The Investment Industry Association of Canada has released its Securities Industry Performance Report, 4Q08 with the highlights:
- Operating revenues and profits fall 7% and 46% respectively from previous quarter and 15% and 39% from 2007.
- Margin borrowing hits five year low as client debt margin outstanding falls to $8.8 billion at year end
- Investment banking revenues drops back 33% for the year.
I found the commentary regarding proprietary trading to be of most interest:
Mixed results were witnessed in the principal trading business– while fixed-income desks experienced recent high revenue, their equity counterparts suffered a recent record low. Bond traders were successful in re-balancing inventory positions in advance of changing credit market conditions and were able to earn trading profits in 2008. Equity trading however suffered trading losses of $11 million on the year, the worst showing since 1990.
That’s the danger of day-trading. It’s immensely profitable through the cycle – but you have to have the capital to survive a bad year … or two.