Remember those rates traders at Deutsche Bank? Those managing directors (MDs) who were earning £878k to £3m ($1.4m to $6.5m)? And those junior rates traders who were earning around £280k ($457k)?
It turns out they weren't that unusual.
Yes, the Deutsche rates MDs were paid a bit more than average, but new figures suggest rates traders are paid unusually well. This remains the case, even though banks (like Credit Suisse) have been pulling back from the rates trading business and even though G10 rates revenues have reportedly fallen 45% in the past two years.
The figures, which are the latest from Emolument.com, the real time pay data website, suggest that London-based managing directors in rates trading earn an average of £696k a year. By comparison, impoverished managing directors in FX trading earn an average of £363k a year. Only senior credit traders are up there with the rates professionals - they get £670k a year.
How can this be? Rates traders have been at the forefront of banks' redundancy programmes since 2013. Banks are pulling back from G10 rates trading as capital requirements have increased and rates revenues have plummeted as volatility has disappeared. Meanwhile, margins are under attack from attempts to push over-the-counter (OTC) rates trades onto centralized exchanges and clearing platforms. So, why are rates traders still paid so well?
Robert Benson, Emolument's CEO, suggests it might have something to do with complexity of the rates market. "Rates and credit are typically more complex products, with higher margins, and this may explain why remuneration is significantly higher," he says. This is true. High pay for rates traders may also be a hangover from the recent past. As JPMorgan pointed out in its 2013 investor day, rates revenues exploded between 2006 and 2012 and London is the world's leading centre for trading in OTC rates derivatives. Meanwhile, a report in April by the CME Group suggested that investors are proving slow to move away from high margin OTC rates products and into exchange traded interest rate futures. In the circumstances, high pay makes sense.
Nonetheless, rates pay is likely to fall in the coming bonus round. Coalition thinks banks' G10 rates trading revenues fell by another 15% year-on-year in the first half of 2014, so that's hardly a recipe for higher bonuses. By comparison, credit trading bonuses are likely to increase this year - credit and structured product teams have been having a good year. FX bonuses are likely to remain depressed - especially following today's announcement of £2bn in fines for banks involved in FX fixing.
Vice President (VP): £177k
Managing Director (MD): £573k
Vice President (VP): £157k
Managing Director (MD): £363k
Vice President (VP): £191k
Managing Director (MD): £670k
Vice President (VP): £232k
Managing Director (MD): £696k