How to write a successful trading algorithm

May 22, 2017, 7:29 am

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If you want to succeed as a trader in future, you’re going to need to understand how algorithms work. As Google chairman Eric Schmidt told the audience at last week’s SALT Conference, either algorithms are going to be doing all the trading themselves, or humans are going to be asking algorithms whether particular trades make sense. Either way, they’re going to be a big part of the job.

Helpfully, Richard B. Olsen, a quantitative finance veteran and the Swiss-based founder of Olsen Limited, a quant hedge fund, and OANDA, an FX trading site, has just released his very detailed guide to creating an automated trading algorithm, or “Alpha Engine.”

You can see Olsen’s full package, which addresses FX traders, either here, or here on Github. If you want the dummy’s version, with text and charts instead of equations and code, we’ve parsed Olsen’s approach below.

You won’t be ready to write your own algorithm if you read it, but you will at least have an idea how a successful alpha-generating trading algorithm can be constructed.

1. Keep it simple

If you want to create a good algorithmic (i.e. mathematical) model of reality, Olsen says you need to keep it simple. Complexity at a macro level is almost always the result of simple rules of interaction at the micro level. You’re trying to model these rules. “The system can be naturally reduced to a set of agents and a set of functions describing the interactions between the agents,” says Olsen. The network is simply the ideal formal representation of your system. The nodes in the network are the agents and the links between the agents describe how they interact.

Olsen chooses the FX market because he says it’s one of the easiest to replicate in the form of a model. Prices (‘quotes’) are always given as one currency in reference to another currency: they’re symmetric. When you’re going long one currency (buying it because you think the price will rise), you’ll usually be going short the other (click here for a definition of short selling).

2. Define your approach to time

Olsen uses a so-called “endogenous time scale” in which time isn’t time as we usually conceive it, but time as defined by specific actions and events. Only if these actions and events take place, does the ‘system’s clock tick.’ For this reason, Olsen calls it “intrinsic time” – it’s a definition of time intrinsic to his model. This has the advantage of filtering out all the irrelevant information that occurs between events. The “signal to noise ratio” is improved in algo-language.

3. Define the events you want to look at

What are the events that cause time to progress? Olsen defines them as: a directional change in the price of a currency (δ), and an overshoot in the price after that directional change (ω). His ‘event-based’ price curve is made up of δ and ω and Olsen it “the coastline.”

For the model to function, however, it’s necessary to define the ‘event thresholds’ at which it becomes active. In the “price up mode”, the highest price is updated and continuously increased. When the price starts to fall again, the difference between the highest price and the current price is evaluated and if the difference exceeds a predefined threshold a directional change event is registered. If the price then continues to move in the same direction as the directional change, for the size of the threshold, an overshoot event is registered too.

You can see a graphical example below. The chart on the right shows Olsen’s coastline representation of a EUR USD price curve. The blue triangles represent directional-change. The green bullets represent the overshoot events.

Directional change and overshoot

4. Add in some ‘scaling laws’

It also helps to anticipate the size of the overshoot. In the FX market, Olsen says there are ‘scaling law relations’ which frequently relate to directional price changes and price overshoots: “A directional change δ is followed by an overshoot ω of the same magnitude hωi ≈ δ.” This can then be built into the model.

Scaling laws

5. Define what happens when your events take place

Olsen’s “Alpha Engine” is a ‘counter-trending trading model.’ In it, trading positions which go against the trend are either maintained or increased by the algorithm.

The ultimate aim is to trade the whole length of the FX price curve (what Olsen calls “the coastline”), in so-called “coastline trading”. You can see how this works in theory in the chart below.

Coastline trading

6. Add in a probability indicator

So far, so good. Except Olsen notes that when markets are experiencing very strong trends, they don’t always operate according to the model above. Instead, agents’ behaviour changes as they amount very large inventories. Because of this, the algorithm also needs a probability indicator ( L) which helps keep the model accurate during times of severe market stress. When the price overshoots and trading agents already have a lot of inventory, they won’t buy and sell as much as usual. By adding ‘L’ into his algorithm, Olsen’s therefore able to moderate the extent of inventory changes in treacherous markets.

7. Add in asymmetric thresholds that reflect the market’s direction

Lastly, Olsen says it helps to define your event thresholds in terms of the market’s direction. You might want different thresholds to trigger your events depending upon whether the market is moving up, or down. Analytically, this is expressed as: δ → ( δup for increasing prices; δdown for decreasing prices). Therefore, ω = ω(δup, δdown) denotes the length of the overshoot corresponding to the new upward and downward directional change thresholds.

The effect of asymmetric thresholds is shown in the charts below. In the left hand panel, the price overshoots and there are two identical trading events represented by the down arrows (where short existing positions are increased). In the right hand chart, an asymmetric threshold is used to divide the overshoot into four segments so that short positions are increased four times instead of two and the event is “smeared out.”

Asymmetric cascading

8. Backtest!

Once you’ve got your trading algorithm, you need to backtest it. This means seeing how it performs compared to real market data from the past. Olsen backtested his model from the beginning of 2006 to the beginning of 2014. He says it yields an un-levered return of 21.3401%, with an annual Sharp ratio of 3.06.

Taken from The Alpha Engine: Designing an Automated Trading Algorithm by Anton Golub, James Glattfelder and Richard Olsen.

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Photo credit: Algorithms by Kevin Dooley is licensed under CC BY 2.0.

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What do analysts, associates, VPs, and MDs actually do in investment banks?

May 22, 2017, 10:00 am

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What do investment banking job titles really signify? Do analysts really analyze? Are vice presidents in charge of whole divisions? And do managing directors run the entire bank? No, no, and no again.

Banking job titles aren’t what they seem. If you haven’t come across them before you need to know this: they often make people sound more grand than they actually are. If someone tells you they’re a vice president in an investment bank, for example, you might think they’re something very fancy. They’re not: Goldman Sachs has over 10,000 vice presidents (VPs) and that Goldman VP you meet is just one of many. The same applies to managing directors (MDs): most banks have several thousands of them.

Why do banks give people such fancy job titles? Ex-Goldman banker turned academic Alexandra Michel suggests it’s because banking careers were historically short. In the past, the average career in an investment banking division (IBD – including M&A and equity or debt capital markets) lasted less than a decade. Banks are trying to change this, but recent research from Quinlan Associates, a strategy consulting firm specializing in financial services, found that anything from 6% to 9% of banks’ graduate hires leave of their own accords in the first three years after they’ve been hired and that another 20% and 17% of those who remain leave voluntarily at associate and vice president level (to say nothing of all those who lose their jobs). – Banks use big job titles to persuade people to stick around.

What analysts really do in investment banks:

If you leave university after a first degree (or a Masters), you will enter an investment bank as an analyst. Analyst is simply a euphemism for being at the bottom of the banking hierarchy.

What do analysts do? If you work in an investment banking division (IBD), you usually will research companies that might be involved in a deal, you will build the financial models which value the companies you’re looking at. And you will assemble your findings into a Powerpoint presentation.

“Junior bankers are experts on financial modeling,” says Michel. They are experts in Excel and VBA. They are also experts in building the PowerPoint presentations that banks use to communicate their ideas to clients. “The more junior you are in M&A, the more time you will spend working on Excel models and PowerPoint Presentations,” says Mark Hatz, a former Goldman Sachs analyst who now helps students prepare for banking interviews.

A current M&A analyst at European bank says analysts do what they’re told: “The analyst is the person who does all the administration work necessary in the deal process. As the most junior person, you might work on research, you might create the materials for the pitch-book which presents banks’ ideas to clients, and you might work on the financial models – but what you do will be quite basic.” Some analysts complain that their work is very boring and repetitive: “As an analyst, you spend 75% of your time on PowerPoint, making presentations,” says one. “Excel modelling is the most valuable and interesting part of the job, but you don’t do very much of that.” He claims that most of his work was updating so-called “comparables: “Each analyst was assigned 20-25 companies to update each trimester and it basically involved going through all the accounts and making sure everything was accurate. You could easily spend 100 hours on it. It’s the kind of thing you stay in late for, but it could very easily be automated. All you’re really doing is pulling information from FactSet and Bloomberg.”

Banks are alert to analysts’ disgruntlement. Most are trying to get computers to do the most boring parts of the job.

Michel says analysts don’t like to be reminded of their status. During her detailed research in two Wall Street banks, Michel came across an analyst who burst into tears after being introduced to a client as such. “You introduced me as an analyst!”, the analyst complained (crying) to a vice president.

How long will you be an analyst for?

Traditionally, people have been analysts in investment banks for three years. However, this is changing. As the chart below from Quinlan shows, analyst programs at most banks have been cut by six to 12 months and now last between 2.0 and 2.5 years.

Banking jobs not so great

How much are you paid as an analyst?

Despite being at the bottom of the pile, analysts in investment banks are paid pretty well. In your first year as an analyst in M&A in London you can expect to earn anything from £65k ($85k) at UBS to £78k ($101k) at Bank of America Merrill Lynch.

How many hours do you work as analyst?

The downside to being an analyst in IBD is the working hours. When people talk about 80 hour weeks in banking, it’s analysts their referring to. Most banks have got policies in place to cut analysts’ working hours, especially at weekends, but it’s still common to work from 9am to midnight – or later – on weekdays.

The chart below, from Quinlan Associates, shows each bank’s policy for reducing working hours.

Quinlan protected time

What associates really do in investment banks:

Associates are one notch up from analysts. After you’ve done your two or two and a half years as an analyst, you should get promoted to an associate. You can also enter a bank as an associate after studying an MBA – although this is harder than it used to be. Associates are like analysts, except more important. Associates immediate purpose to manage the analysts below them and to communicate the wishes of the vice presidents (VPs) above them.

“As an associate you’re still working on the PowerPoint slides, still managing the presentation,” says the M&A analyst, “- But you also work more on the [financial] models.”

The associate’s role is partly to, “guide the analyst in preparing the presentation and doing the research,” he says. The analyst does the work and the associate checks it. “The associate’s still an important part of the process. If you have a 50 page presentation, the analyst will usually do 30-40 pages and the associate will check them and do the rest.”

Associates are still expected to do analyst-type work, says one former associates, although she says that, “analysts are technically the “producers” of all the work and the associates are the “checkers” of it.”

How long will you be an associate for?

If you last the course, you’ll be an associate for three years.

How much are you paid as an associate?

Associates on Wall Street can expect anything from $200k to $350k over the course of their three years according to the Options Group. In London, associate pay ranges from £138k to £216k over the three years.

How many hours do you work as an associate?

Associates usually – but not always – work a few hours less each week than analysts. “You’ll often see the associates going home at 11pm instead of midnight,” says one analyst. “But that kind of depends upon the person and how good the analyst is. If you’re a lazy associate with a good analyst, you can leave early. If you’re an ambitious associate with a bad analyst, you’ll still be working at 2am.”

What vice presidents (VPs) really do in investment banks

It’s when you get to vice president (VP) level, that things start to get interesting. Suddenly, you’re more outward facing – you actually get to talk to clients. However, you also have to manage the team and oversee the process of putting the client presentations together and this can be stressful. “Being a VP requires more “ownership” in the team and well-established client relationships,” says Anne Karina Asbjorn, an associate and strategist for European rates at Nomura.

Vice presidents help to manage clients on a daily basis, says Michel. They also manage the associates and (by default) the analysts and make sure the necessary financial models and Powerpoint presentations are being built. “VPs lead the layout of the presentations,” agrees Hatz. “They’re responsible for making sure the pitch documents are put together and they will also have an active daily role in executing any deals that go ahead.”

“The VPs guide the analysts and associates,” says the analyst in M&A. “They’re running the deal process on a daily basis. – They’re the ones saying which materials need to be created. However, they’re also the ones who speak on the calls to the clients. They help keep the clients up to date with how things are progressing.”

How long will you be a VP for?

Once you get to VP-level, the process of rising up through the investment banking ranks becomes more erratic. In theory, you’re supposed to be a VP for three years but sometimes people get stuck at vice president forever (and ever). Most banks are trying to cut the number of expensive people they have at the top of their pyramids, and this is making it harder to get promoted. Goldman Sachs, for example, only promotes around 400 people to managing director every two years and has around 12,000 vice presidents. On the other hand, talented VPs are being more responsibility (for the same pay) under a process known as “juniorization.”

How much will you be paid as a VP?

Because VPs can vary wildly in terms of experience, their pay often varies widely too. On Wall Street, pay for VPs in front office investment banking jobs can be anything from $375k to $925k according to the Options Group. In London, pay can go from £218k to £321k over the ideal three year VP life cycle.

How many hours do you work as a VP?

As a rule of thumb, you should work fewer hours as a VP than as an analyst or associate. “The associate is running the process for the VP, so the VP gets to leave earlier,” says the analyst. This doesn’t mean they leave early, however. “Our VP goes home around 10pm,” he adds.

What directors and managing directors really do in investment banks:

Some banks have an intermediate level of directors (Ds) between VPs and managing directors (MDs).

And what do Ds and MDs do exactly? Michel points out that their main responsibility is bringing in new business. There’s a lot of travelling. It’s not really as glamorous as people think. MDs also oversee everyone further down the hierarchy and make sure their treasured clients are happy.

“As a director, you’ll speak a lot with the clients,” says the analyst. “Your role is to act as the interface between the client and the rest of the team.”

Managing directors are at the top of the investment banking pile. “They talk to the clients, meet the clients, bring in the revenues and build the business for the bank,” says the analyst. “They’re the connectors – the relationship builders – they’re out there, finding out what’s going on with their clients in their industry.”

How long will you be a D or MD for?

Although some people are VPs forever, you’re usually promoted to director after about three years in a VP position. Once you’re a director, Michel says it should (ideally) take only another two years before you make managing director. This may be wishful thinking, however. – Research suggests most people only become MDs after 15 years in banking, and even then only 20% of those who are elgible for an MD promotion will make it.

Once you make MD, the pressure will be on to bring in revenues. If you don’t deliver you’ll be out. If you do deliver, you can expect to last a while. The average tenure of managing directors and partners at Goldman Sachs, for example, is thought to be around eight years.

How much are you paid as a D or MD?

Pay for directors and managing directors varies wildly from person to person. As an MD in IBD on Wall Street you will almost certainly earn in excess of $600k in total compensation. In London, MD salaries alone are £350k ($500k)+.

How many hours will you work as a D or MD?

As a director, you’ll typically work fewer hours than a VP. – You might go home at 8 or 9pm. As an MD, your hours will assume a life of their own. “Sometimes we don’t see the MDs in the office much,” says the analyst. “- Their jobs are a bit more freestyle and flexible. They might be out of the office for a week, meeting clients. They might have a lunch with a client, and then a coffee, and then a meal with another client. They might go and meet a COO who’s also a personal friend.” If you’re an MD in investment banking, you want to work for a bank that’s happy to let you build relationships, and which accepts that this can take time. At Goldman Sachs, for example, COO Harvey Schwartz says it can take seven years for client relationships to generate fees. Even so, banks like to know what their MDs are up to while they’re flying around schmoozing clients: HSBC recently introduced a system for tracking how its senior M&A bankers use their time and how many deals they bring in.

Although banks are hierarchical, Michel says they can also be fairly egalitarian. If you perform well, you can progress through the hierarchy (at least to VP level) fairly quickly. In IBD, she says most people actually do get promoted up to the next level. This makes banks less competitive places than people expect. Power differentials are minimized and everyone (according to Michel) works for common purpose. Unfortunately, she also concludes that this can lead to overwork and burnout.

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“I wore my school uniform to my first bank interview. Now I’m a CTO in Singapore”

May 22, 2017, 10:40 am

≫ Next: Hong Kong headhunter: “90% of candidates don’t even interest me”

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Noboru Takahashi broke into the banking sector as a teenager – but he didn’t get an internship; he landed a full-time job.

It was 1991 and the American firm Chemical Bank (now J.P. Morgan Chase) was looking for a night-shift data-centre operator in Takahashi’s hometown, Tokyo.

“I was offered an interview and talked to my high school teachers about it. But they hadn’t heard of Chemical Bank – it wasn’t big in Japan – and said it was a risky move,” says Takahashi, who’s now CTO at Singapore fintech firm M-DAQ.

“I wore my school uniform to the interview and on the way there a policeman stopped me and asked what I was doing away from class,” he adds.

Takahashi landed the position and was initially given the unglamorous tasks of batch processing and printing and distributing reports. “But I got my hands dirty and enjoyed the role. I was constantly speaking to developers and seeing them fix issues.”

The job also got him thinking about how to make IT processes easier. “I learnt that even in an area where you’re expected to follow standard procedures, you can always find opportunities for improvement,” he says.

When Takahashi was just 20, he was asked to start programming for the FX team. “It was difficult at first. I had learnt the COBOL programming language at school but the bank used RPG.”

And by 1999, he was seconded into a project team in New York that was assessing which parts of FX trading could be put online.

“At the end of the project I was helping with technology strategy. I’d always enjoyed programming, but previously I didn’t know how my coding was contributing to the business.”

On the back of this success, Takahashi (who had by then also completed a degree in business management) was offered a managerial role in e-commerce sales at J.P. Morgan.

But this immediately created a career dilemma which Takahashi says is common for technologists as they become more senior in the banking sector.

“I was a VP and if I wanted greater success at the bank I needed a higher title. But managers in technology in banks are typically hands-off – I wanted to be hands-on and keep doing programming myself,” he says.

Takahashi then turned down a role working with ex-J.P. Morgan colleague Richard Koh at Standard Chartered. “No matter which bank you’re at, you’ll experience the same problem: if you take a better title and better pay, you end up in a hands-off position.”

By 2010, however, Koh had quit Stan Chart to set up Singapore-based M-DAQ, a multi-currency conversion platform for cross-border transactions. And Takahashi left J.P. Morgan after 19 years to join him.

“Back then the term ‘fintech’ wasn’t really commonly used, but I could see the power of technology to transform the finance sector and I knew how consumers were suffering from the current system of currency conversions,” explains Takahashi.

“What we’re doing here isn’t something you could do in one bank, even if you were the CEO. I enjoyed my time in banking, but when the CEO made a big announcement, I wasn’t usually affected. There was no direct link between what he was saying and what I was doing in my job,” says Takahashi.

At a bank, technologists are segmented from the business and their impact is limited as a result, he says. “But at a fintech firm, you’re actually helping to run the company.”

Takahashi says the initial years at M-DAQ were “challenging”. “But we’re now doing well – we’ve raised US$100m in funding and we’re building our client base. I’m also doing something more fun, and not having to play politics at a big bank.”

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Hong Kong headhunter: “90% of candidates don’t even interest me”

May 22, 2017, 10:45 am

≫ Next: Morning Coffee: Why banks can’t decide whether to hire or fire you. Jes Staley’s prankster shares psychological insights

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As a Hong Kong recruiter I can’t help every banker who comes my way – that’s obvious. But in the wake of bonuses being paid out this year, the proportion of front-office candidates I’m securing interviews for is smaller than ever.

I’m now only interested in hearing from you if you’re an elite performer – and that means you’re better than 90% of other bankers out there.

I deal with the top-10% of job seekers because, frankly, these are the only people banks are interested in. In the recently past, the ‘elite’ figure was 20% or more.

For top bankers in Hong Kong the job market is booming, but for everyone else it’s getting worse.

I’m not placing people into jobs if they’re currently out of work, for example. And I’m not even placing people who are only good enough to secure an interview at one bank.

What makes you an elite in the current job market in Hong Kong?

In general terms, you’ll be a Mandarin speaker who’s worked at two global investment banks, you’ll boast an M&A background and mainland clients, you’ll have a leading Hong Kong or Western university on your CV, and you’ll have topped the performance charts at your bank in recent years.

Moreover, you’ll probably also be at associate to VP level. Banks in Hong Kong face cost constraints from head office and there’s a growing feeling that expensive MDs don’t necessarily add that much more origination capability over their more junior counterparts.

Of course, this young and Chinese-centric profile has been in demand for a while as banks try to get market share from acquisition-hungry mainland clients.

But this year banks are giving recruiters like me much less wriggle room. They’re being more prescriptive with jobs, so we have to check all the boxes and not put someone forward who falls short in one area.

Banks are going to greater lengths to make sure they have the best people, which from their point of view makes sense as their recruitment targets aren’t large enough this year to bother with the rest of the talent pool.

What does this mean if you’re actually in the top 10% yourself?

Well, every bank is looking for your profile, so you’ll get multiple offers and your current bank will counter offer you.

This is a nightmare for me as a recruiter – especially as buy-side firms are often also in the hiring mix – but it’s a strong position to be in as a candidate. Take advantage of it before you get too old – your elite status may not last.

Michael Zhou (we have used a pseudonym to protect his identity) is a Hong Kong-based banking recruiter.

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Image credit: mage Source, Getty

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Morning Coffee: Why banks can’t decide whether to hire or fire you. Jes Staley’s prankster shares psychological insights

May 22, 2017, 4:07 pm

≫ Next: The former Citigroup MD trying to bring bankers out of the dark ages

≪ Previous: Hong Kong headhunter: “90% of candidates don’t even interest me”

Banking careers are not for the fainthearted. Jobs are typically insecure and finding a new one can involve a tortuous process that ultimately comes to nothing. However, try seeing things from a bank’s perspective. When you’re an investment bank, making new hires – especially expensive ones at the senior end, is fraught with peril.

“It’s an art, not a science,” one senior banker tells the Financial Times of his firm’s approach to headcount. “You don’t want to be too big, there’s a lot of cost to that, but you don’t want to be too small, you want to be able to leverage when things take off again . . . ”

If you’re a bank, deciding whether to hire or fire is also harder than it used to be. In the past, hiring in banks often came in waves with banks adding staff (or jettisoning them) in unison. Nowadays, the senior banker tells the FT things are different: because banks have different strategies with different clients and business mixes, hiring is more idiosyncratic. Each individual bank has to decide whether to recruit in its particular niche, and this can be more scary than stampeding after talent with the rest of the herd.

Even so, the FT detects some herding in Asia Pac, where it claims banks are now adding staff again: Goldman Sachs has just opened a Shanghai office and wants quantitative salespeople, Morgan Stanley wants to hire in Australia, Deutsche wants to hire TMT bankers. Even Barclays, whose new strategy is supposed to be focused on the UK and the U.S. is sniffing at Asian expansionism (again): the FT says both CEO Jes Staley and investment bank chief executive Tim Throsby have been to Hong Kong twice in the past year.

Separately, the 38 year-old web designer who tricked the Barclays’ CEO into thinking he was Barclays’ chairman John McFarlane, has been sharing his tips with the Financial Times. First, he says you shouldn’t be afraid of using a Gmail address (he used john.mcfarlane.barclays@gmail.com): most email software doesn’t automatically show the full email anyway. Secondly: write, “Sent from an iPhone,” after your hoax message to excuse the absence of a corporate email sign-off. Thirdly, “Keep it short to begin with and ideally reference something that will ring true. People accept a bit of bizarre once they feel they’re in the saddle of the communication.” These techniques won’t work at Barclays again though: the British bank has tightened its security procedures and staff receive warnings when they’re emailing outsiders since Staley’s mistake.

Meanwhile:

High frequency trading firm Virtu has completed its purchase of KCG Holdings and is making 10% of staff redundant and closing offices in Singapore and Mumbai. (Bloomberg)

Average bonuses for London-based investment bankers fell to £100,000 this year from £115,000 in 2014, while payments for front line asset managers jumped to £103,000 from £56,000 over the same period. (Financial News)

European supervisors want Deutsche Bank to prepare a fallback plan to lay out how it could shift the clearing of trades from London. (Reuters)

Barclays is hiring 100 new private bankers across London, Dublin, Geneva, Monaco, India, Dubai, Jersey, Guernsey and the Isle of Man. (Reuters)

Morgan Stanley’s stock rose 33% last year. In the circumstances, paying James Gorman an extra 7% is fine. (Reuters)

Mizuho is building its corporate bond business. It wants to hire 10 more people outside Japan this year (market conditions permitting). (Bloomberg)

Two women in pursuit of £3k allowed themselves to be ridden as horses around Poundland for 2.5 hours before discovering they had been hoaxed. (Devon on Line)

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Contact: sbutcher@efinancialcareers.com

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The former Citigroup MD trying to bring bankers out of the dark ages

May 23, 2017, 1:35 am

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Since quitting his job as head of macro structuring at Citigroup in June last year, Huy Nguyen Trieu spends his time thinking about fintech. He’s a mentor, a lecturer and a prolific attendee of the hundreds of fintech conferences taking place around the world.

He’s learned one key thing – people working in banking are panicking.

“Every day, I get emails from former colleagues, senior bankers or traders who have no idea what the future holds,” he says. “I can’t keep up with them all.”

In the age of automation, quants are taking over. Artificial intelligence, big data, blockchain – all of these are looming over traditional finance jobs and striking fear into the hearts of senior and junior bankers alike.

“There are people who’ve been bankers for a long time who don’t really know where to start in order to adapt to the new landscape, but juniors are also worried,” says Nguyen Trieu. “There’s a huge amount of information out there, but the key is finding out what’s relevant to your job.”

Nguyen Trieu has been involved with various fintech organisations for the past two years including Start-up Bootcamp and Canary Wharf fintech accelerator Level39. He also lectures on fintech at Imperial College London and Said Business School, and also runs his own firm The Disruptive Group, which advises senior bankers on how to deal with new technology.

Now, together with his wife – former UBS wealth manager Tram Anh Nguyen – he’s just launched the Centre for Finance, Technology and Entrepreneurship (CFTE). This is a new online education platform, which aims to equip finance professionals with the tech skills they need to survive.

“People talk about trading jobs disappearing because of AI, or compliance and operations jobs being wiped out by blockchain,” says Nguyen Trieu. “There are threats, but we also think that there are big opportunities for people who can acquire the right skills.”

The courses on offer will be everything from ‘fintech 101’ to very technical courses on how artificial intelligence will impact trading jobs, says Nguyen Trieu. Claire Calmejane, director of innovation at Lloyds Banking Group, and Janos Barberis, founder of Hong Kong fintech accelerator, SuperCharger, are advising on the curriculum. Nguyen Trieu says eight other academics and bankers are involved, but can’t be named currently because of compliance reasons.

Nguyen Trieu says there are two main areas of concern for people who work in finance. For senior executives, it’s about understanding the ‘ecosystem’ and how the company needs to adapt.

“Look at companies like XTX Markets taking FX market share from big banks, or Marketaxcess eating up bond revenues – technology has lowered barriers to entry to these markets. The big investment banks are still figuring out how to react,” he says.

For rank and file employees, the bigger concern is how you can remain relevant as technology encroaches on more and more business areas.

“It used to be that you’d specialise in one area – you could be, say, the best sterling swaps trader, and your technical knowledge was the most important thing,” he says. “Now, you have to understand the technology innovation process alongside this. If you don’t, these jobs will be gone in a few years.”

“There are a lot of people working in finance who are lost – they need to understand technology, and they have to start somewhere,” he says.

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Contact: pclarke@efinancialcareers.com

Image: CFTE

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Meet the equities hedge fund hiring associates from Goldman Sachs and UBS

May 23, 2017, 2:51 am

≫ Next: Questions to ask at a Barclays interview, by Deutsche Bank

≪ Previous: The former Citigroup MD trying to bring bankers out of the dark ages

If you’re a junior banker looking to move to a hedge fund, you might want to give Alvaro Ventosa a call. The veteran hedge fund manager set up Alvento Capital, a long/short equity fund focused on utilities, renewables, infrastructure and energy back in 2015. In the past month, he’s been hiring new staff from investment banks.

Ventosa just recruited Jon Puckhaber, a former associate in the financial institutions group (FIG) at Goldman Sachs. Puckhaber’s joining as a senior equities analyst.

Ventosa also hired Hugo Liebart, a former associate director at UBS. Liebart was an equity researcher covering the utilities sector and UBS’s lead on renewable stocks. He joins Alvento as a senior analyst.

Before setting up Alvento, Ventosa was one of the founding partners at Cygnus Asset Management and a former adviser at CF Partners, a trading house and asset manager also focused on the energy sector. Several former CF employees also joined Alvento, including Nicholas Frolich, the former head trader at CF and now head trader at Alvento.

Alvento’s only publicly available accounts, for the year ended 31 March 2016, show a turnover of £874k and a profit of £192k distributed among seven partners. At that stage, it wasn’t exactly one of the best paying hedge funds in London, therefore.

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Photo credit: hedge door by Helen Cook is licensed under CC BY 2.0.

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Questions to ask at a Barclays interview, by Deutsche Bank

May 23, 2017, 4:05 am

≫ Next: This hedge fund has just paid its senior staff £3.7m after an amazing year

≪ Previous: Meet the equities hedge fund hiring associates from Goldman Sachs and UBS

Barclays is back on the hiring wagon. Tim Throsby, head of the investment bank, has appointed himself head of the global markets division too and is said to be recruiting 50 to 100 people, some of whom have already arrived.

Is it ‘safe’ to join Barclays now though? In the past decade the British bank has achieved a reputation for hiring and then firing. The FT’s claim today that Barclays is sniffing around Asia again (after shutting part of its Asian business and declaring itself a US and UK-focused investment bank), suggests a continuation of the same old cycle. On the plus side, however, Barclays insiders say things are looking up now that ex-CEO and retail banker Antony Jenkins’ is a distant memory and Throsby has a growth plan.

Nonetheless, if you’re thinking of working for Barclays you might want to ask some pertinent questions about strategy. Helpfully, Deutsche Bank’s team of banking analysts – who were pretty keen on Barclays’ investment bank only a few months ago – have issued a set of questions for Barclays’ management which we’ve parsed below. You could always ask them, gently, at the end of a Barclays interview…

1. How sustainable are revenues in the investment bank?

Revenues at Barclays’ investment bank were ahead of expectations for 2016, with performance solid throughout the year. But the first quarter of 2017 was a miss because of the poor performance of your rates business. What’s the sustainable revenue level for Barclays’ investment bank? Are you continuing to grow market share?

2. What are you doing about Brexit?

What does Barclays plan to do in terms of passporting rights and Europe? How do you plan to maintain equivalent access to Europe if there is no passporting? What percentage of the business in your investment bank is done with European customers?

3. How big do you expect the investment bank to be relative to the rest of your business?

Barclays has been reducing the size of its investment bank in recent years. What’s your intended mix of the investment bank and the retail bank in future?

4. What’s the cost plan?

What proportion of the £1bn of costs associated with your structuring reform programme has already been expensed? How much is to come? How much flexibility do you have with the cost base of the investment bank? Are you expecting to increase investment in areas of the investment bank?

5. How are you coping with the requirements of your US intermediate holding company (IHC)?

What level of capital do you think your IHC needs to hold in the U.S.? Is this a problem? Are you expecting a similar regime in Europe after Brexit? What would be the implications of this for Barclays?

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Photo credit: IMGP7424 by Matt Buck is licensed under CC BY 2.0.

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This hedge fund has just paid its senior staff £3.7m after an amazing year

May 23, 2017, 4:30 am

≫ Next: “I’ve worked in M&A in London & Frankfurt. This is the difference”

≪ Previous: Questions to ask at a Barclays interview, by Deutsche Bank

A lot of UK hedge funds cut headcount in the face of lacklustre performance and pressure on fees last year. Caxton Associates, the $8bn New York-based hedge fund, has been hiring in London regardless.

Newly released accounts for its UK LLP demonstrate why – it made £95.7m in profits last year, up from £15.8m in 2015 and £6.2m the year before. In other words, over the past 12 months, profits in its UK operation have increased by 504%.

Hedge funds usually run as limited partnerships in the UK, which means that any profits are poured back in the form of ‘member remuneration’. All of Caxton’s £95.7m was allocated to its partners’ pay.

However, Caxton, like most London hedge funds, has a number of entities registered with UK Companies House, which form different parts of its business. Caxton Europe Asset Management Limited is the main company that houses the majority of its employees, as well as being the member of the LLP to which it allocates most remuneration, usually to cover general expenses.

Last year, £58.2m went to its highest paid member, which is usually the parent company, leaving £37.5m for the remaining 10 partners – or a £3.75m average payment. Even in the context of partner pay in hedge funds, which usually stretches into seven figures, this is near the top of the pile.

Caxton added two members to its team last year, but has been hiring over the past few months and now has 56 people registered with the Financial Conduct Authority in the UK, up from 49 at this point last year.

Earlier this month, it hired Stuart McQuaid, who was most recently a trader at hedge fund Horizon Asset LLP, but has been adding money managers throughout 2017. James ter Haar and GJ Prasad, both portfolio managers at Millennium Management, joined in March, while Tom Frost, who was previously managing director and head of UK insurance and pensions at Credit Suisse, is its new head of business development for Europe and Asia.

Caxton reportedly gained 2% in the immediate aftermath of Brexit, but across the organisation it hasn’t been all positive. Like most macro funds, Caxton trimmed its management fees from 2.6% to 2.2-2.5% of assets in September last year amid mounting pressure from investors. Still, it remains among the more expensive hedge funds, with a 27.5% cut of any profits it makes.

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“I’ve worked in M&A in London & Frankfurt. This is the difference”

May 23, 2017, 6:23 am

≫ Next: How Madoff inspired an ex-Salomon and UBS investment banker to launch a fintech startup

≪ Previous: This hedge fund has just paid its senior staff £3.7m after an amazing year

If you live and work in banking in London, you probably don’t want to leave. – Especially for Frankfurt, which has a bad reputation among some people in the “City.”

Personally, I’ve worked in M&A for international banks in both cities. They both have their advantages and Frankfurt has more going for it than you might think. Don’t dread a move there, but don’t expect it to be like London either.

1. London’s an international city. Frankfurt’s a traditional town

London’s a global financial hub and a global city. Frankfurt is the second biggest financial hub in Europe, but you can feel the difference. Frankfurt is a lot more laid back and still retains its traditional cultural heritage. It’s also small – much smaller than London. This has its advantages when it comes to meeting up with people. However, it’s not that hard to meet people in London either – most bankers live in Zone One and the tube is a pretty efficient way of travelling.

2. London speaks English, Frankfurt speaks German

This might seem self-evident, but while London is an international city where everyone speaks English, German is still very much the working language in Frankfurt. There are some international bankers in Frankfurt who speak English, but they’re the exception, not the rule.

3. London is a cultural melting pot. Frankfurt is culturally homogenous

London is a place where different cultures come together. There are Britons, Germans, Italians. French, Americans. Australians, Asians and so on….London attracts the smartest and brightest people from everywhere and because of this you can build a brilliant network there. Frankfurt is far, far less international.

4. London is socially varied. Frankfurt is good for socializing with colleagues

London has a huge variety of bars and clubs. You can choose the more fancy West End or the more hipster East End. In Frankfurt, it’s a lot more limited. You can however, have good fun clubbing with a bunch of bankers when you finish work.

5. In London you eat at your desk. In Frankfurt you get an hour to do what you like

If you’re working in London, you’ll probably eat at your desk. For some reason, this is normal. London bankers sit there with their food and browse the web. This isn’t great: the office smells of everyone’s lunch.

In Germany, this would be considered anti-social. One hour lunches, outside the office, are standard in Frankfurt.

6. In London it’s hard to meet people at other banks. In Frankfurt, it’s easy

If you’re working in M&A in London, you’ll probably hang out with colleagues from your own bank after work. Because the finance industry is spread across the city – in Canary Wharf, the City of London and Mayfair – it can be hard to socialize with people from other firms in other areas.

In Frankfurt, this isn’t a problem. Around 90% of the meeting and greeting between M&A bankers happens in one street – the “Fressgass”. Go there, and you’ll meet almost everyone.

7. In London, you’ll pay a fortune to live. In Frankfurt it’s cheap by comparison

If you’re working long days in banking in London, you’ll probably want to live in Zone 1- close to the office. However, you’ll have to pay for this privilege. In my experience a rented flat in Zone 1 can cost double (ore more) the price of a comparable flat in Frankfurt. You’ll also end up spending a lot more in London when you go out to bars or restaurants after work.

8. London bankers are mad about sports. Frankfurt bankers are more relaxed

London bankers have a culture of playing sport and visiting the gym. In the summer, it’s not unusual to run to work. At lunch, it’s not unusual to go to the in-house gym, which can be nice if you don’t mind seeing your colleagues pumping iron. For this reason, most London banks have showers on site. There’s a lot less of this in Frankfurt.

9. In London, you’re expected to drink with colleagues after work. In Frankfurt, you go home

In London, “pub culture” is deeply entrenched. After a hard week, it’s usual to go to the pub with colleagues and have a few pints on Friday evening. There’s no excuse for avoiding this as pubs are ubiquitous in London. In Frankfurt this doesn’t happen – although it’s a ritual that the city could benefit from!

Alex graduated from the University of Mannheim and Frankfurt School of Finance & Management. He worked as an analyst in investment banking in London and now works as an M&A professional in corporate development in London. Prior to that, he gained investment banking working experience in London and Frankfurt. Alex is now dedicating his time to sharing career advice via the ‘M&Academy’ platform, where he discusses how to get into M&A, ECM, corporate development, private equity and leveraged finance.

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Contact: sbutcher@efinancialcareers.com

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Photo credit: Frankfurt by barnyz is licensed under CC BY 2.0.

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How Madoff inspired an ex-Salomon and UBS investment banker to launch a fintech startup

May 23, 2017, 7:06 am

≫ Next: Further reports of big buybacks when people try leaving Deutsche

≪ Previous: “I’ve worked in M&A in London & Frankfurt. This is the difference”

David Shulman was an investment banker for more than 30 years and never came into contact with Bernie Madoff, but he was inspired by the notorious fraudster – as well as his own experience dealing with accusations of insider trading at the start of the financial crisis – to launch a fintech firm that detects the potential for white-collar criminality among new recruits in financial services.

Shulman, who was most recently global head of municipal securities sales and Americas head of fixed income at UBS, now runs Veris Benchmarks, a firm that screens candidates for moral fiber and their degree of similarity or difference to white-collar criminals.

“I was in tune with human resources – I worked very closely with the HR department [at UBS], because I had an interest in the hiring and development of talent,” Shulman said. “I forged a close relationship with HR during that time and led me to my interest in launching Veris.”

“UBS put me in charge of the fixed income department of the investment bank, where municipals were a significant drain, and due to the capital needs for the company, which was going through a lot of stress, the bank decided to wind down the [municipal securities] department,” he said.

Shulman himself has also been involved with some allegations of insider trading. In 2007, Shulman was riding high when his employees started sounding alarm bells about student-loan-backed auction-rate securities. A couple of days later, he allegedly sold off $1.45m worth of auction-rate securities before their market crashed in early 2008, the New York Times reported.

After an investigation by New York’s then-attorney general (now-governor) Andrew Cuomo, Shulman agreed to settle insider trading charges by paying a $2.75m fine, neither confirming nor denying guilt. He was also suspended from employment in the industry for close to a year.

“That was a low point,” Shulman said. “Back in 2008 when the Madoff scandal happened, I had a number of family and friends who were direct investors with Madoff, and I knew one of the Madoff sons, Mark [who committed suicide in 2010], so it hit so close to home.

“Given my involvement in the hiring and HR functions and the management of these global financial institutions, I decided to analyze what companies were doing that were acting in the capacity of a fiduciary in charge of stewarding money or people, basically firms in a responsible position to handle life assets,” he said. “I realized that there was nothing geared toward a higher IQ segment to really address these issues – companies do background checks and drug tests, but unless they really understand candidates and the people who are serving their customers, they couldn’t measure what I call ‘moral fiber.’

Are you more principled than a white-collar criminal?

Currently the Veris Benchmarks’ pre-employment assessment tools include a questionnaire consisting of 149 questions that are scored against a benchmark, which the firm created by testing actual white-collar criminals in prisons across the U.S. Hiring managers and HR executives can use this data as another variable in candidate assessments to understand prospective employees a little bit better and avoid hiring fraudsters or thieves.

“They are able to use this in conjunction with other assessments such as logic tests, background checks and interviews as another input into the calculus of whether you’re going to hire this potential employee,” Shulman said.

“An organization’s reputation is precious and all it takes is one or two bad apples to destroy the reputation of firms that have taken years to build up trust with clients – how could you not want to know that information?” he said.

The traditional Wall Street interview process is overdue for an overhaul

Since launching Veris, Shulman’s views have changed dramatically on the typical interview process at Wall Street firms.

“I’ve interviewed hundreds of candidates over the years, and what I’ve realized after my exposure to some fairly advanced financial services companies, the days of the standard interview questions that drove Wall Street hiring are yesterday’s news,” Shulman said. “Interviews are helpful but rife with bias – the standard interview process is not objective at all – it introduces biases that are not fair to the candidate.

“Unless you have a professional who is skilled in the interviewing, it can be a very biased experience, whereas the technology today can help interviews to be more objective and hold things constant,” he said. “Companies say it’s all about data, so having these employees take competency tests early on makes sense – meeting the person to determine whether they fit culturally in the company should be the last step in the process, not the first step.

“The more information you have, it makes it a more pure decision before that candidate ever walks through the door. Many firms continue to send people around to six or even 10 or more interviews and people say ‘I like his tie’ or ‘I liked her dress,’ ‘We went to the same school’ or ‘We played the same sports’ – that needs to be removed from the process to find thought-leaders and good quality employees.”
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Further reports of big buybacks when people try leaving Deutsche

May 23, 2017, 9:39 am

≫ Next: The 10 poorest paying Singapore banking jobs for 2017

≪ Previous: How Madoff inspired an ex-Salomon and UBS investment banker to launch a fintech startup

As we reported a few weeks ago, Deutsche Bank is said to be averse to people leaving: if the German bank likes you and you get an offer from a rival bank, it might bid you back for significantly more than you’re earning currently.

How much more? One DB insider says he got an uplift of 35% on his base salary, plus a guaranteed bonus for this year when he dangled an alternative offer.

Deutsche doesn’t comment on pay, but if true the claims could create a headache for the German bank at the next bonus round. Deutsche has promised its staff that last year’s withholding of performance related bonuses was a one-off, creating an expectation that pay will return to normal for 2017. However, if enough existing Deutsche people resign and are bought back again – or enough new people are hired on guaranteed bonuses – then the 2017 pay pot will be depleted from the outset. Deutsche bankers who aren’t on big guarantees could find themselves at a disadvantage.

Not everyone who leaves Deutsche is getting a big pay uplift though. One NY headhunter, speaking on condition of anonymity, says the bank isn’t being “too aggressive.”

“There’s no doubling of salaries or multi-year guarantees – just enough of an uplift to keep people sitting at the desk.”

One bank targeting Deutsche staff is Credit Suisse. After a miserable performance last year, CS is trying to reinvigorate its equities business with new blood. It’s already hired Stuart McGuire from Deutsche as head of EMEA cash equities sales and trading along with two senior Deutsche equities executives in Asia. Deutsche, in turn, hired a new head of U.S. global markets client strategy from Citadel’s equities unit in April.

Deutsche set out to hire 100 equities trading staff last year, but the NY headhunter said some of the bank’s most desirable Wall Street employees are in its Delta one business.

London headhunters said Deutsche isn’t alone in trying to retain its existing staff. “Deutsche have made themselves a bit of a target, but we’re seeing aggressive bid-backs everywhere this year,” says one macro search specialist. “There’s been so much cost cutting that there aren’t many people realistically left to choose from, especially at the senior end. Because it’s more painful to hire, it’s also more painful to lose people – banks would rather keep hold of them.”

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Photo credit: The Golden Cuffs by H. Michael Karshis is licensed under CC BY 2.0.

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The 10 poorest paying Singapore banking jobs for 2017

May 23, 2017, 10:10 am

≫ Next: Seven newly hot APAC banking jobs you need to know about

≪ Previous: Further reports of big buybacks when people try leaving Deutsche

Singapore is constantly ranked among the world’s most expensive cities and banking jobs there generally still pay well.

If you want to be well rewarded in Singapore in the years after you graduate, it makes sense to go into a career in the finance sector.

Or does it? Front-office investment banking and to a lesser extent wealth management remain highly compensated, while compliance and even some risk and accounting roles also pay well.

However, if you’re a graduate looking for a career that will help you stay solvent over the long-term in costly Singapore, some parts of banking sector are best avoided.

We’ve looked through 2017 pay surveys from four finance recruiters in Singapore and identified the (non-technology) roles that pay the worst average salaries to people with about five years’ experience (i.e. those who are at, or around, associate level in investment banks).

If you’re rotating across different departments on an analyst programme, don’t get stuck in one of the jobs in the table below (which averages out salary numbers from the four surveys) when your training ends.

People in all 10 of these functions – including even sought-after roles like credit risk, internal audit, and onboarding – are still earning less than S$90k (US$65k) or less five years after they graduate.

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Seven newly hot APAC banking jobs you need to know about

May 23, 2017, 10:13 am

≫ Next: The one place to work in investment banking now

≪ Previous: The 10 poorest paying Singapore banking jobs for 2017

What kind of candidates are top of mind among banking recruiters in Asia Pacific right now? What skill sets have become more sought after in the region this year?

We spoke to recruiters in Hong Kong, Singapore and Sydney to find out.

1. Data science

“Every other department in Asian banking wants to hire data scientists – now it’s not just in the business and innovation areas, but in corporate functions like audit and HR,” says Pan Zaixian, general manager of recruitment firm Kerry Consulting in Singapore. “The challenge for banks is finding enough people in the more rigorous data science domain, rather than in data analytics.”

2. Superforecasting

“Market volatility has made financial forecasting an important skill within banks, and the latest trend to emerge is superforecasting – harnessing the talents of the bank’s best financial forecasters to gain a competitive edge,” says Andrew Morris, Australian director of recruiters Robert Half. “Superforecasting is a useful skill for business, financial and commercial analysts. And because it’s only just emerging in the banking sector, demand is expected to grow over the next several years.”

3. IFRS 9

This important financial reporting standard, which will become mandatory on 1 January 2018, is triggering hiring within banks’ risk teams. “Because it’s relatively new, banks are open to candidates with corporate and wholesale credit-model experience, but it’s a steep learning curve for them,” says Sumukhi Ramnath, a senior consultant at recruiters Ambition in Singapore. “Candidates who complete the IFRS 9 certification usually have an edge.”

4. Cyber security

“As Singapore focuses on becoming a fintech hub, most of the bulge bracket banks are now strengthening their capacity in cyber security here,” says Nilay Khandelwal, regional director of recruitment agency Michael Page in Singapore. “The Singapore talent pool is small, however, so banks are hiring entry-level candidates from local universities as well as experienced professionals from overseas.”

5. UHNW

Ultra-high-net-worth bankers serving Asia’s uber wealthy are more in demand as some private banks have recently raised their investment thresholds. J.P. Morgan has doubled its target client segment to at least $10m in Asia, while Standard Chartered has increased its to $5m. “The rapidly rising number of high-net-worth people in Asia has led to service levels in private banking become less prestigious,” says Maggie Li, an associate director at recruiters Randstad in Hong Kong. “To cope with the influx of new wealth, banks have increased their entry barriers, so skills in UHNW advising have become more sought after.”

6. Risk operations

“In Australia, the increasing focus on APRA and AUSTRAC regulatory requirements has led to new risk operations teams being created. Both temporary and permanent jobs are available to meet specific regulatory deadlines,” says Carl Piesse, a regional director at recruiters Hays in Sydney. “We’re also seeing temporary roles in operational risk, enterprise risk management, and controls as banks revise existing frameworks. Banks in Australia are open to candidates with oversees experience, particularly it’s from the UK, Europe or Asia. This is a response to the domestic skill shortage and because regulatory reforms are often rolled out in these markets before Australia.”

7. Robotic process automation

“The case for intelligent software robots to automate labour intensive back-office processes like onboarding is compelling,” says Piesse. “The benefits include efficiency, cost effectiveness, and the reduction of human error to eliminate the risk of customer dissatisfaction and non-compliance. As a result, RPA skills are increasingly in demand, particularly knowledge of Blue Prism software, which has become the tool of choice for many financial services firms.”

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Imaged credit: ludhi85, Getty

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The one place to work in investment banking now

May 23, 2017, 4:01 pm

≫ Next: Morning Coffee: The quirky $650k job that doesn’t require a degree. How to slap down a prankster with style

≪ Previous: Seven newly hot APAC banking jobs you need to know about

Investment banks have stopped making massive cuts to their fixed income divisions, but there’s only one place where they’re really hiring – credit trading.

“There’s not a single investment bank that’s not speaking internally about competing in credit trading,” says Amrit Shahani, research director at Coalition. “There’s been strong enough revenue growth consistently to generate hiring.”

Coalition has just released its quarterly index for investment banking, and headcount is still heading down in the front office, despite the stellar first quarter for most firms’ fixed income divisions.

In the first quarter of this year, 300 roles disappeared across banks’ FICC, equities and investment banking divisions during the first quarter of 2017, it says. Overall, 1,900 revenue-generating jobs have gone from top investment banks since Q1 last year, and nearly 13,000 roles have disappeared over the past five years.

Screen Shot 2017-05-23 at 17.27.13

“Generally, banks have stopped cutting, except in equities – particularly in Asia – but a lot of cuts in the second half of last year were booked in Q1 2017,” says Shahani.

Year on year, credit revenues were up 65% year on year across the 12 large investment banks Coalition tracks, to $4.7bn. This is still equal to the revenues generated in Q1 2015, and far less than the $7bn+ in the first quarters of 2012-14.

“Smaller banks like HSBC, UBS and BNP Paribas are staffing up in credit. Everyone is trying to compete,” says another research analyst who declined to be named.

Smaller players have clout when it comes to hiring – BNP Paribas, for example, has just poached Goldman Sachs bond traders Robert Boeheim and Eusta Qin. Isabel Mahony, the former co-head of credit trading at Morgan Stanley, joined Japanese bank SMBC Nikko Capital Markets earlier this week.

Screen Shot 2017-05-23 at 17.21.30

Elsewhere, investment banks are also hiring for their G10 rates trading teams, although Shahani says it’s much more selective.

Kumaran Surenthirathas, founder and managing director at headhunters Rosehill Search, which focuses on FICC, says banks are “hiring but not expanding”.

“One good quarter does not warrant the huge costs of expansion. They’re still making less money than they were ten years ago, juniorisation is still happening and a good quarter means that people aren’t getting fired. Hiring is still very selective,” he says.

Shahani says that banks FX desks continue to shrink because of “electronification and smaller tech savvy players gaining market share”, while commodities – where revenues declined by 29% year on year – is in “structural decline”.

“What we’re seeing now is a general improvement from a very low base,” he says. “The second half of last year was strong, so if we see improvements for the last six months of 2017 it’s likely that banks will start hiring again in more significant numbers.”

Screen Shot 2017-05-23 at 17.27.00

Screen Shot 2017-05-23 at 17.27.06

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Morning Coffee: The quirky $650k job that doesn’t require a degree. How to slap down a prankster with style

May 23, 2017, 10:00 pm

≫ Next: The Brexit effect on competition for banking jobs in London

≪ Previous: The one place to work in investment banking now

Chances are that if you’re working for an investment bank, hedge fund or private equity firm, you’ll be highly-qualified (or at least attended a top university) and towards the upper crust of society. Yes, these jobs are (very) well-paid, but you deserve it, right? You’ve got the qualifications and beat hundreds of thousands of other applicants to the role.

But what if you could be in the top 1% of earners without even going to university. Bloomberg has been given an insight into the ‘wheeler-dealer’ world of London’s Clerks, a role that acts as a kind of broker between solicitors, which provide legal advice, and barristers who deal with the action in court. It’s a Victorian-era profession, which you can get into as a teenager with no formal qualifications. Oh, and earn around £500k ($650k) a year.

Clerks’ role is essentially ensure that solicitors direct work towards barristers – or, as some barristers call it, acting as a pimp. The downside is that these roles are subject to their own quirks and rules – no two Clerks can share the same first name, which means newbies often have to give up their Christian names if it clashes with an existing member of staff. Then there’s the ‘trollies’ – every morning junior clerks lug heavy boxes of legal documents around the streets of London, up and down stairs of antiquated buildings. Still, no slow encroachment of technology here, but also not many women Clerks.

One advantage is that Clerks, often from working class backgrounds, get to exert some power over the private-school educated barristers who rely on them for a steady supply of cases at the right price. There’s also the more unsavoury side – Bloomberg reports incidents of Clerk’s being asked to dress a boil on a barrister’s back, or countless stories of being asked to buy gifts for barristers’ mistresses. Every job has its downsides.

Separately, while the world worries about malware attacks, top bankers should be more concerned about hotmail or gmail. Bank of England governor, Mark Carney, has been duped by the same email prankster who tricked Barclays’ CEO Jes Staley into believing he was having an exchange with the bank’s chairman John McFarlane. This time, the 38-year-old web designer from Manchester pretended to be Anthony Habgood, the chairman of the Court of the Bank of England, by using the fake email address anthonyhabgood@hotmail.com to converse with Carney. After a brief exchange about the drinking habits of Eddie George, the former Bank of England governor, ‘Habgood’ steered the conversation towards a personal party and the use of “dashing bar ladies”. Carney slapped this down: “Sorry Anthony. Not appropriate at all.” Then stopped replying.

Meanwhile:

How Jamie Dimon should have responded to angry shareholders: “I understand why people are upset by CEO pay. We earn a lot. That’s something that our board and compensation committee need to keep looking at.” (Financial Times)

Goldman traders have defected to BNP Paribas (Bloomberg)

Deutsche Bank’s global head of multinational coverage, Robert Snell, has left (Financial Times)

In Q2 Barclays will post the biggest drop, Morgan Stanley may gain, says J.P. Morgan (Bloomberg)

You can buy your lunch using bitcoin at Fidelity (Financial Times)

Time to move into insurance (WSJ)

Aberdeen Asset Management is hiring data scientists (Financial News)

Martin Wheatley, the former head of the UK’s Financial Conduct Authority, has just joined a hedge fund (Financial Times)

People are unusually confident in their abstract perception of time (NY Mag)

“There were certain pieces that if you went from hedge fund, to fund, to fund—they were always there. Always the Warhol dollar sign, the graphic Christopher Wool, ironic Richard Prince, the Robert Longo, and the Basquiat, always a Basquiat; it was like a checklist.” (Artnet)

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Image: Getty Images

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The Brexit effect on competition for banking jobs in London

May 24, 2017, 3:34 am

≫ Next: I’m taking the CFA exam next week. This is what I’m doing to get through it

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If you’re an experienced professional looking for a London banking and finance job in 2017, the Brexit referendum result has its advantages. It’s helped dissuade overseas candidates from applying.

Applications to London-based jobs from candidates in Italy, France and Germany are down 15%, 10% and 8% respectively year-to-date compared to the same period of 2016, according to figures from eFinancialCareers. Candidates based in the U.S. are not as dissuaded from applying – applications are down by just 2% over the same period.

The 2016 Brexit referendum took place on June 23rd, meaning 2016’s figures reflect pre-referendum applications while 2017’s figures show applications in the wake of the referendum. The associated decline in the value of the pound is also likely to have tempered candidates’ enthusiasm – although the c10% decline in the value of the pound against the euro since June 2016 appears to have more effect than the c12% decline in the value of the pound versus the dollar.

Brexit hasn’t put everyone off applying for jobs in London though. eFinancialCareers’ figures suggest that overseas applications from junior candidates with one to two years’ experience have actually increased since the referendum, particularly from the U.S., where the number of junior candidates applying for London jobs are up over 10% this year.

Anecdotally, European bankers at early stages of their careers still see London as the local repository of the best and most career-enhancing jobs. “London is the financial capital of Europe – and that’s still where you can get the best experience,” one young French banker told us late last year. ““Moving banks’ headquarters and thousands of staff from London to other European capitals will be a long process,” said another, adding that it’s too soon to start avoiding the City yet.

If junior overseas candidates are keener than ever on applying to London, the same can’t be said for experienced staff. With a few exceptions (France-based applicants with more than 20 years’ experience and U.S.-based applicants with between 11 and 20 years’ experience), applications from more senior overseas staff are down significantly on last year.

Does this make it easier to find a London finance job in 2017? Not necessarily. Most London job applications come from people already in the UK – some of whom are also EU nationals. Moreover, U.S.-based candidates make up over 50% of the overseas applicants for London banking jobs in our sample, and their enthusiasm for the City is less diminished.

Problems could arise in future though. If experienced European bankers continue to reduce their applications, banks in London may struggle to fill senior jobs requiring key native European language speakers – or to replenish experienced European talent as people return home. Then again, this might not be necessary: post-Brexit, most roles requiring an ability to converse with European clients are likely to move to European financial centres anyway.

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Contact: sbutcher@efinancialcareers.com

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I’m taking the CFA exam next week. This is what I’m doing to get through it

May 24, 2017, 4:21 am

≫ Next: Top traders are leaving BNP Paribas as the bank hires from Goldman Sachs

≪ Previous: The Brexit effect on competition for banking jobs in London

The Chartered Financial Analyst (CFA) exam day is June 3. Here’s some advice from a Level II candidate, a Level III candidate and a CFA charter-holder for what you should be doing right now and on exam day in order to pass.

Incoming investment banking analyst attempting to pass Level II

Sergey Litvinenko is a 21-year old student about to graduate with his Master of Finance from Boston College. He’s focused on passing the Level II CFA exam. He said that he did not find Level I difficult in terms of content, but the challenging part was trying to cover every single topic and making sure he had a solid grasp of the material.

“My recipe was to read every single book from A to Z, do every single practice problem in those books, move on to practice tests, find weak spots, revise, rinse and repeat,” Litvinenko said. “It is quite intimidating to go through thousands of pages and try to keep everything fresh and interconnected in your head, but this is how it works.

Litvinenko is approaching Level II in the same way he did Level I. However since Level II has a slightly different structure, he decided to allocate more time to practice tests.

“I still read every book and do the practice problems, but it is taking a smaller portion of time compared to Level I,” Litvinenko said. “One of the reasons must be that there is some overlap between the exam and my previous finance studies.

“Also, when you deal with ‘short’ cases, it is imperative to pay attention to every single word said in a case,” he said. “If you miss something, you might go in a wrong direction – and again, it is not about the hard content; it is more about being able to consume a lot of information, make sense of it and keep a sharp focus.

Hedge fund associate attempting to pass Level III

Noelle Sisco, an associate at hedge fund Napier Park Global Capital, has achieved the Chartered Alternative Investment Analyst (CAIA) and taking the CFA level III.

Proper budgeting of time is key, Sisco said. Here are her three main tips:

Plan out how you intend to use May for studying and follow it – “Being able to check off my study to-do list helps recognize my accomplishments and increases confidence going into exam day.”
Find something non-work-related to focus on during study breaks – “I play various instruments so they help me wind down after a few chapters…golfing and fishing are other good go-to’s.”
Make her own study guide – “I have found this to be especially helpful. I am going through the full curriculum and writing my own study guide, because it helps to learn the material and I feel it helps to be able to reiterate it in my own words.”

In retrospect, there are a few things Sisco wish she had known in advance or done differently before and during the Level I and Level II exams.

“I wish I had a better idea of what the test day was like for the CFA Level I exam,” Sisco said. “When walking up to the test center that morning, there was a line all the way down the block of people preparing to enter the test center.

“I definitely didn’t realize how big it was, but the excitement of it all kind of made me like ‘game on,’” she said

CFA charterholder says not to overlook ethics – or lunch

Marco Sementilli, a portfolio design analyst at City National Rochdale, the investment management subsidiary of City National Bank, previously worked at UBS. He passed all three levels of exams and is a CFA charterholder.

From now until the exam, candidates’ focus should be on mastering ethics and completing as many practice problems as possible, he said.

“For all candidates, ethics is such an important part of the exam, but it is also arduous and time-consuming to master,” Sementilli said. “Reading through the Ethics and Standards of Professional Conduct section two or three times in May should leave candidates well prepared for the ethics portion of the exam.

“Practice problems will help to reinforce the material learned throughout the candidates’ studies,” he said. “A large part of the game for these exams is knowing how to answer questions accordingly, and there is no better way of doing this than by taking practice problems.

“The last piece of advice that I can give is to relax on the Friday before exam day – you’ve worked as hard as possible to get to this point and you need to have a fresh mind for exam day.”

“If at all possible, pack your own lunch for exam day because some of the larger testing centers, New York City, for example, will be a madhouse during lunch break with other candidates trying to get something to eat,” Sementilli said. “If you need to use the bathroom during the timed portion of the exam, raise your hand and do so.”
Follow @danbutchrwrites

Photo credit: AntonioGuillem/GettyImages
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Top traders are leaving BNP Paribas as the bank hires from Goldman Sachs

May 24, 2017, 6:04 am

≫ Next: Meet the ex-Goldman Sachs strats trying to tackle the biggest problem facing investment banks now

≪ Previous: I’m taking the CFA exam next week. This is what I’m doing to get through it

BNP Paribas is losing senior traders as it swaps staff with Goldman Sachs.

Headhunters say the French bank is parting company with Asa Atwell, its global head of G10 FX trading. At the same time, BNP has supplemented its existing stock of ex-Goldman Sachs traders with Robert Boeheim and Eusta Qin, a former Goldman sterling corporate bond trader and investment grade financials trader respectively. Bloomberg reported the latter moves early this week.

Atwell was promoted as global head of FX options trading at BNP in 2012 when the previous head of the business departed. The reason for his exit is unclear, although he’s not thought to be joining another firm.

The flow of talent at BNP goes both ways, however. While BNP is hiring in traders from other banks, it’s also losing them to rivals – Goldman Sachs included. GS is understood to have hired Darren O’Meara from BNP’s rates desk. Paul Mehta, a senior loans and distressed debt trader at BNP is said to have gone to Aberdeen Asset Management. And Paul Crawford, a senior sterling credit trader at BNP is said to be the latest arrival at UBS.

After cutting 233 London jobs last year, BNP Paribas has plans to expand its investment bank in Europe. Under ‘Strategy 2020′, BNP plans to achieve compound annual revenue growth across the CIB of 4.5% over the next three years.

Traders at the French bank had an excellent 2016. This may be helping to attract talent from elsewhere and encouraging “upgrading.” Goldman Sachs in particular appears to be losing sales trading staff this year, with UBS, Nomura and now BNP all poaching its people. As a result, and following layoffs last year, headhunters say Goldman is hiring. It already recruited Miran Serdarevic, Deutsche’s head of real money sales in London and is thought to have more senior hires lined up.

BNP Paribas declined to comment.

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Contact: sbutcher@efinancialcareers.com

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Photo credit: UK Headquarters of BNP Paribas, Harewood Avenue,. London UK by Roberto Herrett is licensed under CC BY 2.0.

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Meet the ex-Goldman Sachs strats trying to tackle the biggest problem facing investment banks now

May 24, 2017, 9:30 am

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≪ Previous: Top traders are leaving BNP Paribas as the bank hires from Goldman Sachs

Leo Labeis spent his final year at Goldman Sachs leading the bank’s efforts to comply with the long and sprawling requirements of MiFID II for its global markets business.

As the deadline looms next year, Labeis says one thing is clear – investment banks’ compliance teams are stretched.

“Compliance programmes are under very tight deadlines, in a rapidly shifting regulatory environment – it’s incredibly hard to keep up,” he says. “Technologists are consumed by individual projects, then immediately go on to work on the next thing. There’s little room to think strategically about how you tackle regulation, and this is even the case at Goldman where the programmes are well-run.”

Labeis spent 13 years at Goldman Sachs, working in senior roles across its strats division, including heading up its EMEA emerging markets trading strats team. Latterly, before leaving last year, he was global head of macro CVA and FX trading quants. He oversaw a team of dozens of quants and developers, taking responsibility for regulatory capital requirements and ensuring MiFID II compliance in its sales and trading business.

Most investment banks have been throwing people at the problem and hiring in people. Technologists who would have previously focused on innovative front office programmes have been shifted across to regulatory projects.

The sweep of MiFID II alone on banks tech teams is huge. Banks have to reengineer everything from algo engines, order and execution management systems to reporting and record keeping – just to keep the lights on.

“Investment banks have massively increased the number of people working in technology and control functions, but this just keeps pace with regulatory momentum,” says Labeis. “There’s also the question of cost – the entire industry is beholden to shareholder cost-control. They don’t have a free rein – there’s only so many people you can hire.”

Labeis, together with Pierre Lamy, a former managing director in FICC technology at Goldman Sachs, has just launched a new regulatory technology start-up called REGnosys.

The idea, at least initially, is to solve the problems large investment banks are facing complying with MiFID II on the trading floor. It provides a “canonical representation” of business processes – namely converting them into a standard format – across all investment banking markets divisions. It then converts them into programmable code that’s easily auditable for regulators, and also makes them available on an open source domain, so that compliance is fully transparent.

This is one of the main issues that banks face when it comes to compliance. There are teams working across divisions and functions in “parallel streams”, says Labeis, which means that technology around regulatory compliance has become “too complex and opaque to be auditable”.

So far, it’s attracted a lot of industry interest. The two founders raised $900k in private funding – largely, according to Labeis, from senior investment bankers and private equity professionals. The firm is currently speaking to “most bulge bracket banks on the street”, says Labeis, initially with the aim of confirming the technology with a product around MiFID II compliance.

REGnosys currently has four employees and is likely to start recruiting for business development roles in the future. Labeis says that 70-80% of staff will be software engineers. So far, most have come from investment banks. Jim Wang, a former executive director in interest rates technology at Goldman Sachs, joined earlier this month, while Minesh Patel spent 15 years in banking technology – latterly at Mercuria – before joining REGnosys.

“We want experienced technologists who have seen it all and done it all in investment banks, are regulatory specialists who understand the problems banks are facing,” says Labeis.

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Contact: pclarke@efinancialcareers.com

Image: Getty Images

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1. Keep it simple

2. Define your approach to time

3. Define the events you want to look at

4. Add in some ‘scaling laws’

5. Define what happens when your events take place

6. Add in a probability indicator

7. Add in asymmetric thresholds that reflect the market’s direction

8. Backtest!

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