Trading Activities at Systemically Important Banks, Part 1: Recent Trends in Trading Performance, Accessible Data

Figure 1: Average VaR-adjusted trading revenue across asset classes

This figure shows the 60-day moving average of daily VaR-adjusted trading revenue for the average bank in each asset class. The x-axis shows the time period from 2011 to 2016 and the y-axis plots VaR-adjusted trading revenue. Total and equities VaR-adjusted trading revenue is noticeably higher than the other asset classes and track each other closely, with values between .4 and 1.2. Despite some spikes and dips, these two series generally increased over the time period shown, from about .5 in 2011 to just under 1.2 at the end of 2016. VaR-adjusted trading revenue for the other asset classes (credit, rates, FX and commodities) generally range between zero and .5. Credit is the only asset class that has had negative VaR-adjusted trading revenue, which occurred toward the end of 2011. These series have also generally trended up over time, although the trajectories are flatter than those of total and equities VaR-adjusted trading revenue.

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Figure 2: Percentage of total variance explained by the first two principal components

This figure shows, for each asset class and time period, the cumulative percentage of the cross−bank sum of variance of daily VaR-adjusted trading revenue that can be explained by the first two principal components. Missing VaR-adjusted trading revenue observations for a given bank and asset class are interpolated using the Expectations-Maximization algorithm. The figure shows clusters of three bars for each asset class, covering the time periods of 2011-2012, 2013-2014, and 2015-2016, respectively. The x-axis labels the clusters of bars by asset class. The y-axis labels the percentage of variance explained by the first two principal components, ranging from 0 to over 60 percent. For every asset class except FX, the cumulative percentage of variance explained by the first two principal components falls in each two-year period. For most asset classes, between 50 to 60 percent of variance were explained in 2011-2012; between 40 to 50 percent of variance were explained in 2013 and 2014, and less than 40 percent of variance were explained in 2015 and 2016. FX is the sole exception, in which the variance explained increases by a few percentage points from the 2011-2012 period to the 2013-2014 period, and then falls below its 2011-2012 levels in the 2015-2016 period.

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Last Update: July 10, 2017