A new report suggests 90% of traders will lose their jobs over the next eight years. Rubbish, say recruiters.

The report, produced by IBM and reported in today’s Times reputedly says traders are set to be replaced by algorithmic computer-based trading systems, which place trades automatically and eliminate the need for human intervention.

Algorithms have become popular as banks and hedge funds have sought to reduce trading costs and increase their anonymity. Companies like Credit Suisse, Bank of America and Goldman Sachs have all invested heavily in algorithmic systems over the past few years, while Goldman and UBS have both made equities traders redundant.

Recruiters say this doesn’t mean that traders are about to be let go en-masse, however. “It’s rubbish,” Bahador Moussa, a consultant specializing in equity derivatives and exotic products at recruitment firm Huxley Associates, tells us. “A lot of banks have been investing in high frequency black box trading,” he adds. “But it hasn’t made money yet – banks and hedge funds have been struggling to set up the necessary historical databases, finding information on the market has been difficult.”

Moussa points out that algorithmic trading is difficult to apply to the fast growing exotics area, where traders need to price products manually. It’s a view shared by consultant Richard Melkonian at search firm Napier Scott. “Algorithms apply solely to commoditised markets which need to be very liquid and fungible,” he says.

However, Melkonian does predict growing demand for algo-specialists: “Banks have had a lot of teething pains with their algorithmic trading systems. Right now I’m not sure they have the personnel in place to manufacture this stuff.”

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