Equity sales traders will take their share of the lumps from the financial fallout this year in the form of a major hit on their 2008 compensation, according to data compiled by an executive search firm.
Equities sales traders can expect a projected drop in pay this year of as much as 30 percent from 2007, according to Eric Moskowitz, head of compensation consulting at Options Group, a New York-based global executive search and strategic consulting firm.
The average vice president sales trader in equities at a bulge bracket firm who made $500,000 in total compensation in 2007 is more likely to get paid a $100,000 base and a bonus of up to $250,000 in 2008, he said.
Still, equities desks are doing relatively well compared with those on the debt side, given the problems in the disastrous mortgage-backed securities market, Moskowitz said.
Sales traders at “eat-what-you-kill” independent firms should still expect to see their usual payout of from 25 to 50 percent of the commissions they bring through the door, according to executives at these variable compensation shops.
These independent firms have been a destination for sales traders from bulge bracket firms over the last two years. During that time, the role of the sales trader has changed at the big shops, as the buyside turned to cheaper no-touch electronic trading solutions that bypassed sellside trading desks. That has also negatively affected compensation for sales traders.
However, bad news at the bulge shops could translate into opportunity for the independents. A head sales trader at one of the burgeoning independent shops said that those at bulge firms will consider those shrinking bonuses-as well as their job security-when they ponder opportunities at independent firms.
“Really high-end sales traders, who have worked really hard this year and are not going to get any [bonus] money, have opened their eyes,” the exec said. “And then people don’t know if they’re going to be the one on the chopping block, so they’re being more proactive and moving, and saying: I’m not going to wait around and be the last elephant out the door.”
Moskowitz estimates that as much as 40 percent of all sales traders have either lost their jobs or have moved to independent firms and asset managers over the past nine months. The recent turmoil at the investment banks only boosted the number of sales traders on the move, he added.
The trend is expected to continue. The head trader at the independent shop suggests that the employment outlook for sales traders for the near future should resemble that of late 2008: There should be a large number of them looking for better or any opportunities.
