Derivatives houses are starting to review the structure of proprietary trading desks to reduce volatility of earnings and keep top staffers. This has become increasingly important as more firms, such as Deutsche Bank , Merrill Lynch and Bank of America , set up principal finance desks for structured credit instruments, according to bankers.
In addition, to reducing the volatility for the sponsoring house, it also gives the senior managers participation in the fund. The firms hope this will reduce the number of bankers leaving to start hedge funds.
The diagram above shows the framework of a typical structure.
