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BNP Paribas Is Said to Shut $3 Billion Prop Trading Arm

Traders Magazine Online News, January 23, 2019

Bloomberg News

BNP Paribas SA, the biggest French bank, is shuttering its 2.5 billion euro ($2.9 billion) proprietary trading arm, according to people with knowledge of the matter.

The Opera Trading Capital division of the lender, which makes risky bets with shareholders’ funds, struggled to make a profit last year amid market volatility, one of the people said, declining to be identified as the details are private. BNP Paribas, based in Paris, told employees and has begun informing prime brokers and counterparties about the plans to close Opera, the people said.

Regulators have clamped down on proprietary trading -- or prop trading, for short -- since the financial crisis. While the practice isn’t banned for European banks, it has become less economic under new rules. In France, for example, lenders must place their riskiest trading businesses into separately-capitalized subsidiaries, crimping their profitability.

Opera struggled in 2018, one of the people said. Volatility returned to markets last year, whipsawing investors amid a brewing global trade war and fears over economic growth. Natixis SA, BNP Paribas’ smaller Paris-based rival, reported losses and provisions of 260 million euros on Asian equity derivatives in December. Hedge funds, meanwhile, slumped that month and ended the year down 4 percent, their biggest decline since 2011.

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