New report by McKinsey suggests that the implementation of Dodd Frank's swaps rules and the rise of new electronic trading platforms will reduce revenue from major banks' swaps business.
Swaps....deals used to be hammered out over the phone between companies and their banks. But swaps now need to be traded on electronic platforms. Similar shifts have lead to huge drops in prices banks could charge in other markets in the past. The swaps business - with a total outstanding volume of $710 trillion around the world - is dominated by Citigroup Inc, JPMorgan Chase & Co and Bank of America Corp, Goldman Sachs Group Inc and other large banks. These banks have been showing sharp drops in their fixed-income business in the past few quarters, a trend that was partially explained by the rise of the new trading platforms - called Swap Execution Facilities - McKinsey said.