The decline in investment bank profits is spreading.
Late Friday, it was JPMorgan who said trading revenues will be down 20 percent this quarter. Now Barclays says trading revenues in the first three months were down 41 percent. The company cited "challenging trading conditions resulting in subdued client activity." Like JPMorgan, Barclays also warned they were seeing no improvement in trading in the second quarter.
'Subdued client activity?' That's a great line. The question is whether this is this a cyclical or structural decline in the trading business?
It's cyclical in the sense that for several years following the 2008 financial crisis, traders made a fortune in the trading business. However, for the moment traders can't make any money trading fixed income.
Why not? Think about what drives trading volume. Sometimes sectors mismatch, when one—investment grade corporate debt, for example—is cheaper than high yield. However, valuations are rich right across the board for fixed income., so you have to have an event to drive volume. That's not what's happening.
Still, there may be serious structural issues. For the banks, new capital restrictions and U.S. regulations like the Dodd-Frank Act are curtailing proprietary trading—or more likely permanently. It was those "proprietary trading books" that were the real drivers of growth.
Meantime, the options business is growing. Options market operator CBOE Holdings reported better-than-expected earnings and sales, helped by heavier trading volumes. "We experienced double-digit increases in trading volume across each of our product categories during the first quarter, resulting in record revenue and earnings," said CEO Edward Tilly.
"We were particularly pleased with the continued growth in our volatility products, with average daily trading volume in VIX options up 22 percent and VIX futures up 22 percent during the first quarter," he added.
--By CNBC's Bob Pisani