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London: where the $$m rates trading jobs have coalesced

Where the interest rate derivatives traders hang out

Where the interest rate derivatives traders hang out

Rates traders are well paid. Last month, it emerged that a senior rates trader at Deutsche Bank was earning £3m a year while his junior was on £280k. Another rates trader was given a $2m settlement after being wrongly dismissed – suggesting his annual pay pre-dismissal was a healthy six figures, if not seven.

The £3m rates trader was based in Frankfurt and the trader receiving the $2m in compensation was based in New York City. However, a new report from the Bank for International Settlements (BIS) suggests that if you really want to get ahead in rates trading you need to be based in the City of London.

As the chart below shows, London blows every other global financial centre away when it comes to over-the-counter (OTC) interest rate derivative trading. Over half of the entire global total of OTC derivatives trades went through trading desks in the City in 2013. Just 23% went through the U.S.. Next to nothing went through Paris, Frankfurt and Japan. Moreover, OTC rates derivatives have been a huuuuge growth area for the City of London since 1995. If you want a highly paid rates trading job, the City has been the place to be – the BIS points out that London even surpassed local markets when it comes to trading derivatives denominated in yen, the Australian dollar and the New Zealand dollar in 2013. Why ever would you want to based elsewhere?

OTC derivatives market 2013Source: BIS  

So far, so good. It’s a little unfortunate, however, that OTC rates trading jobs look particularly vulnerable during 2014. Deutsche Bank analysts are predicting a 7% reduction in rates trading revenues next year as trades currently made over the counter move onto exchanges. London’s highly paid, highly populous OTC rates derivatives traders have had a good run. But it could be about to come to an end.

 

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