How much P&L do you need to generate if you want to work for a top high frequency trading firm? If the UK operation of Sun Trading is anything to go by, it’s somewhere in the region of $6m a year.
The UK arm of Chicago-based HFT, Sun Trading, posted £28m ($42m) in revenues for 2014, according to accounts released this week. This is a slide from £35m in 2013, but is still impressive considering that it has just seven traders working for it.
On a per head basis, this means that revenue per front office employee was £4m ($6m), although this discounts the contribution of two management staff and another 11 employees working in support functions.
How does this compare with traders at large investment banks? Well, admittedly revenues per head at large banks are weighed down by more support staff, but traders in J.P. Morgan’s fixed income currencies and commodities (FICC) team made an average of $2.9m per head in 2014, and equities traders brought in $1.7m each. Goldman Sachs’ UK-based traders earned an average of $2.5m according to a regulatory filing.
Of course, investment banks – stripped of their prop trading abilities by regulators after the financial crisis – would argue that it’s harder to make big sums when you’re mere ‘market-makers’. HFTs argue that they’re only market makers too. Michael Lewis may disagree.
While investment banks are constrained by what they can pay their employees, HFTs are linking compensation to traders’ P&L.
Pay at Sun Trading in London still appears comparatively modest, however. On a per head basis, the £5m it allocated to compensation last year works out as only £253k ($383k). Coincidentally, this exactly the same as the average compensation at Goldman Sachs last year….