$TREET FE$TIVAL
Some bond traders expect ’16 comp. to hit $1M
Wall Street’s top bond traders can start dreaming again about fancy cars, a new Rolex and maybe even trading up to a fancier condo.
Compensation for these financial pros, after falling sharply last year, is expected to triple — to $1 million or more for some senior traders — in 2016, according to a recent survey.
Bond traders benefited in 2016 as the yield on the 10year started to rise — thanks to Brexit and to the Federal Reserve rate increase — sparking an increase in trading.
More than half of buy-side company directors said they earned between $300,000 and $600,000 last year — and were expecting a 200 percent increase in 2016, according to the survey by headhunting firm Options Group, a copy of which was obtained by The Post.
Options Group surveyed 3,200 bankers and traders.
Even the most junior buyside bond traders will see a hefty pay boost. More than half of these one- to three-year traders said they earned total compensation last year of between $100,000 and $175,000.
That means total comp this year could soar by $200,000.
Traders receive most of their compensation in bonuses that are paid out in the first quarter of the following year.
“Part of [the expected giant increase] is actually recovery from last year,” Jessica Lee, executive director at Options Group, told The Post. “Last year was a pretty tough year for credit, specifically distressed.”
The expectations for traders’ pay aren’t set in stone yet, and the highest increase will probably only get paid out to a few traders, if any. The median expectation for a pay increase was 10 percent.
Bond traders have had notoriously sweet paydays since the go-go days of the 1980s, when Tom Wolfe walked around the Salomon Brothers trading floor researching Wall Street for his novel, “The Bonfire of the Vanities.”
“Just imagine that a bond is a slice of cake, and you didn’t bake the cake, but every time you hand somebody a slice of the cake a tiny little bit comes off, like a little crumb, and you can keep that,” Wolfe wrote in his 1987 book. “If you pass around enough slices of cake, then pretty soon you have enough crumbs to make a gigantic cake.”
Other traders who are expecting a good year include:
Some medium-size hedge fund managers expect as much as a 400 percent increase in their take-home pay. Most made between $200,000 and $600,000.
Stock and options traders expect this year’s compensation could double their 2015 comp, which went as high as $1.5 million.
“Cross-asset” traders, who aren’t confined to a single kind of investment, are expected to get better pay than their counterparts at hedge funds.
Banks could double their biggest winners, while hedge funds will get only a 40 percent raise.
One weird quirk of Wall Street emerged in Options Group’s 49-page annual survey: that the youngest workers have longer non-compete periods than some executives.
Banking associates have to wait, on average, three months before they can take a job at a competing firm — a full month longer than more-experienced vice presidents, and just about as long as directors.