Derivatives moolah

September 29, 2009

The nation’s top commercial banks are poised to generate record revenue from trading derivatives this year. And that’s as good a reason as any why no one should expect the nation’s bank to go along peacefully with a plan to regulate the trading of these sophisticated instruments.

In the first half of the year, the 25 biggest commercial banks took in $15 billion from trading derivatives, with JPMorgan Chase and Goldman Sachs being two of the biggest beneficiaries. And as things stand now, the nation’s banks will easily surpass the record $18.8 billion in derivatives trading revenue taken in during 2006.

In short, there’s a lot of money to be made from trading derivatives. So don’t expect banks to easily accept new rules that will put a crimp in this important source of income.

Oh, and just where did Goldman get most of its derivatives trading revenue from? Trading credit default swaps and other credit derivatives. The OCC reports that Goldman, in the second quarter, raked-in $1.48 billion from trading CDS-like transactions.

That ain’t chump change.

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Matthew, if there is a winner, there must be a loser.

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