Revenue and (lack of) volatility
The current lack of volatility is not exceptional; in equities, FX, and rates it has merely returned to pre-‘Crunch’ levels.
The link between banks’ revenue and volatility has been overstated. Equally important factors – to name a few – are banks’ risk management, regulatory initiatives, and investors’ inertia.
We reiterate our view that successful banks adapted to ‘flat’ markets by better monitoring of trading patterns and by successfully internalising trades via their electronic trading units.