Societe Generale resigned as a primary dealer for U.K. government bonds, the second market maker to exit in just over three months.
Bloomberg News reports that the bank’s resignation follows Credit Suisse’s decision to leave its role in October, which was the first such move since December 2011. SocGen will end its role in both the conventional and index-linked markets as of the close on February 5, the Britain’s Debt Management Office said in a statement on Friday.
The exit comes as U.K. primary dealers and investors said this week that it’s becoming increasingly difficult to sell gilts due to new regulations. Banks are also cutting costs in their fixed-income departments amid a drop in trading profits and tighter rules that increase the cost of warehousing risk and market making.
'The nature of being a primary dealer for any sovereign debt market has changed significantly such that the benefits accrued to the primary dealer have changed substantially', said Anthony Perrotta, a partner at financial-services research firm Tabb Group in New York. 'Having this mandate to be a market maker and potentially own securities in the wake of auctions, the risk-reward now is no longer in favor of being a primary dealer'.
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