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Traders Face Weak Hiring Prospects in 2012

Capital markets firms remain hungry for quants and risk management professionals. But quantitative analysts are likely to spurn Wall Street for more lucrative offers at social media powerhouses like Facebook or LinkedIn.

Traders who are looking for work face an uphill battle in 2012. As financial services firms continue to struggle with weak trading volumes, a skittish U.S. marketplace and persistent concerns about the eurozone debt crisis, industry experts are forecasting dim hiring prospects on trading desks during the first half of 2012. The job outlook is made murkier by the fact that a number of prominent firms announced layoffs late last year in the aftermath of weak revenues from trading in key areas such as fixed income, foreign exchange and equities.

Tens of thousands of layoffs are sweeping across a range of job functions at investment banking powerhouses -- including Goldman Sachs, Morgan Stanley, Credit Suisse, Bank of America and HSBC -- a large chunk of which are likely to come during the first quarter of 2012. In all, 233,000 jobs were cut but by financial services firms in 2011, according to Bloomberg, which reported that traders who specialize in energy, metals and agriculture either are jumping to, or are launching their own, hedge funds as a result. That route, however, won't be a viable option for most deposed traders, since raising money without a long track record is difficult in this climate, while established hedge funds typically don't hire many people, industry sources say.

In light of this, job seekers need to brace themselves for an arduous and potentially futile search in 2012, according to Richard Lipstein, a recruiter and managing director at Boyden Global Executive Search. "This profession is going to be among the toughest to be in, quite frankly," he warns. "A lot of people are saying that Wall Street will be a smaller employment market and a smaller percentage of the U.S. G.D.P. -- going back to what it had been 20-plus years ago."

This new, more streamlined capital markets workforce may be the result of structural changes in the marketplace that are being driven by the Dodd-Frank Act in the United States and by Basel III in Europe, Lipstein suggests. So although firms are likely to beef up their trading desks when the markets improve at some point, he says, it could be years before many of the positions that were slashed in 2011 are refilled.

"As long as there are public markets, people will need to trade," Lipstein comments. "Time will tell, but I suspect material job growth in the trading profession is not going to be happening anytime soon."

Traders Must Work to Stay Relevant

Meanwhile, traders who are fortunate enough to be employed can protect their jobs by developing the ability to operate across a wider range of asset classes and mastering the latest trading tools, many experts agree. Such skills may entail becoming proficient in high-frequency trading techniques, or gaining a better understanding of how to use algorithmic trading tools that either were built in-house or purchased from a third party, according to Giles Nelson, cofounder of trading technology provider Progress Apama.

"It's not going to be the case any longer where a trader can just concentrate on just one asset class and ignore what's going on elsewhere," Nelson contends. "They're going to have to become more sophisticated, be able to look across asset classes and use the tools that allow them to do that."

And with regulations in the U.S. and Europe moving assets that were once traded over the counter onto exchanges or swap execution facilities, traders have no choice but to adapt to an environment that will become entirely electronic, Nelson adds. "From a European perspective, OTC derivatives are going to come on-exchange, and that opens up a whole new area of electronic trading activity to occur," according to Nelson, who warns that some traders won't be able to make that transition. "That's going to be a very radical change in the way that market works and the type of trader that's going to be required for that."

As the Senior Editor of Advanced Trading, Justin Grant plays a key role in steering the magazine's coverage of the latest issues affecting the buy-side trading community. Since joining Advanced Trading in 2010, Grant's news analysis has touched on everything from the latest ... View Full Bio

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