We've discussed before that the business model for research and trading has changed. Once you took investment banking out of the equation, it seemed like a less viable concern, especially in this era of unbundled trades. So it's not really surprising that Prudential Financial, the big insurer, will shut down its equity research and trading business, laying off about 420 staffers around the world. Prudential said it was unable to achieve the appropriate scale and would rather focus on other businesses. Recall that well-known bank analyst Michael Mayo and his team left for Deutsche Bank recently. It seems that research can no longer sustain a sales and trading operation. There are some independent shops that have found niches, however. It's telling that Prudential could not find a buyer; it had been on the block for months.
Our take on this news: The reason Prudential wasn't able to sell its operations was because that new firms are springing up doing that line of work. Why invest hundreds of millions for an operation one can start from scratch for much less. The top-notch research firms are still around and doing quite well.
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