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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.”

These changes are already forcing sweeping reductions in staff and substantial cuts in the traditional year-end bonuses that fixed-income traders have long taken as a birthright. Could the age of the fixed-income master of the universe, as characterized by Michael Lewis in Liar’s Poker and Tom Wolfe in The Bonfire of the Vanities, be coming to a close?

JPMorgan is already paying a heavy price for its derivatives loss, which Dimon confessed “violates our own principles” on acceptable risk-taking. The CEO canceled a planned $15 billion share buyback in the wake of the trading loss, causing the bank’s share price to plummet and leading analysts to wonder whether JPMorgan is still worth a premium. But because the losses occurred in the chief investment office, which attempts to mitigate risk by investing excess deposits, rather than in the investment bank, some analysts believe that when the smoke clears, JPMorgan will remain among a select group of bulge-bracket investment banks that controls even more of the pie in FICC trading.