Dallas, Texas 05/23/2014 (FINANCIALSTRENDS) – Bloomberg recently reported that Bank of America Corp. (NYSE:BAC) has decided to close its electronic market making unit following potential conflict of interests as well as increased regulatory scrutiny of electronic trading. BofA launched this unit only last year and was yet on the advanced trail phase. The electronic trading unit was started to serve the retail client orders pertaining to its Merrill Lynch business. However, the unit was a contributing a fairly smaller portion of the bank’s overall operations. The company initiated this unit to match trades for its retail clients internally over sending them to the established electronic market makers and to earn more profit through this strategy. Even upon closing of this unit, the bank will continue to operate its automated market making unit to serve institutional clients.
What Forced BofAto Close the Unit?
Bank of America Corp. (NYSE:BAC)’s decision to close its electronic trading unit is believed to be influenced by increasing probes into high frequency trading by the SEC (Securities and Exchange Commission) as well as several other agencies including FBI (Federal Bureau of Investigation) and New York Attorney General, Eric Schneiderman. Further, release of Michael Lewis’ book “Flash Boys” in April 2014 also triggered the investigation as it threw light on prevalence and overall impact of high frequency trading on the $22 trillion U.S. equities market.
In addition, Bank of America Corp. (NYSE:BAC) was also recently labeled as “too complex to handle” give many ongoing investigations related to its historic accounting error, litigation overburden and certain business conduct. Hence, the decision to close its electronic trading unit seems to be a relieving step for the bank towards defending its challenged reputation.
On Thursday, BofA stock closed at $14.71, gaining 0.68% from its previous close. The stock traded with fewer than average volumes of 51.93 million shares against its 30 day average trading volumes of 94.20 million shares. The stock has delivered 9.7% negative returns over past one month.