---
title: "Trading Assets: definition, formula, and thresholds"
description: "Trading assets are securities and derivatives a bank holds for short-term resale or to serve client market-making, carried at fair value with changes running through earnings. They are concentrated at the largest dealer banks and are essentially absent at community banks."
canonical_url: https://www.bankregreports.com/glossary/trading-assets/
source: BankRegReports
category: "Securities & Investments"
units: "$"
schedule: "Schedule RC-D"
---

# Trading Assets

> Trading assets are securities and derivatives a bank holds for short-term resale or to serve client market-making, carried at fair value with changes running through earnings. They are concentrated at the largest dealer banks and are essentially absent at community banks.

## Formula

```
Trading Assets = Fair value of securities and derivatives held in the trading account
```

Reported on Schedule RC-D for banks with significant trading activity. Unlike investment securities, trading-account gains and losses flow straight through net income each quarter as trading revenue, making earnings more volatile.

## Why it matters

Trading assets carry market risk that hits earnings immediately, and they drive the market-risk capital charge under the rules. A meaningful trading book signals a capital-markets business model very different from a deposit-and-lend community bank.

## How to read it

For all but the largest banks, trading assets are near zero. Their presence tells you the bank runs a dealer or market-making operation. Where they are large, read them with trading revenue volatility and the market-risk capital requirement rather than as a simple asset.

## Thresholds

| Range | Reading | What it means |
|---|---|---|
| None / negligible | Typical bank | No trading book; earnings driven by spread and fees. |
| Modest | Normal | Limited trading activity relative to the balance sheet. |
| Significant | Watch | Material market risk and earnings volatility. |
| Large dealer book | Concern | Substantial market risk; read with VaR and market-risk capital. |


## Worked example

At a money-center bank, trading assets can run into the hundreds of billions and swing trading revenue sharply quarter to quarter. At a typical $1 billion community bank the trading-asset line is simply zero, a quick tell of how different the two business models are.

## Questions

### How are trading assets different from AFS securities?

Trading assets are held for short-term profit and marked through net income, adding earnings volatility. AFS securities are part of the investment portfolio and marked through AOCI (equity), not income.

### Do community banks have trading assets?

Almost never. A trading book requires market-making infrastructure and triggers market-risk capital rules, so it is the domain of large dealer banks.

## Sources

- [FFIEC Call Report Schedule RC-D (Trading Assets and Liabilities)](https://www.ffiec.gov/sites/default/files/data/reporting-forms/FFIEC031_FFIEC041_202606_i.pdf) (PDF)

## Related metrics

- [Total Securities](https://www.bankregreports.com/glossary/total-securities/): Total securities is a bank's entire investment portfolio, held-to-maturity bonds at amortized cost plus available-for-sale bonds at fair value. It is typically the second-largest asset after loans and the bank's main liquidity reserve and interest-rate-risk position.
- [Available-for-Sale Securities](https://www.bankregreports.com/glossary/afs-securities/): Available-for-sale (AFS) securities are bonds a bank may sell before maturity for liquidity or balance-sheet management. They are carried at fair value, and their unrealized gains and losses flow through accumulated other comprehensive income (AOCI) into equity.
- [Net Income](https://www.bankregreports.com/glossary/net-income/): Net income is a bank's bottom-line profit for the period: total revenue less interest expense, noninterest expense, the provision for credit losses, and taxes. It is the source of retained earnings and the numerator behind ROA and ROE.

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