If you listen to the great and the good (and occasionally, to this website), you may have thought fixed income sales and trading was a bad place to be. For the past few years, everyone who is anyone has predicted that fixed income sales and trading jobs were on a hiding to extinction as the business of trading bonds moved swiftly online.
Boston Consulting Group reiterated this ‘death of fixed income trading’ meme last May but its peak was back in 2012, when the Wall Street Journal ran a hysteria-inducing article suggesting fixed income traders were about to be superannuated by programmers. At the time Ryan Sheftel, head of automated Treasury bond trading at Credit Suisse told the Journal that the bank’s best traders were already, “pounding away writing code.” In July 2012, the New York Times ran a piece saying that even the best bond traders were struggling to find new jobs and that traders who knew how to code were eating their lunches. In confirmation of this horror, Goldman launched an electronic bond trading platform, so did Morgan Stanley, so did RBS.
Fast forward nineteen months, and any claims that fixed income traders need to learn code and that fixed income salespeople need to start selling electronic systems look wrong. Very wrong.
As the Financial Times reported earlier this week, Goldman has very quietly retreated from developing G-Sessions, its electronic bond trading platform, after finding that clients were reticent about trading over a system that could provide Goldman with data to trade against them. A report by Greenwich Associates suggests Goldman’s not the only with issues – only 25% of fixed income trading is executed online and most of it goes through multi-dealer platforms (Bloomberg, MarketAxess, Tradeweb and Yieldbroker) rather than the proprietary e-trading platforms developed by banks themselves.
For old school fixed income traders who don’t know their C++ from their C#, this shouldn’t come as too much of a surprise. A report by McKinsey & Co and Greenwich Associates last August concluded that bonds aren’t conducive to being traded online and that, “full-fledged e-trading in corporate bond markets will be slow to arrive (if at all).”
This doesn’t mean fixed income currencies and commodities (FICC) professionals are out of the woods entirely. As the chart below (from information provider Coalition) shows, FICC headcount fell 4% last year – more than in any other area of the market. Nonetheless, productivity per head in FICC is falling says Coalition – as FICC revenues decline, banks’ old school FICC traders need to do something more to justify their existence. Learning to code isn’t going to do it.