Why it is that JPMorgan needs to hire in cash equities
JPMorgan wants to hire for its equities business. In their presentation last week, Mike Cavanagh and Daniel Pinto, co-heads of its investment bank, said the bank plans to 'strengthen its equities position this year.' Right now, it's advertising for delta one traders, equity research analysts (autos and media) and technologists to develop its electronic trading platform.
JPMorgan's reason for equities hiring is very clear in light of the table below, taken from last week's presentation. The U.S. bank ranks first or second for most things, but when it comes to cash equities it ranked 6th globally in 2013. In Asia and EMEA it ranked 7th and 8th.
JPMorgan's weak spots
What's going wrong? Chris Wheeler, a director at Mediobanca, points to JPMorgan's historic weakness in electronic equities trading. "JPMorgan's electronic equities platform is nowhere near as strong as its competitors," says Wheeler. "It's already made some progress there, but needs to make more."
A study released this week by Tabb Group reflected JPMorgan's failure to position itself among the market leaders in electronic trading. Tabb surveyed 58 head traders of equity management firms across Europe, the UK and the US (at both hedge funds and long only investment managers) and found that they rated UBS, Morgan Stanley and Credit Suisse as the best providers of electronic equity trading systems. There was no mention of JPMorgan, Nor was there any mention of arch rival Goldman Sachs.
Wheeler says UBS has been the big winner of equities sales and trading market share in recent years. As we noted last month, the Swiss bank is becoming defined by the success of its equities business. The Swiss bank increased its global market share of equities revenues (cash, derivatives and prime broking) from 7.1% in 2012 to 10.2% according to Wheeler's estimations. Over the same period, Goldman's market share declined to 21.2% to 17%. JPMorgan's share stands at a paltry 11.3%. For a market-leading U.S. bank, that's a bit disappointing.