Is the lack of competition when it comes to trading on behalf of clients a problem? In years past, the widening spreads on stocks and other securities were a huge problem that prompted some severe regulatory action against what some saw as collusion. But it's not collusion this time around, its a good old-fashioned lack of competition.

The Economist seems to think that situation, as much as anything, accounts for Goldman Sachs' stunning second-quarter performance. As an example, it points to agency bonds, noting that dealers can earn 10-15 times more than before the crisis making markets in such stocks. We'll see how long this will last. You would think that others would sense an opportunity and enter the market, thus driving down spreads, but we'll see. Making markets takes capital and requires a firm to assume risks, which isn't in vogue right now. Except at one firm.   

For more:
- here's the article

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