It’s been a tough 20 years if you’re an FX trader. In the past two decades, Bloomberg says NatWest Group, once home to some of London’s top FX traders, has cut the number of people targeting G-10 FX trading by 70%. Trading has disappeared, but a different kind of work has emerged 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 it was $50 for every trade made using algorithms. They are now down to just $25.
Ralf Donner, head of fixed income, currencies and commodities solutions at Goldman, warns of falling fees. Banks won’t have the money to invest in future algorithms, Donner says: “The decline in fee income is now at a point where it threatens to stifle further product innovation and investment in client analytics tools.”
It follows that the developers and quant developers who work on the FX trading algorithms are about to screw themselves. These developers and quants are people like Asif Razaq, global head of algorithm implementation at BNP Paribas. Razaq studied mathematics and computing, followed a visionary master’s in artificial intelligence at Queen Mary University of London in the late 1990s, and worked for UBS and Citi before joining BNP in 2010. Bloomberg reports that it has developed a set of algos with names like Chameleon, Viper and Iguana, and that it brings a plastic dinosaur to each point of sale.
Razaq and his quantitative counterparts have had fun riding the wave of automation in the FX markets, but shrinking fees suggest things may be less happy going forward. Donner wants Goldman clients to make more holistic choices when choosing which algorithm provider to go with. He acknowledges that best execution is important, but clients should also “focus on long-term overall performance when evaluating.”
While FX quants try to do more with less, they at least have a better time than the remaining human traders in the market. The last group of trading venues is still under pressure: in the year to January 2024, Bloomberg says algorithmic trading volume between Citi and regional banks grew 200% year-on-year.
On your own, you don’t have to work for an investment bank for a hedge fund to seek you out.
Mike Platta’s BlueCrest Capital Management is technically the Platt family office, but it was formerly a hedge fund and continues to follow the trading strategies typical of his legacy. These include building a commodity and energy trading team.
The Wall Street Journal reports that Platt poached Alex Watson, a natural gas trader at French energy company EDF, last year after Watson quietly made “millions” from skyrocketing natural gas prices following Russia’s invasion of Ukraine. Watson, who joined BlueCrest in October 2023 and is a graduate of Loughborough University, is now a senior portfolio manager at BlueCrest, ostensibly based in Jersey.
He’s not the only natural gas trader that hedge funds have hired. The WSJ notes that Citadel, Millennium, Balyasny and Jain Global were building teams. Portfolio managers can take home 12-30% of their profits, with Platt paying at the top end of that scale.
Meantime…
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 is emailing junior staff at 5am and calling people on his daily morning walks. He is now looking for a fourth CEO for his chairmanship, which HSBC has frozen a lot of other recruitment. (Bloomberg)
AI 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)
Revolut CEO Nik Storonsky plans to release tens or even hundreds of millions of dollars worth of stock in a secondary trade in the coming weeks. (Sky)
Ronan O’Grady, a former Goldman Sachs employee, was convicted at Dublin Crown Court on June 28 of sexually assaulting a child. He was an executive in the wealth department. (Financial Times)
Last week, a federal judge upheld a challenge to the FTC’s ban on competition clauses, saying it improperly “imposes universal access without an end date.” (WSJ)
Bill Ackman wants to use his Twitter account to raise money from small investors. (Sherwood News)
No one has quit their job in recent years and now everyone is bored. (WSJ)
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