Traders are usually very well paid. But that pay comes with long hours. UK equity markets currently open between 8am and 4:30pm. That doesn’t sound so bad, but traders have to be at their desks at least an hour before and after trading. The Association for Financial Markets in Europe is trying to get those opening hours shortened.
However, I think that shorter market opening hours are a red herring. Historical trends in the nearly two decades since I started trading have made them irrelevant.
I began working at an investment bank, as an interest rate options trader. We were trading Sterling and Euros, which meant arriving for the European open at 8am. Our MD laid down a strict start time of 7:30am. Anyone missing the deadline had to buy breakfast for the entire desk.
Once the market opened all trading was done manually. Options were traded via voice brokers. Hedging was done with primitive web interfaces, but a human still had to move the mouse. Trading stopped around 4:30pm, and I would normally be gone by 5:30pm once I had finished signing off all my trades .
The trading day was exhausting. There was precious little time for more strategic tasks like thinking about how to price new products. Sometimes there wasn’t even enough time to visit the toilet.
Subsequently, I got a job in a hedge fund that traded systematically. It’s universally acknowledged that the hours are much better on the buy side, and this is doubly true if you are at a systematic shop.
We traded 24 hours a day, but the portfolio management team worked relatively relaxed hours. The official hours were 9am to 5:30pm with an hour for lunch. As I’ve written before, I’d normally be in by 8:15am and gone by 5:45pm.
Because computers made all the trading decisions there was almost no need to be in the office during market hours. Indeed at times, like during the 2008 financial crisis, the daily market moves were an annoying distraction to my job of researching trading strategies that were designed to work for many years. Instead, there were teams of execution traders and IT specialists who worked in shifts in London and Hong Kong to trade and watch over the machines.
Smart quant funds treat their researchers like academics. Fixed working hours shouldn’t matter that much: it’s more important to give your staff time and space to think. If an ultra smart analyst does their best work late at night, then you shouldn’t complain when they come in at 10am.
Trading has changed a lot since I started. Firstly, the trend is for much longer opening hours. Most futures markets open for extended hours during electronic trading sessions so you can trade nearly 24 hours a day. Equity exchanges have been slow to catch up, but alternative venues (‘dark pools’) are meeting the demand for out of hours trading.
Secondly, trading has become increasingly dominated by computers, and as a result the job of most traders has changed radically. Traders are increasingly spending their time babysitting automated systems rather than trading manually.
Babysitting requires you to be at your desk the entire time that markets are open, but as systems become more robust smart traders will eventually delegate this task to operational specialists working in shifts. This will free-up traders to become more like the PM at a systematic fund. They should spend their days researching and calibrating their automated trading systems, and will have the time and space to think more deeply.
Banks should then start treating their traders more like academics. The culture of always being at your desk during market hours will need to change. I look forward to the day when a trader can legitimately arrive at 11am after a long bike ride, mentally refreshed and full of new ideas.
Robert Carver has worked on the buy side as an options trader at Barclays, and on the sell side as Head of Fixed income at quantitative hedge fund AHL. He is the author of 'Systematic Trading', 'Smart Portfolios' and ‘Leveraged Trading’. Robert still uses computers to trade his own money, 24 hours a day whilst he spends his time cycling and thinking up new trading strategies.
Photo by Ben Sweet on Unsplash