Yet the opaque trading environment has made it easier for Wall Street banks to mark up prices charged to outside buyers, which in turn has made CDS trading a huge profit center for the banks. In all, CDS trading amounts to 15% to 25% of top Wall Street firms' trading revenues, estimates CreditSights analyst David Hendler.
In the first two quarters of 2007, when trading revenues were at their peak, Mr. Hendler estimates J.P. Morgan could have cleared $1 billion to $1.9 billion from CDS sales and trading. For Goldman Sachs, that would mean $2 billion to $3.4 billion, said Mr. Hendler.
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