Goldman Sachs, JPMorgan and Morgan Stanley capture 80% of equities trading revenue

Wall Street’s three largest investment banks have captured nearly 80% of the industry’s booming equities trading revenue this year, driven by artificial intelligence stock volatility and relaxed capital rules that let them expand high-margin lending to hedge funds. The concentration highlights a widening divide between the giants and their competitors as the financial system grows more leveraged.

• Goldman Sachs, JPMorgan Chase and Morgan Stanley generated $52 billion in combined stock trading revenue through September 30, nearly 80% of the $67 billion the five largest investment banks earned.
• Goldman Sachs’ equities financing activities jumped 96% in the third quarter to a record $3.37 billion, driven by hedge fund demand for leverage on AI bets.
• U.S. regulators eased balance-sheet capital rules in 2025, giving the largest banks more room to expand prime brokerage and other leverage-heavy businesses.

• $52B Combined stock trading revenue by Big Three through September 30, versus $67B total for five largest banks
• $3.37B Goldman Sachs equities financing in Q3 2024, up 96% from prior year
• $13T Global hedge fund assets, per International Monetary Fund estimate this month
• 80% Share of equities revenue captured by Big Three versus industry total

According to reporting by CNBC, the five largest U.S. investment banks have generated about $67 billion in equities revenue through September 30, already surpassing the entire $67 billion haul they made during 2025, which itself set a record. Goldman Sachs, JPMorgan Chase and Morgan Stanley have claimed $52 billion of that total, cementing their dominance over competitors including Bank of America and Citigroup in what has become the financial industry’s most lucrative trading arena. The performance gap reflects structural advantages that smaller rivals cannot replicate: global balance sheets large enough to absorb potential $100 million losses on single trades, prime brokerage networks spanning Asia and Europe, and access to the largest hedge funds amplifying bets on artificial intelligence hardware, chip suppliers and hyperscalers.

Goldman Sachs financing surge shows extent of hedge fund leverage demand

Equities financing, the business of lending to hedge funds so they can amplify their investment positions, has emerged as the engine driving the Big Three’s outperformance. Goldman Sachs disclosed that equities financing activities jumped 96% in the third quarter to a record $3.37 billion, a figure released in its third-quarter earnings presentation. JPMorgan and Morgan Stanley do not break out that metric separately, but bank executives acknowledged seeing similar surges in demand from institutional investors and hedge funds.

On JPMorgan’s third-quarter conference call, Chief Financial Officer Jeremy Barnum characterized the moment as one of “insatiable demand for capital.” He told analysts: “In this moment where AI is such an overwhelming theme … there is capital being tapped through all kinds of different mechanisms.” That leverage has transformed equity desks at the Big Three from cyclical, transactional businesses into durable, high-margin lending engines staffed by traders who manage collateral, margin calls and the balance-sheet deployment that prime brokerage demands.

Rachid Alaoui, JPMorgan’s global head of equities, emphasized that institutional clients value continuity and breadth of services. “For clients, the value isn’t just a price on one trade, it’s coverage and continuity,” he told CNBC. “You want a dealer that can give you the full suite across products, and you want that service to travel with you across regions. That matters in stressed markets and periods of volatility.”

Regulatory relief and European bank exits widen the Big Three’s moat

The Big Three’s advantage has been amplified by two regulatory and competitive shifts. First, Trump administration regulators finalized revised leverage and capital rules in 2025 that eased stringent balance-sheet caps previously imposed after the financial crisis. Those rules treated Treasurys and collateralized prime brokerage loans the same as riskier assets, constraining how much capital banks could deploy. The new rules took effect as early as January 2026, giving the largest banks greater flexibility to expand balance-sheet-heavy businesses without exhausting their capital ratios.

Second, major European banks including Credit Suisse have retreated from equities trading and prime brokerage in recent years, ceding market share to U.S. giants. That exodus has concentrated scale in the hands of fewer players. Bloomberg Intelligence analyst Herman Chan noted that “prime is one of the ultimate scale businesses. If you have a strong equities franchise, the hedge funds will want to transact with you because you have a bigger pool of trading opportunities with counterparties.”

Asia trading surge and leverage risks test the system

Institutional investors have poured capital into South Korea and Taiwan, targeting what Alaoui called the “picks and shovels” of the AI supply chain: memory chipmakers and semiconductor manufacturers supporting data center construction. For the Big Three, with offices across Tokyo, Hong Kong, Seoul and Mumbai, this trade generated outsized profits. However, transaction taxes and stamp duties included in top-line revenue artificially inflate Asia prime totals, and the lack of agreed-upon definitions for equities trading revenue means banks exclude or include business lines like clearing services inconsistently, complicating direct comparisons.

The leverage underpinning this boom has drawn scrutiny from regulators and international bodies. The International Monetary Fund warned this month that growing leverage, crowded positions and correlated selling from hedge funds could create potential stability risks, estimating global hedge fund assets at $13 trillion.

JPMorgan CEO Jamie Dimon said in August that industrywide leverage was “the highest it’s ever been,” though he stopped short of calling it a threat to financial markets. Darrell Duffie, a finance professor at Stanford University and leading expert on financial stability, acknowledged that easing balance-sheet caps meant “the system is somewhat more levered because of the relaxation in regulations.” He added: “It’s not a good idea, but it hasn’t gotten dramatically out of whack.”

Wall Street executives pointed out that the industry weathered the summer hedge fund meltdowns without disruption. When Leopold Aschenbrenner’s Situational Awareness hedge fund and several smaller firms experienced forced unwinding, prime brokers moved quickly to call margin, unwind positions and contain risk. Barnum told analysts: “Hedge fund leverage as a contributor of risk to the system is very much in the category of known unknowns. It doesn’t mean it’s riskless, but we kind of know what it is.”

The BlockWest read. The Big Three’s dominance reflects not market skill but regulatory architecture and competitive exit: eased capital rules let them deploy more balance sheet at lower cost, while European rivals fled. The system is more levered and concentrated in fewer hands, and if AI investment slows, equity trading revenue will reverse faster at banks that bet hardest on the continuation. This is structural vulnerability disguised as franchise strength.

Regulators and lawmakers will face pressure to justify leverage-friendly rules if a sharp market correction forces hedge funds to deleverage or if further bank consolidation reduces competition in prime brokerage. The International Monetary Fund’s warning and Dimon’s characterization of leverage as the highest ever suggest official scrutiny may intensify before year-end. Watch whether Congress or the Federal Reserve questions the 2025 capital rule changes when banks report full-year 2026 earnings in January 2027.

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