Trading Bonuses To Plunge
Ah, the life of a trader. Once a secure path to millions for most, today no guarantee of butter on toast. More potentially bad news for you fixed-income and equities guys. According NYC comp consultants Johnson Associates Inc, trader bonuses may plummet up to 30 percent this year.
Bonuses for fixed-income and trading department are expected to drop 20 percent to 30 percent, a reversal from a May estimate that they would rise 10 percent to 15 percent. Senior managers will probably receive bonuses that are unchanged to 30 percent lower.
Not surprisingly, the sluggish recovery, the S&P downgrade and the looming EU debt funk are some of the main culprits. Goldman reported a 63% fixed-income trading revenue plunge a bit under a month ago and several bond traders I know are plotting a mutiny aboard the U.S.S. Bernank.
In a finer bit of tuning Johnson expects equities guys to take a 15 percent bonus hit, while you prime brokerage guys servicing hedge funds should see a slight 5 percent bump.
Obviously reports like these are not much different from NBA division champ predictions made in June, but the reality of today makes these numbers seem quite reasonable. All of this after anticipated 10 to 15 percent bumps as recently as May.
I don't need to ask you guys if you think this sucks. Clearly it does for anyone on one of these desks. The thing that worries me is that with the structural issues faced by the global economy, the likelihood of bonuses falling at these rates year-over-year for the near term, is not unimaginable.
Many of you busted your balls and asses to break into trading, how does this turn of events effect your long term views about working in the industry? The earnings and excitement that come with a front office role on a desk are slowly deflating as time goes by. The living standards a young trader could once afford are coming back down into the pre-70's Solomon realm. This is still a million miles from the poor house, just wondering if it changes any of your own views in how you will proceed in the industry and how your bank and your book will look as a result a few years down the road.
Is anyone really surprised? Everyone knows most people who work in finance are a bit overpaid. This is reason #45 for being thrifty as a banker.
Long run, this is a very healthy sign for the markets and the economy as a whole. We need the sharpest pencils in the drawer to go back to engineering, tech work, and research. The economy needs better outpatient cancer treatments, not 2 bp bid/ask spreads on CDSs. College students need to see a shrinking financial industry and better opportunities elsewhere. Bad news for us for the next five years, good news for the next thirty.
I am getting kinda optimistic now. Optimistic enough to pay for a new coat of paint on my rusty honda.
this is my favorite comment so far!
I actually agree with this line of thinking. The United States used to have world dominance in so many things - education, manufacturing, medicine, etc. Now we're the financial innovation capital of the world. Financial innovation is great and creates value, but so does a lot of other innovation that we could be putting more of our best and brightest into.
Let's not get ahead of ourselves Illini. If I were you, I'd invest the money I would have spent on a new coat of paint in low risk assets. Come on dude, once you hit 250,000 miles you're going to have to get the engine rebuilt, and that's not going to be free. You need to be saving for that now.
Can't wait!!!!
I read an article in the journal this morning about how high frequency traders are making record profits from the volatility of the past week. Why are bonuses being dropped again?
HFT guys for the most part don't call themselves traders. HFT, for all the press it gets, is done by a small number of people.
Traders? How many traders are even really left out there? My rack of servers colo'ed with NYSE don't need bonuses.
The ranks of traders have been thinned out to near non-existence. Look at the floor of the NYSE these days, you could build a house of cards down there.
I am not saying this to be a dick. I have met many more ex traders than current traders. Its a shrinking area. For years now I have been writing programs that slowly automate traders out of existence. I think most of the blood letting was done in the 2000s, but I don't see that being a growing occupation this decade.
Trading is not dead. Traders are. HFT will replace them all if it doesn't get regulated. And super computers don't ask for bonuses.
Anyone in S&T with a view on this comment?
I never worked in S&T proper, but when I worked in MM, around 2000 there were about 150 traders. By 2006 when I left, there were about 10-15, and they were more risk managers than traders. By the time I got into algo trading, I was working with a team of about 10 traders for an enormous business.
However, I don't believe HFT is going to replace the traditional trader. HFT is a totally separate type thing. Algorithmic trading, which is different than HFT, is what has largely replaced old school traders. Then again I am speaking mostly from experience in agency trading at big IB's that hired legions of traders. I really don't know what BB firms prop desks looked like in the 90's, unless you count market making as a prop desk, which a lot of people do not.
Some of it is just semantics. A lot of the role of "traders" has been picked up by "Portfolio Managers." The role that has really been eliminated is the junior trader that gets a call from a portfolio manager or client, and says "buy me 100k shares of IBM today." with additional instructions on how he wants it traded. Whatever is left of those roles is now more of a sales trader role, focusing on building relationships and managing the client. From a prop/hft point of view, the role of those that watch the system is almost janitorial. You mostly sit and watch.
I hope this helps...
If Hindu's are cheap someone needs to inform my GF.
they are so cheap....
I think it sucks if it's not profit related. If a desk sucked this year, they should get lower bonuses. But if they had an amazing year and only get a 5% raise...thats BS.
Rhino is drinking PBR by himself. I would pay to get shot right now.
Lol why ant you ok or just stressful bump? My friend ever get back to you?
Work sucks. Counting down the days until bonus hits. Haven't heard from your friend, but I have been pinging other people. I'll come to the city soon and we can all get drinks or something.
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