Citigroup Inc., the No. 1 US financial services firm, is conducting an internal review of the size and shape of its global equities business, which will likely result in layoffs of traders and salesmen, according to people familiar with the situation.

Citigroup has called for a series of studies on how to offset shrinking trading commissions and weak trading and underwriting volumes. Because of its importance, Robert Rubin, chairman of the banking company's executive committee and former US Treasury Secretary, has taken a role in overseeing the review.

While it remains unclear what the firm will do with the review's results, Citigroup is expected to have a smaller global trading and sales force and an increased reliance on electronic trading, the people said.

"The longer companies operate in this environment without a recovery, the more they will have to rationalize making changes on the cost side," said Brock Van Der Vliet, a financial services analyst at Lehman Brothers. "Citigroup is no different."

Wall Street firms are being forced to scale back equities businesses after they were ramped up during the bull market. Last week, investment bank Goldman Sachs Group said it fired 100 traders and salesman, or three per cent of its equities staff.

"We regularly conduct strategic business reviews," a Citigroup spokesperson said. The reviews "are standard and prudent and intended to best position our businesses for current and future markets."

Trading volumes have dropped off precipitously, while commissions charged by full-service brokers have been driven down by competition from discount brokers.

Last year Citigroup's revenue from equities trading plunged to $302 million, a drop of 66 per cent from its 2001 revenue of $882 million and 82 per cent below its 2000 revenue of $1.7 billion.

The review is only about half completed, according to a person familiar with the process, and could involve pushing into some businesses as well as pulling back from others.

For instance, Chairman and Chief Executive Sanford "Sandy" Weill has moved Citigroup away from proprietary trading to reduce risk. But in the down market, competing investment banks like Goldman Sachs have made big profits by trading for their own accounts.

"Has Weill's philosophy changed in this market? That's a question I'd like to revisit," Lehman's Van Der Vliet said.

But the principal dilemma on Wall Street is how to turn a profit in a business that's been reduced to a fraction of its size from two years ago.

"The question is how much of the change in the business is secular and how much is cyclical," said one executive at a Wall Street firm. "If it's secular, then there are some major changes to made across the board."

Many Wall Street executives now think the market may not come back in any substantive way for years, requiring the dismantling of massive trading and research teams built up during the late 1990s boom.

Even so, Citigroup has several advantages over competitors. Its investment banking unit became the No. 1 underwriter of US equities last year for the first time, helping drive business to its trading operations.

The bank's retail businesses like credit cards and home loans also have grown, helping offset declines in trading and investment banking.