Despite the historically weak September month for the markets, a pick-up in trading activity could help boost revenue for some of the biggest banks and broker-dealer related exchange traded fund.
The iShares US Broker-Dealers ETF (NYSEArca: IAI), which lagged behind the broader market for much of the year, is beginning to gain momentum, rising 7.9% over the past three months, compared to the 4.6% gain for the broader Financial Select Sector SPDR (NYSEArca: XLF). [A Quiet Rally for Broker-Dealers ETFs]
September could provide a positive catalyst for third-quarter trading results after a slow August and a moderate July, reports Mary Thompson for CNBC.
“Oil, rates and foreign exchange picked up in September from August,” Barclays analyst Jason Goldberg said in the article, also noting that debt and equity issuance have done well, which should have a positive impact on trading.
Investors have been piling into the equities market as U.S. stocks touch new highs. Trading activity also picked up around a record $21.8 billion initial public offering from China’s Alibaba (NYSE: BABA). Additionally, short- and intermediate-term interest rates saw increased activity as investors positioned against Federal Reserve’s rate outlook.
“Industry-wide activity so far in September has also bounced sharply from a slow August, with investment grade trading activity up 25 percent from August, and high yield up 34 percent industry-wide respectively,” according to Keefe, Bruyette and Woods.
The industry experienced a slowdown in trading action last year for FICC, or fixed-income, commodities and currencies, due to uncertainty over the Fed’s plan to wind down its asset purchase program, along with the government shutdown. For instance, Goldman Sachs, (NYSE: GS), which derives over 40% of its revenue from its trading branch, experienced a 44% drop in FICC.