Why JPMorgan is exiting prop trading

The decision by JPMorgan CEO Jamie Dimon (Jamie Dimon news) to exit proprietary trading has been attributed to Dodd-Frank, in particular the Volcker Rule. But you have to wonder if the bank was considering a drastic scale back anyhow.

Some huge prop trading losses may have left a sour taste in the mouth of Dimon, who doesn't hail from a trading tradition. Recall that back in April, a JPMorgan commodities trader named Chan Bhima lost $130 million due to ill-timed wagers on European coal prices. A massive surge in prices went against the trader, and the effect was devastating. It really rocked the coal market. Bhima was later let go.

You don't get a sense that the bank is trying to preserve the value of prop traders by either transferring them en masse into market-making units where they can continue to ply their trade or transfering them to hedge funds. It really does seem like a clean break.

For more:
- here's an overview from Portfolio

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Prop bets vs. agency trades at Goldman Sachs
Can prop trades be disentangled from client trades?
Jamie Dimon at the top of the industry?
Another whistleblower emerges at JPMorgan

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