Key Takeaways
- • Goldman Sachs, JPMorgan Chase and Morgan Stanley have generated a combined $52 billion in stock trading revenue through Sept. 30, nearly 80% of the five largest investment banks' roughly $67 billion in equities revenue, according to company filings.
- • The five biggest banks' equities revenue of about $67 billion through Sept. 30 already exceeds their full-year 2025 total, which was itself a record, by $7 billion.
- • Goldman Sachs' equities financing activity rose 96% in the third quarter to a record $3.37 billion, driven by hedge fund demand for leverage tied to AI hardware, hyperscalers and chip suppliers.
- • Relaxed leverage rules finalized in 2025 freed balance-sheet capacity at the largest U.S. banks, letting them expand prime brokerage lending to hedge funds.
- • The IMF warned that hedge fund leverage, crowded positions and correlated selling could pose stability risks, estimating global hedge fund assets at $13 trillion.
Summary
The three largest U.S. investment banks have captured the bulk of a record equities trading boom fueled by the global rally in artificial intelligence stocks, relaxed capital rules and expanded lending to hedge funds. According to company filings cited by CNBC, the five biggest investment banks generated about $67 billion in equities revenue through Sept. 30, $7 billion more than the group earned in all of 2025. Goldman Sachs, JPMorgan Chase and Morgan Stanley accounted for a combined $52 billion of that total, nearly 80%.
Prime brokerage, which provides hedge funds with margin loans, securities lending and other trading services, has become a central growth engine. At Goldman Sachs, equities financing activity jumped 96% in the third quarter to a record $3.37 billion. JPMorgan and Morgan Stanley do not break out that figure but said they saw similar dynamics. JPMorgan CFO Jeremy Barnum described demand for capital as "insatiable" on the bank's third-quarter call, and executives say the equities business has shifted from a cyclical, transactional franchise into a more durable, high-margin lending engine. Mike Mayo, a Wells Fargo banking analyst, said the Big Three consider each other their main competitors and were best positioned to benefit from the AI trade.
Trading executives said the largest banks can absorb potential losses of around $100 million on a single trade, a capacity smaller rivals lack, which has forced some to decline business or cede share. Bloomberg Intelligence analyst Herman Chan noted that the retreat of European banks, including Credit Suisse, from equities has also benefited U.S. prime brokers. Asia was the fastest-growing equities frontier this year, according to JPMorgan's Rachid Alaoui, with investors targeting memory chipmakers and semiconductor manufacturers in South Korea and Taiwan. Executives caution that transaction taxes and stamp duties inflate top-line Asia prime revenue, and that banks define equities trading revenue differently, complicating comparisons.
Regulators under the Trump administration eased some leverage rules for the largest U.S. banks, finalized in 2025 and adoptable from January, reducing the capital treatment of Treasurys and collateralized prime brokerage loans. Stanford finance professor Darrell Duffie said the system is "somewhat more levered" because of the relaxation but that it "hasn't gotten dramatically out of whack." The IMF has warned that hedge fund leverage and crowded positions could create stability risks, and JPMorgan CEO Jamie Dimon said in August that industrywide leverage was "the highest it's ever been." Bank executives describe hedge fund leverage as a "known unknown" and point to collateral and stress testing as safeguards. Analysts warn that if AI proves less transformative than expected, a downturn could hit the Big Three harder than other banks.
Prime brokerage, which provides hedge funds with margin loans, securities lending and other trading services, has become a central growth engine. At Goldman Sachs, equities financing activity jumped 96% in the third quarter to a record $3.37 billion. JPMorgan and Morgan Stanley do not break out that figure but said they saw similar dynamics. JPMorgan CFO Jeremy Barnum described demand for capital as "insatiable" on the bank's third-quarter call, and executives say the equities business has shifted from a cyclical, transactional franchise into a more durable, high-margin lending engine. Mike Mayo, a Wells Fargo banking analyst, said the Big Three consider each other their main competitors and were best positioned to benefit from the AI trade.
Trading executives said the largest banks can absorb potential losses of around $100 million on a single trade, a capacity smaller rivals lack, which has forced some to decline business or cede share. Bloomberg Intelligence analyst Herman Chan noted that the retreat of European banks, including Credit Suisse, from equities has also benefited U.S. prime brokers. Asia was the fastest-growing equities frontier this year, according to JPMorgan's Rachid Alaoui, with investors targeting memory chipmakers and semiconductor manufacturers in South Korea and Taiwan. Executives caution that transaction taxes and stamp duties inflate top-line Asia prime revenue, and that banks define equities trading revenue differently, complicating comparisons.
Regulators under the Trump administration eased some leverage rules for the largest U.S. banks, finalized in 2025 and adoptable from January, reducing the capital treatment of Treasurys and collateralized prime brokerage loans. Stanford finance professor Darrell Duffie said the system is "somewhat more levered" because of the relaxation but that it "hasn't gotten dramatically out of whack." The IMF has warned that hedge fund leverage and crowded positions could create stability risks, and JPMorgan CEO Jamie Dimon said in August that industrywide leverage was "the highest it's ever been." Bank executives describe hedge fund leverage as a "known unknown" and point to collateral and stress testing as safeguards. Analysts warn that if AI proves less transformative than expected, a downturn could hit the Big Three harder than other banks.
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