Boutique debt trading firms were all the rage just two years ago. The conventional wisdom at the time was the bulge bracket firms were debilitated by the financial crisis and a recovery would take many years, especially during a tough regulatory climate. As commissions soared, boutiques offered favorable cuts of commissions and attracted a lot of talent. But the big firms proved them all wrong. And the boutiques are now struggling.

These new firms are now being "squeezed," Bloomberg reports. Many have been forced to lay off staff. For example, "BTIG LLC, an equities broker that hired 75 debt traders and salespeople in 2009, has lost at least 42 fixed-income staff in the past year," and LaBranche "shut its debt-trading operations in July, informing clients in an 11-word email."

More carnage is in store for the roughly 70 boutiques that entered the market in 2009. The trend suggests market making activity will likely always be found superior to arranged trades.

Many traders have gone back to big bulge bracket firms. But some may be squeezed out of the industry altogether.

For more:
- here's the Bloomberg article

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