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Proof that trading jobs in investment banks are a fast track to financial mediocrity?

How it is after you've bought a Venti Latte.

How it is after you've bought a Venti Latte.

If you’re a paid up member of the Anton Kreil fan club, you will already be fully cognizant of the idea that working as a trader in an investment bank isn’t what it used to be. Kreil, an ex-trader at Goldman Sachs, tours the world preaching the pointlessness of working on a banks’ trading floor today. Now that proprietary trading has been done away with (except in an obscure corner of Citigroup), he argues that investment banks’ trading jobs are only really about executing trades, and that execution is mostly done by machines. Worse, he calculates that young traders in investment banks are earning a mere £11 ($19) per hour and living hand to mouth.

Senior traders have objected to Kreil’s summation of their profession. However, research from Emolument.com, the real time salary data specialist, suggests that Kreil might be onto something.

Emolument’s data indicates that median pay for managing directors on the trading floors of investment banks has fallen by 38% in the past three years, that associate bonuses fell from an average of £24k to an average of £15k between 2012 and 2014, and that analyst bonuses on trading floors are now zero.

This doesn’t mean that junior traders in investment banks are on the minimum wage. Analysis by Emolument in January suggested that analyst-level traders in London earn £21 pounds an hour – nearly double Kreil’s estimate. However, the latest crop of data does seem to validate Kreil’s claim that pay for traders in banks pales into significance compared to what’s on offer at some hedge funds.

Of course, recent cuts in traders’ pay may be cyclical rather than structural. Low volatility means that 2013 and 2014 haven’t been good years for banks’ fixed income currencies and commodities businesses. Banks like Barclays are cutting entire business areas, allowing banks to pick up new traders cheaply and to pay their existing traders less. Traders’ pay may yet increase again. But with more trades being executed electronically and more capital being held against trades, this looks a bit like wishful thinking.

Related articles:

Here’s how much you’ll make per hour in M&A or sales and trading

Ex-Goldman trader runs calculations, says young bankers now living hand-to-mouth

Ex-Goldman trader’s brilliant student presentation on what trading jobs in investment banks really entail

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