China’s financial engineers are coming home. Inspired by the launch of the first equity options in Shanghai, finance professionals with experience in structuring or trading derivatives are thinking of quitting jobs in Western locations to become early movers in China’s potentially large new market.
“I’m thinking of coming back to China and starting my own trading business to seize this chance,” one ex-trader at a major UK bank told us on the condition of anonymity. Options trading is not within the grasp of every investor, but this trader believes he has the skills to make it work. He has a PhD in financial engineering and over 10 years’ experience trading derivatives in both the UK and Switzerland.
Earlier this month, China unveiled its first equity options that are based on an exchange-traded fund (ETF) that tracks the SSE50 index. It’s early days – a managing director at Chinese brokerage Hongyuan Securities describes trading volumes as “petty” – but local firms are already scouting out what sort of talent they need to take advantage.
The MD, who himself had a few years of quantitative trading experience in London, says that primarily they’ll be looking for Chinese quants with science and engineering backgrounds; ideally a quantitative PhD from a Western university. However, they also need experience – at least three years working for a major bank in either London or New York, he says.
But persuading these people to leave high-paying jobs in Western institutions for a new and currently relatively illiquid product is no easy task. Any good quant needs support, says an associate working at hedge fund Paulson & Co in London. “It’s a teamwork thing,” he says. “You can be a great quant, but you need a team of IT professionals to work on the data and control. These people cost a lot.”
The reality is that Chinese banks are more likely to look closer to home for talent, at least in the short term. Taiwanese candidates are a good source of recruits. Taiwan opened up its markets to options trading in 2002 and has grown rapidly since then – there’s deep well of well-trained individuals who could make the move to China, and they speak the same language. Some of them already have.
“There are more career development opportunities here,” says one investment manager at Xinhu Futures, a Shanghai-based futures company. “Those who have first-hand operational and trading experience can be department heads here, and those with management experience can be promoted to senior management.”