Derivative Regulation Could Reduce J.P. Morgan Revenue by $3B

Increased regulation that would restrict the major banks, hedge funds and other investors that trade derivatives on what have been called ‘dark markets’ for their lack of oversight, could reduce revenue at J.P. Morgan (JPM) by up to $3 billion, MarketWatch reports citing a Sanford C. Bernstein & Co. analyst.

MW: “Regulation of derivative trading could reduce revenue at J.P. Morgan & Chase Co. by up to $3 billion in a worst-case scenario, resulting in a hit to earnings that may reach 20 cents a share after expenses, reserving costs and taxes, a Sanford C. Bernstein & Co. analyst said Wednesday.

“Aside from compensation, the investment bank faces a number of other potential regulatory headwinds including increased derivative regulation from the CFTC, and higher capital requirements for certain trading assets,” analyst John McDonald wrote in a research note Wednesday following a meeting with the executive chairman of J.P. Morgan’s investment bank.

“Management acknowledged the potential challenges of increased regulation and emphasized that the company could quickly adapt its business model to the new regulatory environment, once the new guidelines become clear.”

JPM shares were off 55 cents, or 1.30%, to $41.67  in recent NYSE action.

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