According to Reuters, key U.S. brokerage houses – TD Ameritrade Holding Corporation (AMTD) and The Charles Schwab Corporation (SCHW) – have decided to shutter their businesses in Europe. This move by the brokerage giants comes on the heels of the slowdown in trading activities in the market due to the reluctance of investors in betting their money attributed to the continued ambiguity regarding the prospects of the Euro Zone.
Though these firms have earned huge profits through trading in the share market, yet at current level, European dealers are scrambling to maintain profit levels. European share trading for the year has recorded its lowest level since 2009.
Reasons for Closure
Bearing the brunt of Europe’s sovereign debt crisis and slow economic recovery, funds managers are striving hard to make profits by trading in European countries.
Schwab has come up with the closure of the European arm of its derivatives trading unit, OptionsXpress on November 30. The company has intimated clients to transfer their account to another company or get their positions liquidated and retrieve funds.
TD Ameritrade also restricted the opening of new accounts and new business transactions in some foreign countries. Moreover, accounts will be closed down in Italy and Belgium, while some European countries will be constrained with certain types of transactions.
In recent months, among others, Deutsche Bank AG (DB), Nomura Holdings, Inc. (NMR) and UBS AG (UBS), reorganized their European equities units with huge layoffs.
For quite some time now, the investors have been losing huge amounts in trading. If this continues along with mounting regulatory pressure, it would be a huge blow to investors in the ongoing economic situation.
If the European crisis continues further, there will be significant impact on worldwide capital markets. On the other hand, the extremely low interest-rate environment is another manifestation of this uncertain macro backdrop.
Concerns about the European finances and soft U.S. growth prospects have made treasury instruments the choice of safe asset class. As a result, the yields on benchmark treasury bonds are hovering at low levels.
We don’t expect the potency of the sector to return to its pre-recession peak anytime soon. The economic intricacies may lead to further disappointments in the upcoming quarters.
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