Algorithmic trading is supposed to be the next big thing. Not in Australia.
Billed as the biggest revolution in equities trading since markets moved off trading floors and onto computer screens, algorithmic trading jobs are a hot topic in the northern hemisphere, but have yet to gain traction down under.
The tiny Australian market and the esoteric skill set required in algorithmic trading conspire to make it a realistic opportunity for only a handful of people, say recruiters working in the trading field.
“Most of the global investment banks have an algorithmic trading capability here, but you’re talking about less than 10 people,” says Oliver Darkes, principal consultant at Carmichael Fisher in Sydney.
“Even then, you are talking substantial overseas experience and a rocket-science Ivy League PhD. It’s a highly numerate group of people, from a strong mathematics, actuarial or IT background.”
Algorithmic trading uses proprietary computer-based mathematical models to make and execute trades. It allows institutional investors to make trades quicker and more efficiently; and to add to its attractiveness, cutting out the broker sales desk middleman allows the institution to disguise a trading strategy.
Darkes says Australian-based algorithmic traders are paid in line with senior prop traders in the domestic markets. “A director would be on AU$250k with a bonus potential of four to six times in a good year.
To put that in context, the serious algo boys in the UK and US would be on US$3m (AU$3.61m) to US$5m (AU$6m).”
The problem is, says Darkes, the Australian market is neither large enough nor volatile enough for algorithmic trading to work. “The size of equity blocks they’re moving here is too small to do highly synthetic, highly programmed algo trades,” he says.
More jobs in algo support
Traders wanting to punt on the further development of algorithmic trading in Australia could look to the support function that sits behind the algorithm and high-frequency trading desks, he says.
“Citigroup, Credit Suisse, Deutsche Bank, UBS, Macquarie and Goldman Sachs JBWere will all have a support function sitting behind that from a quant and analytical perspective. That will have graduates straight out of university, probably PhDs with a mathematics/IT background. But they would be looking at AU$80k to AU$100k base salary – even though it is a speciality area, it is not an automatic ticket to huge amounts of money,” says Darkes.