One big feature of the investment banking Q2 reporting season so far – and it’s likely to be there in UBS today and Barclays next Thursday too – has been better-than-expected trading revenues from the biggest investment banks. On closer inspection these turn out to have been juiced by their share of the IPO proceeds of Tradeweb, the electronic bond trading platform in which many of the major players held stakes. The money has certainly come in handy during an otherwise pretty tough quarter for revenues.
Meanwhile, Tradeweb itself continues to flourish. In June, the firm’s average daily volume across rates, credit, equities and money markets for set a new record of $859.2bn, up 45.8% year on year, according to its website. And last year Tradeweb CEO Lee Olesky announced his ambition to “disrupt” global bond markets in the way that Amazon has done with retail.
But there’s another – more overlooked – aspect of Tradeweb’s ascendency: the fact that it’s hiring the type of technology professionals who might otherwise be attracted to jobs at big banks. The company’s careers site, for example, is full of vacancies for Java and C++ developers – exactly the type of candidates that banks want to hire as they develop their own trading systems.
Elsewhere, according to the Financial Times and more than a dozen internal sources, the final straw for Christian Sewing was November last year, when he was trying to have a civilised lunch with the Federal Reserve’s top regulator but kept being interrupted by police cars arriving to seize documents for their investigation into the Panama Papers. He had seen the investment bank as a bunch of “buccaneers” and “mercenaries” for some while, but from that day onward, “Project Cairo” was put in place.
Nothing had really been decided until after the Commerzbank talks collapsed at the end of April, though. At that point, two fairly major decisions were taken. First, to close the equities business. And second, that Garth Ritchie wouldn’t have a role in the new Deutsche. That, in turn, meant an awkward staffing decision: Ritchie couldn’t very well continue on the Project Cairo team if he wasn’t going to be there, so Christiana Riley, the investment bank CFO, was brought in to replace him.
That must have made for some extraordinary conversations at the staff canteen and by the vending machines. There were almost two months left before the announcement was made, during which time Riley was responsible for a bottom-up analysis of the investment bank to determine what would stay and what would go, taking decisions like the one to maintain most of the research analysts. Having the effective power of life and death over all the business units, while not being able to tell anyone what you’re doing or that your immediate boss is for the chop – that’s a level of stress that few of us are likely to experience in our careers. After that, even promotion to the notoriously difficult regional CEO job at Deutsche’s US operations must have seemed like a holiday.
A degree in daytrading? Prop trading house OSTC is working with a British university to create the world’s first degree program aimed at derivatives traders, including a year of work experience on the computers at OSTC. (Financial News)
It probably says something about the way of the world that “head of internal investigations” is now a prestige job in investment banking. Congratulations to Emma Molvidson, who takes that role at UBS. (Finews)
These things are less exotic than they used to be, but still; Blackstone is floating a bond backed by royalties on songs from the back catalogue of Bob Dylan, Adele, Guns ‘n’ Roses and other artists. The roadshow for the bonds will presumably be less exciting than for the underlying assets, but if investor demand is high, can we expect a “bootleg” bond backed by remixes and rarities? (Bloomberg)
Bizarre story of an airline financing bond deal that went bad, where things got so complicated that some of the creditors have hired private detectives to try and find out how much involvement Lars Windhorst had in structuring the transaction. (Bloomberg)
Analysis of the reasoning behind Rothschilds’ investment in Redburn (optionality, plus benefitting from equity research) and Deutsche’s decision to shut equity trading while keeping research and ECM (risky). (Financial News)
And although most bankers have a set of horror stories about the awful hotels you sometimes get booked into on marketing trips, this couple turned the experience into a $600m customer feedback software business. (Bloomberg)
Image credit: D-Keine, Getty