Tags: London | trader | jobs | cuts

With Glory Days Gone, London Traders Face Life in 'Real World'

Tuesday, 24 Nov 2015 04:02 PM

Once dubbed "masters of the universe," it seemed the party would never end for a profession often associated with a champagne lifestyle of fast cars and faster living.

But those days are over for London's financial market traders. Perceived by the public to have lived in a bubble for much of the past 30 years, thousands are now being forced into the "real world" as banks slash costs and shrink trading operations.

The effects of increased regulation on an industry whose reputation has been battered by the global crash of 2008 and myriad market-rigging scandals has been compounded by a rapid advance in technology that is seeing traders replaced by quicker and cheaper computer algorithms.

In third-quarter earnings updates, banks took another scythe to costs, with expensive traders and trading desks in London's "City" financial district feeling the pain.

"In the early days it was great. You had big teams and it was 'seat of your pants' stuff. As traders you felt that even if you had a bad day the next day it was all to play for. Going to work was fun, I didn't really think of it as work," said former currency trader Philip Rands.

After joining Japan's Sumitomo in 1987 straight from school, Rands worked in a variety of roles at European and Asian banks, reaching chief dealer at Sumitomo in 2000. He held various jobs after that before leaving the industry in 2013, as work became harder to find.

He now works in the business of importing and exporting commercial LED lighting.

"I'm not an archetypal City person, but you are in a bubble. It's not the real world. You realize it's quite difficult to transfer your skill-set to the real world," the 47-year-old said.

While the number of financial and professional services jobs in London has risen since 2009, the number of those directly involved in "securities dealing" has plummeted, according to financial industry lobby group TheCityUK.

At the end of last year there were 9,400 people employed in securities trading, down 42 percent from 16,400 in 2009, the earliest comparable figures available. Total employment in financial and professional services rose 17 percent to 248,600 over the same period, the figures show.


Welcome to the Machine

There are no comparable figures available, but "peak trading" in London in terms of employment is widely thought to have coincided with the zenith in overall financial services employment in 2007, just before the global crash.

Advances in technology over the last decade have led to a dramatic increase in automated trading, however. In currency markets, for example, algorithms now account for about 70 percent of trading on major platform EBS, up from around 30 percent in 2007, according to a study by the Bank for International Settlements.

The squeeze on costs is most acute in banks' fixed income, currency and commodity (FICC) operations, where post-crisis regulation has been tightest. Some banks have exited certain business lines entirely.

Banks are less able and willing to act as market makers in fixed income securities trading because they are now required to hold more capital and liquidity, making it more expensive and risky to keep assets on their balance sheet.

Figures from financial industry analytics data firm Coalition showed FICC front office headcount at the top 10 investment banks in London fell 3.5 percent in the third quarter. It is down nearly 30 percent over the last five years.

"Automation, a change in attitude towards risk, increased regulation and shrinking liquidity has meant a reduction in the number of traders," said Fraser Younson, partner at Squire Patton Boggs, a law firm specialising in City employment.

"The trading community is shrinking."

Few people see London losing its status as the world's pre-eminent financial center any time soon, even if Britain does vote to leave the European Union in a referendum to be held before the end of 2017. But it could be a leaner City.


Fear Factor

Several banks said in their third-quarter earnings reports that tens of thousands of jobs would be axed. London trading floors will not be spared.

Credit Suisse cut 100 fixed income and foreign exchange jobs in London earlier this month, with another 100 to follow. That is part of a larger drive to cut 2,000 roles in London, mostly back-office positions.

Deutsche Bank said it would cut 9,000 fixed positions and has already moved thousands of back-office jobs out of expensive London to cheaper Birmingham. Standard Chartered said it would cut 15,000 roles by 2018.

Earlier this year HSBC said it would slash 50,000 jobs in total, while last year Barclays said it would cut 19,000 jobs over three years.

"For banks, peak trading is history," said Peter Hahn, Senior Fellow in banking at Cass Business School and a former bond salesman himself.

A series of market-rigging scandals since 2008 has only served to tarnish traders' image further in the eyes of the public, regulators and banks' shareholders.

Banks have paid tens of billions of dollars in fines and settlements for failing to prevent their traders attempting to manipulate global interest rate, FX and commodity markets through communications via electronic chat rooms.

They have cracked down on chat rooms in recent years, and many have banned mobile phones from trading floors.

In a sign of how their stars have fallen, staff in the sales and trading divisions at one global banking giant have to pay for their personal mobile phone bills, whereas those in the investment banking division can still get theirs funded, one senior banking source told Reuters.

"There's a fear factor. People nowadays will do nothing rather than something that might be wrong," Rands said.

"It's all about looking after the customer and doing everything by the book rather than old school taking risk. It's just a service industry now."

© 2018 Thomson/Reuters. All rights reserved.

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Once dubbed masters of the universe, it seemed the party would never end for a profession often associated with a champagne lifestyle of fast cars and faster living.
London, trader, jobs, cuts
Tuesday, 24 Nov 2015 04:02 PM
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