Banks keep cut­ting cur­rency traders

The Pak Banker - - COMPANIES/BOSS -

As banks around the world cut sales and trad­ing jobs in an ef­fort to re­duce costs, the blood­let­ting in for­eign ex­change is prov­ing to be among the deep­est and most painful.

The world's 12 big­gest banks cut frontof­fice cur­rency staff by 5 per­cent in 2015, ex­tend­ing a trend that's seen them re­duce for­eign-ex­change head­count by more than a quar­ter since 2010, ac­cord­ing to Coali­tion De­vel­op­ment Ltd., a Lon­don-based provider of re­search and an­a­lyt­ics for the fi­nan­cial in­dus­try. Lay­offs among for­eign-ex­change traders last year out­paced those in eq­ui­ties, cor­po­rate fi­nance and ad­vi­sory, and fixed in­come, cur­ren­cies and com­modi­ties trad­ing broadly.

The $5.3-tril­lion-a-day cur­rency mar­ket has been trans­formed by a shift to au­to­ma­tion that's re­duced staffing needs and co­in­cided with de­clin­ing vol­umes.

For­eign-ex­change 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. A 19 per­cent surge in rev­enue spurred by el­e­vated volatil­ity will likely do lit­tle to stem fur­ther cut­backs in the com­ing years, ac­cord­ing to Coali­tion's Ge­orge Kuznetsov.

"The out­look for head­count is neg­a­tive to neu­tral," Kuznetsov, head of re­search and an­a­lyt­ics at Coali­tion, said in a Feb. 19 in­ter­view. "Last year's spike in rev­enue didn't nec­es­sar­ily make banks change their opin­ion about the for­eign-ex­change mar­ket."

Deutsche Bank AG, which runs Europe's big­gest in­vest­ment bank by rev­enue, said Mon­day it will cut 75 jobs at its trad­ing busi­ness. The job losses will fo­cus on Deutsche Bank's fixed in­come unit, which also in­cludes cur­rency trad­ing, ac­cord­ing to a spokesman.

Banks reaped higher for­eign- ex­change rev­enues for the first time since 2011, driven by a surge in ac­tiv­ity af­ter the Swiss Na­tional Bank shocked mar­kets last Jan­uary by aban­don­ing its cur­rency cap.

Rev­enues from sell­ing and trad­ing Groupof-10 cur­ren­cies in the spot, for­wards and op­tions mar­kets rose to $9.5 bil­lion last year, up from $8 bil­lion in 2014.

"We saw a mas­sive spike in for­eignex­change volatil­ity re­lated to the Swiss franc. This gen­er­ated trad­ing op­por­tu­ni­ties and, most im­por­tantly, in­creased client ac­tiv­ity to help boost banks' rev­enues for the year," Kuznetsov said. "It does seem like a one-off volatil­ity event that drove the in­crease in per­for­mance."

A JPMor­gan Chase & Co. gauge of cur­rency volatil­ity av­er­aged 10.08 last year, the most since 2011.

The 5 per­cent de­cline in front-of­fice for­eign-ex­change head­count com­pares with a 1 per­cent drop in cor­po­rate fi­nance and ad­vi­sory po­si­tions and a 4 per­cent de­cline in fixed in­come, cur­ren­cies and com­modi­ties jobs broadly. Equity head­count re­mained flat, ac­cord­ing to Coali­tion.

Banks that de­cide to make fur­ther cuts to for­eign-ex­change desks will likely cede mar­ket share and be forced to re­duce ac­tiv­i­ties in some cur­rency prod­ucts or mar­kets, Kuznetsov said.

The 12 banks in­cluded in Coali­tion's anal­y­sis were Bank of Amer­ica Corp., Bar­clays Plc, BNP Paribas SA, Cit­i­group Inc., Credit Suisse Group AG, Deutsche Bank, Gold­man Sachs Group Inc., HSBC Hold­ings Plc, JPMor­gan, Mor­gan Stan­ley, So­ci­ete Gen­erale SA, and UBS Group AG.

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