WHEN JPMORGAN CHASE & CO. CEO JAMIE DIMON admitted to at least $2 billion in losses on a complex derivatives trade in the second quarter of this year, he may well have signaled the end of an era for big global banks. Until then it was clear why investors paid up for such institutions: Banks with a big capital markets franchise made oodles of money, especially for fixed income, commodities and currencies — the so-called FICC business, as the industry categorizes its trading operations. The capital markets business represented nearly two thirds of the revenues at the top 13 global banks as recently as 2010, according to research by consulting firm McKinsey & Co.

But this rosy picture is about to change dramatically as a result of slumping demand and a slew of new rules and regulations for leading global banks. Demands for higher capital; new definitions of what constitutes risk-weighted assets, against which they must reserve capital; and now, thanks to JPMorgan’s losses, heightened demands for restrictions on virtually any proprietary trading or risky hedging, will impact the FICC business at most banks, hurting their profits and forcing them to rethink their strategies. Some business lines are likely to be closed or sold off.

“There will be major changes at the big banks,” says Roy Smith, a longtime partner at Goldman, Sachs & Co. who now teaches finance at New York University’s Leonard N. Stern School of Business. “I suspect all of these businesses will have to be regeared. You may have three or four of the top ten investment banks veering off into significantly different business or so de-emphasizing fixed income that they will leave a lot of ground to be picked up by others.”