Salespeople are hot, traders aren't. Rates traders may be especially challenged

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The big news this morning is that Goldman Sachs no longer loves its traders, it loves its salespeople. Feeling unloved, Reuters points out that its traders are leaving, especially in rates where has been a lot of movement of heartbroken traders seeking affection elsewhere (eg. Nomura).

We pointed out banks' enthusiasm for salespeople last year. In a flow-driven client-oriented trading environment, it's logical that salespeople will become more important. According to Reuters, Goldman has been both promoting its salespeople more than its traders and touching its salespeople warmly with higher pay.

Traders, meanwhile, are struggling against stricter risk limits and restrictions on their compensation. Value at Risk at Goldman was down 25% year-on-year in the second quarter of 2011. Traders' pay at all banks is now more likely to be deferred or clawed back.

"It used to be the case that a trader's seat could be worth $100m, whereas a salesperson's seat was capped out at $15m," says the head of one headhunting boutique. "But that's changed. In this market, traders are finding it hard to make money and salespeople who can convince clients to trade are becoming more valuable."

It doesn't help that traders can lose money and salespeople can't. A trader who makes a lot of profit in one year may receive a lower proportion of this than a salesperson who brings in lot of revenue.

"The very worst a salesperson can do is to bring in no money and cost you a seat," reflects the headhunter.

Bloated rates desks

Within the realm of melancholic traders, rates traders are said to be particularly dejected.

"Rates and government bonds businesses have been having a particularly difficult time recently," says Christian Robbins, managing director of search firm Nicholas Scott and a former sterling arbitrage trader himself. "A lot of businesses have moved into this area in the past two years and they haven't performed as well as they'd hoped."

When Credit Suisse issued its results yesterday, it revealed that its rates revenues were down significantly on last year, and that the market has shifted to a less favourable operating environment.

In the past few years everywhere from Jefferies to Santander, Daiwa, Citadel, MF Global, State Street and Scotiabank has built up a government bonds and rates business in Europe.

"One of the reasons so many banks went into government bond trading was the large volume of new issues and the fact that QE made it seem a good way of making money," says Ian Robinson, head of credit strategy at F&C asset management. "But it does seem that trading is a lot lower between those events," he adds.

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