In the FX sector, man is losing out to machine. However, while expensive traders are being displaced by algorithms as the market becomes more electronified, banks are fighting over skilled technologists with experience of building cutting-edge trading platforms.
The technology ‘arms race’ in the FX space has been ongoing for years, but an increasing number of firms are currently rolling out ‘greenfield’ projects to enhance their platforms. The equation has always been simple in FX – cut back on IT investment and you’ll fall behind. Now, though, banks are trying to poach each other’s technologists in a keep-up-with-the-Joneses approach to developing new FX technology platforms.
“FX technologists are a sought-after breed, but banks are looking for brand names on people’s CVs,” says Paul Bennie, managing director of IT in finance at headhunters Bennie MacLean. “However, all the banks want to hire developers who have worked on the latest leading-edge platform. If there are 250 people who have worked on, say, Barclays’ Barx platform, the challenge is finding the people who had a central role.”
What to do if you’re under 20 and want to work for Google or a hedge fund when you’re older
What you can expect to earn in accounting, IT, operations, risk and compliance in the UK
JPMorgan embarking on hiring spree after tech shake-up
Part of the reason for this investment in technology is a long-term desire among banks to cut costs in their FX business. Not only have profits slid – albeit by only 7% year on year, according to Coalition – but the probe into rate-rigging within the FX market has also sped up the move towards electrification of the market.
Investment banks have been creating new e-trading platforms, directly challenging market leaders, “foretelling a brutal battle” to get ahead using technology, according to a report by Aite Group. It believes that 76% of all currency transactions will take place electronically by 2018, up from 66% last year and 20% in 2001.
Deutsche Bank, Morgan Stanley, SocGen, Credit Suisse, HSBC, Nomura, Barclays and Citi have all been hiring FX technologists in recent weeks, according to recruitment sources. As Chris Purves, global head of foreign exchange, rates and credit electronic trading at UBS told Bloomberg, it’s becoming more like the equities sector.
“Many algorithms in previous foreign-exchange platforms were very, very basic - not a lot more than egg timers,” he said. “The equities world, on the other hand, had advanced algorithms with gaming technology inside of them - they would randomly split up clip sizes to provide best execution. A lot of that technology has now been brought into the foreign-exchange world.”
There’s an ongoing demand for FX IT professionals, says Ben Cowan, director at recruiters Astbury Marsden. “The challenge first of all is to bring in skilled business analysts who can present the case to senior management, and then banks are keen to bring in skilled developers to launch the project.”
The types of people working on these projects are coming from ever-more sophisticated backgrounds. As Kevin Rodgers, global head of foreign exchange at Deutsche Bank told the Reuters FX Summit last year, a lot of people working on eFX trading platforms are “literally Russian rocket scientists.”