroun, global head of product development for flow and exotic derivatives, and Beat Von Gunten, European head structured products for distributor marketing.

The alleged redundancies are fuelling speculation that JPMorgan may reveal a big loss in equity derivatives trading when it announces its 4Q results early tomorrow.

JPMorgan declined to comment on the rumours, but if it has made a loss on equity derivatives it won't be the only one. BNP Paribas, Deutsche Bank and Natixis all made equity derivatives losses in November and Bloomberg says $500m of the $1bn losses announced by Deutsche today are down to equities trading.

The head of equity derivatives research at one European bank says the sale of equity derivative products to retail investors has collapsed: "There's a lot more risk aversion out there and a lot less trading ambition."

Headhunters say BofA/Merrill are expected to make a lot of equity derivatives cuts as the businesses are integrated and other banks have fat to trim. "There are a lot more equity derivatives people to go out there," says one.