eFinancialCareers

Rumour has it that algorithmic traders are none too happy with the recent bonus round.

“Algorithmic traders in banks and hedge funds have had a stinking year,” says one London headhunter. “Profits haven’t been as high as anticipated and pay has been squeezed.”

Another (equally anonymous) headhunter agrees. “Although some investment banks are making huge returns from algorithmic trading, there are quite a few that aren’t. Where businesses are immature, people haven’t been paid very well – I know some junior quants who’ve been paid a £60k salary plus a £60k bonus, while similarly experienced algo traders have made bonuses of just £15k.”

Is pay in the sector really that bad? Not according to Luke Williams, a consultant at search firm Kinsey Allen. But Williams agrees the quants who build algorithmic trading models are inevitably better remunerated than the traders who do little more than execute trades that the models suggest: “The supply of guys who write the algorithms is a lot more finite than the traders who execute them.”

Quants vs traders

While a quant with two to three years’ experience can expect to earn a base salary of around £70k plus a bonus in the region of £140k, Williams says a comparable algo trader will earn a bonus that’s a fraction rather than a multiple of a similar base – 50% to 100% is standard.

Which banks pay their algorithmic traders the most? Rumour has it Goldman and Lehman Brothers rank among the more generous. By comparison, Credit Suisse is said (by headhunters) to pay less well.

David Korn, European managing partner at search firm Options Group, says there’s a trend in favour of algorithmic traders who can combine equity and fixed income products, but says it hasn’t had an adverse impact on everyone else in the market: “Houses are still looking for strong algo guys – we haven’t seen any impact on pay.”