$500m

To be saved from axing between 1,500 and 2,500 workers.

Gorman last month placed Ted Pick, who has led the equity-trading business, in charge of the entire trading division.

While Morgan Stanley has reduced the capital that its fixed-income unit requires by more than half over the past four years, the bank still hasn’t reached its goal of a return on equity of at least 10 per cent.

Crimped margins

“They’ve struggled to generate sufficient return on equity in this business,” Hawkens said.

“It’s nearly 40 per cent of their risk-weighted assets, so it’s hard to generate good ROEs for the company when that much of your capital is generating such a weak return.”

Stiffer capital rules, a slump in client transactions and a shift toward electronic trading have crimped margins in key fixed-income markets, pushing banks to pull back and eliminate staff.

Kelleher said last year that the new supplementary leverage ratio — which measures a firm’s capital against total assets — made banks unable to earn sufficient returns in some interestrate trading businesses.

Morgan Stanley generated $3.75 billion in fixed-income revenue in the first nine months of this year, seventh among major global investment banks.

The firm produced $6.31 billion in equity trading revenue in that period, most among the banks.

Revenue from fixed-income, currencies and commodities trading, or FICC, is on pace to drop to $65 billion this year at the 10 largest global investment banks, according to industry analytics firm Coalition Ltd.

That would be the lowest since the financial crisis and less than half of what those companies produced in 2009.

The firms on average employ 1,700 front-office workers within FICC,

Bloomberg Focus on electronic trading Morgan Stanley’s headquarters in New York. The lender will focus on cutting front-office jobs rather than ‘back-office’ technology as it seeks to move toward electronic trading.