A dying breed: Currency traders left out of new Wall Street as jobs decimated

Posted by: privatefinancetips in BLOG, Financial Advisor Mar 27, 2016

Charlie Stenger, a currency-broker-turned-recruiter, has witnessed it all. One fired trader wept in the office. Another admitted he hadn’t told his wife he was unemployed, and left the home every day in a suit to sneak off to a coffee shop. There are the delusional guys, who carefully explain how they are not thinking about jobs that don’t pay as well as those they simply lost.

Stenger, who had been laid off from ICAP Plc in 2013 and now works for Sheffield Haworth Ltd., tells the men and women he counsels: Go ahead and take pay cut. Oh, and do not wait for a phone to ring.

“This is crunch time – it isn’t looking great,” Stenger said. “This is really a shrinking pond.”

The investment banking business has shed tens of thousands of positions because the end from the financial crisis, and also the downsizing has been hard on foreign-exchange desks at a lot of lenders, including Morgan Stanley, Barclays Plc and Societe Generale SA. The industry-wide job-axing sweep coincided having a shift to automation, which slashed staffing needs and spawned a new, and small, generation of quantitative traders whose decisions are driven by mathematical models.

There were 2,300 people employed in currency-market front-office jobs at the world’s biggest banks in 2014, a 23 per cent drop from four years earlier, based on Coalition Development Ltd., an analytics firm.

The layoffs have continued and therefore are unlikely to stop within the US$5.3 trillion-a-day market. Revenue from from foreign-exchange divisions hasn’t bounced back after falling to US$6.5 billion in 2014, down almost 45 per cent from 2009, Coalition data show. Forex trading within the U.K. and The united states shrank by more than 20 per cent in October from the year earlier, based on central banks in those regions. London may be the biggest centre for foreign-exchange trading.

This is crunch time – it’s not looking good.This is a shrinking pond

“The business has to be downsized,” said Keith Underwood, a foreign-exchange consultant who ended a 25-year trading career, including at Lloyds Banking Group Plc, in 2014. But it is not easy “for those who have experienced a market for a lot of, many years to determine that they’ve been substituted with an algorithm.”

Humans are up against formidable opponents over the industry. Take Virtu Financial Inc. Deploying sophisticated technology in the business, the business’s computers can trade a lot more than 11,000 securities and other products on more than 225 trading platforms in 35 countries. Because automation is really deeply ingrained in the business, it had no more than 150 employees this past year – generating a lot more than US$5 million per worker.

From his office at Sheffield Haworth in Chicago, Stenger doles out advice to friends still on foreign-exchange sales and trading desks. First, prepare to become let go. When you look for work, plan on having to have a 25-per cent reduction in pay. “Your stock falls once you lose your job, and that’s just the nature from the beast,” said Stenger, whose clients typically earn annual salaries of $250,000 to $1 million.

Transferable Skills

Some ex-traders have moved to smaller houses or pulled kids from private school. Those awaiting the ax to fall hoard paychecks. Stenger was from regular work for annually after he lost his job; he was told about the lay-off four days after he learned his wife was pregnant using their first child. “There were periods where I wouldn’t earn money for 90 days at a time,” he explained, “and the insurance coverage bill was still due every month, and the rent and the car payments.”

Underwood, the consultant, said he left the marketplace because regulators were cracking down on his niche by implementing stricter derivatives rules following the economic crisis. “My style of trading went of vogue,” he explained. Therefore the former head of forex trading for that Americas at Lloyds, who also led teams at Credit Agricole SA and Lehman Brothers in London and New York, reinvented himself.

In Control

“I couldn’t be more happy,” said Underwood, who described the hourly rates he charges as similar to those of a senior lawyer. “There is more empowerment, with charge of my future.”

Many traders have discovered they have transferable skills. Some have landed work as salespeople or executives at financial technology companies, payment providers or trading platforms and exchanges. Other medication is utilizing their knowledge to boost banks’ risk-management operations. Franz Gutwenger, a recruiter in New York, said certainly one of his financial-institution clients has expanded its regulatory-compliance staffing by a factor of five.

“I don’t think there’s a good deal from my generation that are still in the market,” said Guy Piserchia, who throughout a three-decade career led North-American foreign-exchange trading at Bank of the usa Corp. and Paribas, a precursor to BNP Paribas SA, in Asia. He left Wall Street in 2012 to become mayor from the 8,700-person township of Long Hill, New Jersey. Now he’s deputy mayor, but said he really wants to return into the business in a role that mixes his financial and government experience.

“With automation and electronic dealing, I believe you will find going to be fewer people” on foreign-exchange desks, Piserchia said. “The ones which have evolved and survived may be some of the better ones – or, as with life, might be a few of the lucky ones.”

-With the help of Rachel Evans and Michael J. Moore.

Bloomberg News