Lunchtime Links: Morgan Stanley's underpaid traders start showing everyone how it's done

Morgan Stanley is not thought to have paid its traders particularly well last year.

In December, James Gorman warned that traders' bonuses could fall as much as 30%. It subsequently emerged that an abnormally high proportion of bonuses at the bank had been deferred.

Despite this, despite allegedly missing an internal fixed income revenue target by 40% and despite rumours of big losses on an inflation trade, Morgan Stanley's traders appear to have done very well in the second quarter.

Its Q2 results, out now, show second quarter fixed income revenues fell 10% year on year. At Goldman they were down 53% over the same period.

Success may have something to do with Morgan Stanley's newfound appetite for risk.

While Goldman's average daily VaR across all businesses fell 26% year-on-year in the second quarter, Morgan Stanley's rose 4%.

Success may also be related to the fact that Ken deRegt was made head of the fixed income trading business at Morgan Stanley in January and that - as former head of risk at the bank - he's allegedly been given more autonomy than his predecessor Jack DiMaio.

Either way, Morgan Stanley seems to be paying its traders and investment bankers more than it used to. Compensation and benefits in the institutional securities business were up 10% year-on-year in absolute terms in the first half. The compensation ratio increased from 39% to 48% over the same period.

"Morgan Stanley is the new Goldman Sachs. Every one of their divisions shows an improvement and the improvement in trading operations is especially impressive." (Reuters)

Morgan Stanley has hired Aileen Daley from Citigroup to help it cope with new banking regulations in Europe. (Financial News)

Geoffroy Houlot, a former Morgan Stanley prop trader who joined Brevan Howard in January 2010, has left. (Financial News)

RBS says fixed income revenues won't be much good in the third quarter either. (CityAM)

Credit Suisse's co-head of global securities is leaving after 25 years. (Wall Street Journal)

The EU might try to proscribe bonuses that exceed a specific proportion of compensation. (CityAM)

Josef Ackermann is attending the European banking summit. (Reuters)

There will not be a bank tax after all. (Financial Times)

Is Bank of America at risk of a death spiral. (Naked Capitalism)

"The word today in banking, which is a word that bankers aren't used to, is 'productivity." (Wall Street Journal)