Morgan Stanley begins layoffs in credit division

Wed Dec 9, 2015 1:40pm EST
 
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By Olivia Oran and Richard Leong

NEW YORK (Reuters) - Morgan Stanley this week cut staff covering short-term credit and regional broker-dealers, after a quarter in which the bank posted a 42 percent drop in bond trading, several sources told Reuters.

    The sources blamed the shakeup at the No. 6 U.S. bank by assets on tougher capital rules, mounting competition from faster and cheaper trading on electronic systems and expectations that the Federal Reserve will raise U.S. interest rates next week for the first time in nearly a decade.

    The decision to downsize followed one of Morgan Stanley's slowest quarters for bond trading since the global credit crunch.

The bank has been focused on improving profitability within fixed income and has been scaling back businesses that miss those metrics, the sources said.

Morgan Stanley's short-term credit desk, including its commercial paper business, has seen extensive cutbacks, they said.

Morgan Stanley has also significantly reduced the number of bond sales people who cover smaller, regional broker-dealers, they added, although the bank will continue to cover these types of clients.

A Morgan Stanley spokesman declined to comment on the layoffs.

Traders and fund managers interviewed by Reuters said Morgan Stanley's move is hardly a surprise as tougher capital rules, domestic and abroad, have made it less profitable to trade Treasuries, agency debt, corporate bonds and mortgage-backed securities.   Continued...

 
The corporate logo of financial firm Morgan Stanley is pictured on the company's world headquarters in the Manhattan borough of New York City, January 20, 2015.   REUTERS/Mike Segar