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Morning Coffee: Goldman Sachs' warning as trading jobs disappear to algorithms. The power trader headhunted by Mike Platt

If you're an FX trader, it's been a difficult 20 years. In the past two decades, Bloomberg says that NatWest Group, once home to some of the best FX traders in London, has reduced the number of humans it has focused on G-10 FX trading by 70%. The trading jobs have gone, but a different kind of job has appeared instead: software developers and quant developers now rule the FX market, but they too are under pressure. 

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As algorithmic FX trading increases, Bloomberg notes that the fees banks earn per trade have plummeted. 10 years ago, they were $50 for each trade made using algorithms. Now they're down to as little as $25. 

With fees falling, Ralf Donner, Goldman’s head of fixed income, currencies and commodities execution solutions, is sounding a warning. Banks won't have the money to invest in future algorithms, says Donner: “The reducing yield from fees is now at a point where it risks stifling further product innovation and investment in analytical tools for clients." 

The implication is that the developers and quant developers working on FX trading algorithms are about to be squeezed themselves. Those developers and quants are people like Asif Razaq, the global head of algorithm execution at BNP Paribas. Razaq studied maths and computing, followed by a prescient masters in artificial intelligence at Queen Mary University London in the late 1990s, and worked for UBS and Citi before joining BNP in 2010. Bloomberg reports that he's developed a suite of algos with names like Chameleon, Viper, and Iguana and that he brings a plastic dinosaur to every sales pitch. 

Razaq and his quant counterparts have had fun riding the wave of automation in the FX markets, but the fee squeeze suggests that things may be less happy in the future. Donner wants Goldman's clients to make more holistic choices when selecting the algorithmic provider they go with. Best execution is important, he acknowledges, but clients should also, "focus on long-term all-in performance when evaluating us.” 

While FX quants try to do more with less, they are at least having a better time than the remaining human traders in the market. The last cluster of trading jobs are still under pressure: in the year to January 2024, Bloomberg says the volume of algorithmic trades between Citi and regional banks rose 200% year-on-year. 

Separately, you don't have to work for an investment bank to be headhunted by a hedge fund.

Mike Platt's BlueCrest Capital Management is, technically, Platt's family office, but it was formerly a hedge fund and continues to pursue trading strategies typical of its heritage. These include building its commodities and power trading team. 

The Wall Street Journal reports that Platt hunted down Alex Watson, a natural-gas trader at French utility EDF last year, after Watson quietly made "millions" from rocketing natural gas prices following Russia's invasion of Ukraine. Watson, who joined BlueCrest in October 2023 and is a Loughborough University graduate, is now a senior portfolio manager at BlueCrest, seemingly based in Jersey.

He's not the only natural gas trader hedge funds have hired. The WSJ notes that Citadel, Millennium, Balyasny and Jain Global have all been building teams. Portfolio managers can take home between 12-30% of their profits, with Platt paying at the top of that scale. 

Meanwhile...

Mark Tucker, the 66-year-old chairman of HSBC, is based in New York but dominates HSBC in Europe. He has a "phenomenal appetite for work" and sends 5am emails to junior employees and calls people on his daily morning walks. He's now looking for the fourth CEO of his chairmanship, which HSBC has frozen a lot of other hiring. (Bloomberg) 

AI's focus is shifting to smaller and cheaper LLMS. “Getting these smaller, specialized models to work in these more boring but important areas” is the frontier of AI right now. (WSJ) 

Nik Storonsky, Revolut CEO, plans to offload stock worth tens or even hundreds of millions of dollars in the secondary deal in the coming weeks. (Sky) 

Ronan O’Grady, a former Goldman Sachs employee, was sentenced at Dublin’s Criminal Courts of Justice on June 28 for sexually assaulting a child. He was an executive director in the wealth unit. (Financial Times) 

Last week, a federal judge backed a challenge to the FTC's ban on non-compete clauses, saying that it wrongly “imposes a one-size-fits-all approach with no end date.” (WSJ) 

Bill Ackman wants to use his Twitter account to raise money from retail investors. (Sherwood News) 

No one's left their job in the past few years, and now everyone is bored. (WSJ) 

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AUTHORSarah Butcher Global Editor
  • Bl
    Blue Horseshoe
    8 July 2024

    Bluecrest no longer loves Watson

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