Propping up profits

Proprietary trading at the larger banks is contributing a worryingly large share of profits to the bottom line, say market observers. Richard Bravo reports on whether an imbalance in the risk-reward equation of such an investment strategy is developing

The halcyon days of 2003 are over, but the much-anticipated downturn in fixed income has yet to materialize. And yet there are concerns that a secular shift in how the larger investment firms are making their money is adding too much risk to their investment strategies. Some have even argued that the proprietary trading operations at the major banks are signaling a change in the fundamental role that these financial institutions play, making them more akin to riskier hedge funds, not the