The head of trading at Morgan Stanley just confirmed Wall Street's worst fear

Morgan Stanley

MorTed Pick, global head of sales and trading at Morgan Stanley

Ted Pick, the global head of sales and trading at Morgan Stanley, just confirmed Wall Street's worst fear.

It has been a horrible first quarter in trading.

Pick is speaking at the Credit Suisse financial services forum.

"The year started out OK. It started out OK for everyone," he said.

More recently, however, markets have gotten choppy. He was asked what trading revenues looked like half way through the first quarter.

It is "more like sequential quarters rather than the healthy first quarter we got last year," he said.

That comment is critical. The first quarter is typically the most important period of the year for trading desks, as asset managers move in to new positions.

If that isn't happening, and the first quarter looks just like any other quarter, then trading revenues are likely to come in down on last year. He added that while equity and bond trading volumes are up, it isn't the right kind of volume.

"It isn't the classic beginning of the year reinvesting cycle," he said. "It is choppier, it is gappy, it is highly insured volume."

"I think we'd all argue some of this volume isn't terribly healthy," he added.

His comments confirm fears that the recent volatility has dented trading revenues. Credit Suisse analysts led by Susan Roth Katzke highlighted the increased trading volumes in a note at the beginning of February, but said it was unclear as to whether that increase in volumes would lead to an increase in profits.

Pick started his interview at the Credit Suisse conference talking about markets more broadly, saying that this is "the finishing phase" of a climb down from established market tops.

"We know what the three culprits for this violence are," he said. "China and its adolescence, the relentless decline of crude and its impact on the credit complex and sovereigns ... and the Fed, and fear of Fed self doubt."

He said that the long short hedge fund community had struggled, and were taking risk off the table. As they did so, they were removing levered long positions, but maintaining their levered short positions, turning negative on the market in the process.

Sovereign wealth funds have been quiet, he said, adding that if the crude oil price hangs around the $30 mark for a while, they might start to sell their assets too.