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Want to be a trader in 2020? Look at these charts

Electronification of fixed income trading jobs

He's gone. Who's next?

If you work in trading, times remain ‘uncertain.’ J.P. Morgan and Goldman Sachs keep talking up a revival of fixed income revenues, but it hasn’t happened yet. J.P. Morgan’s banking analysts actually think that fixed income revenues may never return to what they were in 2010, and that equities revenues will barely change between now and 2018.

Unsurprisingly, banks are cutting costs. Credit Suisse is moving 40 of its prime brokerage traders over to Dublin. Deutsche Bank has long been moving ‘low touch’ traders working with undemanding clients to Birmingham (where it’s cheaper), and has now begun shunting structured credit trading jobs there too.

Underpinning it all is the relentless rise of the machines: automated trading systems which allow orders to be placed and trades to be made electronically, without the need for human intervention.

If you’re concerned that a robot might be coming for your trading job, you may want to read the Bank of International Settlements’ 43 page new report on the rise of electronic trading in fixed income markets. In summary, it confirms the well-worn adage that electronification is coming for fixed income traders’ jobs in much the same way that it came for equities traders.

Take the first chart below. In three short years between 2012 and 2015, it shows that machines ate the dinners of standardized interest rate swap (IRS) traders. They also made big incursions into single name CDS, repo and investment grade cash trades. As the second chart shows, electronic trading now accounts for nearly 50% of the market in European corporate bonds, and is growing fast.

What does this mean if you’re a fixed income trader now who wants to be a fixed income trader in 2020? Firstly, that you might want to work in an area like high yield, which doesn’t lend itself to electronification. Secondly, that you might want to steal yourself for a drop in pay – electronic trading squeezes margins. And thirdly that you might want to move out of trading and into project management and IT – as banks invest in technology to facilitate electronic trades, this is where the jobs will be in the years to come.

Electronification fixed income trading

Source: BIS

 

European bond trading

Source: BIS

Photo credit: Spencer Platt/Getty Images News/thinkstock

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