With increased automation, currency traders are an endangered species
Currency traders are losing jobs as algorithms take over “This is crunch time—it’s not looking good”
Charlie Stenger, a currency broker-turned-recruiter, has seen it all. One dismissed trader wept in his office. Another said he hadn’t told his wife he was unemployed and left the house every day in a suit to sneak off to a coffee shop. Then there are the delusional ones who carefully explain how they’re not interested in jobs that don’t pay as well as those they just lost. Stenger, who was laid off from broker ICAP in 2013 and works for executive search firm Sheffield Haworth, tells the men and women he counsels: Take the pay cut. Oh, and don’t wait for the phone to ring. “This is crunch time—it’s not looking good,” he says. “This is a shrinking pond.”
The investment banking business has shed tens of thousands of positions since the end of the financial crisis, and the downsizing has been hard on foreign exchange desks at many banks, including Barclays, Morgan Stanley, and Société Générale. The industrywide job axing coincided with a shift to automation, which slashed staffing needs and produced a new smaller generation of quantitative traders whose decisions are driven by mathematical models.
There were 2,300 people working on currency trading jobs at the world’s biggest banks in 2014, a 23 percent drop from four years earlier, according to Coalition Development, an analytics firm. Revenue from foreign exchange divisions hasn’t bounced back after falling to $6.5 billion in 2014, down almost 45 percent from 2009, Coalition data show. Currency trading in the U.K. and North America shrank by more than 20 percent in October from a year earlier, according to central banks in those regions.
Humans are up against formidable opponents across the industry, such as Virtu Financial. Because its business is built on automation, Virtu had only about 150 employees last year— generating more than $5 million per worker. Its computers can trade more than 11,000 securities and other products on more than 225 trading platforms in 35 countries. “My style of trading went out of vogue,” says Keith Underwood, who traded currencies for 25 years before becoming a consultant in 2015. “The business has to be
“There were periods where I wouldn’t make money for 90 days at a time, and the insurance bill was still due every month, and the rent and the car payments.”
downsized.” Even if traders recognize that, he adds, it’s not easy “for people who have been in a market for many, many years to see that they’ve been replaced by an algorithm.”
From his office at Sheffield Haworth in Chicago, Stenger still advises friends on foreign exchange sales and trading desks. First, prepare to be laid off. When you look for work, plan on taking a 25 percent pay cut. “Your stock goes down once you lose your job, and that’s just the nature of the beast,” says Stenger, whose clients typically earn salaries of $250,000 to $1 million. Stenger was told he was being let go four days after he learned his wife was pregnant with their first child; he didn’t have a regular income for a year. “There were periods where I wouldn’t make money for 90 days at a time,” he says, “and the insurance bill was still due every month, and the rent and the car payments.”
Some dismissed traders have landed work as salespeople or executives at financial technology companies, payment providers, or trading platforms and exchanges. Others use their knowledge to bolster banks’ risk-management operations. Franz Gutwenger, a recruiter in New York, says one of his financial institution clients has expanded its regulatory compliance staffing by a factor of five.
“I don’t think there’s a whole lot from my generation that are still in the industry,” says Guy Piserchia, who led foreign exchange trading desks at
Bank of America and Paribas over a three-decade career. Piserchia left Wall Street in 2012 and got more involved in local politics, serving two terms as mayor of the 8,700-person township of Long Hill, N.J. Now deputy mayor, he’d like to get back to Wall Street in a role that combines his financial and government experience. “With automation and electronic dealing, I think there are going to be fewer people” on foreign exchange desks, he says. “The ones that have evolved and survived may be some of the better ones—or, as in life, may be some of the lucky ones.”
The bottom line With volume down and computer use up, there are at least 23 percent fewer people working in currency trading than in 2010.