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”

Bloomberg Businessweek (Asia) - - CONTENTS - −Lananh Nguyen

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.”

——Char­lie Stenger

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.

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