Were rules forcing OTC trading into clearinghouses to preempt an increase in electronic trading instead of independently negotiated trades, Carrier notes that Wall Street banks could face further pressure on trading earnings.
"[We] view clearing alone as a modest headwind," writes the analyst. JPMorgan could see a 4% earnings hit as a result of having to process trades through clearinghouses, however, the move could free up capital for the nation's largest bank by assets.
On the other hand, Carrier cites Goldman as being among "a few of the leading dealers" that could "gain a first mover technological advantage," from the switch.
The implementation of the new swaps rules is just the beginning of reforms to some of the risky trading environment prior to the financial crisis, as Wall Street and Washington continue to hammer out the so-called Volcker Rule to put limits on how much capital megabanks can speculate on risky trading activities.
-- Written by Antoine Gara in New York