JPMorgan's Trading Desk Lost Money On Just Two Days In The Past 4 Years

Tyler Durden's picture

Three years ago there was outrage among traders when HFT marketmaker Virtu reported that it had managed to log just one day of trading losses in over 4 years of trading. Many speculated that this was proof that HFTs had managed to effectively rig the market in a way that prevents any trading losses. It now appears that Virtu is not the only one with a near-perfect trading record.

Over the past several years, America's big banks have been loathe to publicly disclose how effective their trading desks are, and as a result several years ago they changed they way they report their "trading losses", usually adjusting for VaR and market-risk. A quick look at JPM's most recent 10-K reveals just that. According to disclosure in JPM MD&A, a reader would be left with the impression that JPM's trading desk is mediocre at best, as a result of the following disclosure:

The following chart compares the daily market risk-related gains and losses with the Firm’s Risk Management VaR for the year ended December 31, 2016. As the chart presents market risk-related gains and losses related to those positions included in the Firm’s Risk Management VaR, the results in the table below differ from the results of back-testing disclosed in the Market Risk section of the Firm’s Basel III Pillar 3 Regulatory Capital Disclosures reports, which are based on Regulatory VaR applied to covered positions. The chart shows that for the year ended December 31, 2016 the Firm observed 5 VaR back-testing exceptions and posted Market-risk related gains on 151 of the 260 days in this period.

Naturally, any time banks purposefully "adjust" or otherwise obfuscate a number, it usually means that the actual, unadjusted number reveals a very different picture, and not surprisingly, the same is true regarding JPM's trading record. Conveniently, during JPM's investor day yesterday, JPM Investment Bank CEO Daniel Pinto presented a 25 page breakdown which among other things, contained the answer.

According to the following chart on page 12, not only did JPM not have a single losing day in all of 2016, but JPM's trading desk also had zero daily losses in 2014 and 2013. It did, however, lose money on two days in 2015. Prior to that one needs to go all the way to 2012 to find 7 days in which the largest US bank by market cap posted any losses.

The other notable observation: JPM generated on average $80 million in daily trading revenues in 2016, up from $70 million the year before. In fact, 2016's average daily profit were the highest in the past 5 years. Putting the firm's market revenues in context, JPMorgan generated around $21 billion in fixed income and equity sales and trading revenues in 2016, in a year in which volatility - aside from two notable episodes - was largely absent.

The jump in daily markets revenue was the result of increased revenue across virtually every JPM business line. As shown above, flow market-making revenues increased 21% from 2014 to 2016, while financing-related revenues increased 24%.

Meanwhile, in his presentation, Pinto said that the bank spends a lot of time discussing the appropriate level of risk it should run.

"We need to take the amount of risk necessary to provide liquidity in any kind of market conditions," he said. "If we try to be smarter and take a punt to drive excess profitability, we will find ourselves in a bad place."

Then again, looking at the numbers above, one wonders "what risk?"

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Jim Sampson's picture

Funny, I've only made money 2 days in the past 4 years.

apadictionary's picture

now you know where they ended up

Muh Raf's picture

These are net portfolio gains. Needless to say they are made up of a large number of individual gains and losses. There will be far more than a couple of losses in individual investments and assets. Comparing net P&L against regulatory VaR methodologies is also very misleading, as is only using the market risk VaR, where is the credit and liquidity risks of the portfolio? This information is meaningless.

legalize's picture

Finally you say something useful.

Dead Canary's picture

Demons! Witchery!

Bear's picture

Well this makes sense ... The Bear has had only four positive trading days in the last four years :)

Dolus's picture

Go long. Not that hard. 

cowdiddly's picture

Why not, with margin debt now at an all time high, everyone else did.

SeuMadruga's picture

I long for shorting...

Squid Viscous's picture

all those gains and bonuses won't seem like much when your measly little kike corpse is hanging from a lamp post,

J J Pettigrew's picture

So who is isnt Goldman...

Algos that are never wrong...

What ever happened to the investigation into the "flash" trading.....or, as anyone in the business knows....front running?

Yen Cross's picture

 losers. <sarc>

WTFUD's picture

They who write the rules and control the fix can't lose. The rest are fodder!

Still JP are only the first vulture at the carcass; slim pickings all around.

Conax's picture

The Presidential cufflinks are the scepter, the bearer hears all, trades all. 

Being months ahead of everyone else has its advantages. Throw in a printing press, a few algos and voila!

No worries.

enough of this's picture

Statistically and astronomically impossible results unless JPM is cheating. 

Where are the cops?

Market Rage's picture

The collusion is on a larger scale than I could have ever imagined.

WTFUD's picture

Busting peeps for selling $20 bags of weed and single fags. Won't go near the CIA and their Coke & Opium Trade though.

unnamed enemy's picture

don't forget the illegals, doing landscaping, housekeeping, and working in the kitchens

unnamed enemy's picture

don't forget the illegals, doing landscaping, housekeeping, and working in the kitchens

PoliticalRefugeefromCalif.'s picture


.."Where are the cops?"

Out chasing true criminals, "only bad people smoke pot" ya know..

to repost a common complaint..

 .."All I wanted was drain the fucking swamp and I see none of that. None of that at all"..

Snaffew's picture

5 point ramp up in 6 minutes on the S&P at 2:15-2:20 est...this can only happen with market collusion from the big trading desks.  that is a concerted and highly coordinated effort.  Poof!

Yen Cross's picture

 sovereigns and dark pools much?

small axe's picture

wealth transfer in progress

Jaime wants a new pair of presidential cufflinks

JTimchenko's picture

Ever wonder why big bank trading desks always gets it right even though their public recommendations are almost always wrong? It is because they trade against their customers. I don't know about JPM, but GS and others were caught red-handed doing that.

The key NYC & London trading banks are all members of a worldwide manipulative banking cartel that controls the actions of central banks. I'd be fairly confident in assuming that JPM is a member of this group. Hence the trading success. It is as simple as that. Anyone who's read the book, "The Synod" will understand what I am talking about.

It is a huge conspiracy, wherein banksters control the treasury departments and central banks of all the major nations of the world. They bet correctly, because they know what the news will be in tomorrow's market, today. They just don't tell their customers, because they need someone to trade against.

Not only that but, personally, I think they extensively wash trade against one another, creating a string of false transactions that makes stocks, bonds and commodities appear to go up or down as they please. Non-connected hedge funds and regular investors buy at the faked prices, because they think that they are real, and created through open "price discovery", which is BS.

kenny500c's picture

Yes, when they want to buy a stock, a negative recommendation will ensue and stories in the press will get you to sell with phony stories. They can also use the sell recommendation when a customer in a managed account complains. 

If they want to sell, the oposite is true. Immoral yes but not illegal. Read Richard Ney's books for starters.

deerhunter's picture

Movie "the Sting". Comes to mind with Robert Redford. Showing my age though ha.

1stepcloser's picture

so much winning... Make JPM Great Again

Trucker Glock's picture

Obviously incompetent leadership.  If a bank has lost money on any single day since TARP, they have a problem.

El Hosel's picture

.... This is why we must Deregulate the Banks?  They already have license to print money, only thing left is to screw the women and children I guess?


NEOSERF's picture

Funny, printing money at JPM is almost as easy as it is at the Treasury.

NEOSERF's picture

What other "business" in the history of the world was as profitable and risk free as this connivery?  Even drugs and prostitution have some risk.

mjcarr51's picture

Scum sucking cheating pigs.

Uranium Mountain's picture

If I lived in the Middle Ages, I would be worried about none of this.  Everyone would be using it real money.

innertrader's picture

PLEASE CORRECT ME if I'm wrong, however, it's my belief that their so called trading desk isn't trading at all.  It's "market making" by providing a "bid and offer" creating liquidity via computers.  Read carefully and you will find the statement, "market-making revenues", that's NOT trading and taking "risk."  Essentially having replaced the floor traders of years gone by.



sorocaba's picture

"Machines" *read this thinking on Morpheus voice*

JailBanksters's picture

That should prove Wall St is not a Stock Market, it's a Casino, and a Casino where all the tables are rigged.

When you can litterally print your own money, you can make or break any company.

Pumpkin's picture

Rigged.  You'd think they'd post a few more days as losses just to make it look more legit.  Then again look at the average intelligence of society and the willingness for regulators to turn their heads.

gmak's picture

Wonder if that 47-year old suicided Hedge-fund trader was one of the guys on the other side of their trades?

goldenbuddha454's picture

If you never questioned the interactions between business, govt. and insider trading, now would be a good time to start.