If you’re an FX trader, it’s been a tough 20 years. Bloomberg says NatWest Group, once home to some of London’s top FX traders, has cut the number of people dedicated to G-10 FX trading by 70% over the past two decades. The trading jobs have disappeared, but a different kind of job has taken their place: software developers and quant developers now dominate the FX market, but they too are under pressure.
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As algorithmic FX trading grows, Bloomberg notes that the fees banks earn per trade have fallen. A decade ago, they were $50 for each trade made using algorithms. Now, they’re down to just $25.
As costs fall, warns Ralf Donner, Goldman’s head of fixed income, currencies and commodities execution solutions. Banks don’t have the money to invest in future algorithms, says Donner: “The diminishing returns on costs have now reached a point where it threatens to stifle further product innovation and investment in analytical tools for clients.”
The implication is that the developers and quants who work on FX trading algorithms are themselves going to get squeezed. Those developers and quants are people like Asif Razaq, the global head of algorithm execution at BNP Paribas. Razaq studied mathematics and computer engineering, followed by a visionary master’s in artificial intelligence from Queen Mary University London in the late 1990s, and worked for UBS and Citi before joining BNP in 2010. Bloomberg reports that he has developed a range of algorithms with names like Chameleon, Viper and Iguana, and that he brings a plastic dinosaur to every sales pitch.
Razaq and his quant colleagues have had fun riding the wave of automation in FX markets, but the cost-squeezing suggests things could be less rosy in the future. Donner wants Goldman’s clients to take more holistic decisions when selecting the algorithmic provider they go with. Best execution is important, he acknowledges, but clients should also “focus on all-in long-term performance when evaluating us.”
As FX quants try to do more with less, they’re at least doing better than the market’s remaining human traders. The last remaining cluster of trading jobs remains under pressure: In the year to January 2024, Bloomberg says, the volume of algorithmic trades between Citi and regional banks rose 200% year-on-year.
Moreover, you don’t necessarily have to work for an investment bank to be approached by a hedge fund.
Mike Platt’s BlueCrest Capital Management is, technically, Platt’s family office, but it was formerly a hedge fund and continues to pursue trading strategies typical of his heritage. These include building out his commodities and energy trading team.
The Wall Street Journal reports that Platt last year tracked down Alex Watson, a natural gas trader at French utility EDF, after Watson quietly made “millions” from rising 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, which is apparently based in Jersey.
He’s not the only natural gas trader hedge funds have hired. The WSJ notes that Citadel, Millennium, Balyasny and Jain Global have all assembled teams. Portfolio managers can take home between 12-30% of their profits, with Platt paying the highest percentage.
In the meantime…
Mark Tucker, the 66-year-old chairman of HSBC, lives in New York but dominates HSBC in Europe. He has a “phenomenal work ethic” and sends emails to junior staff at 5 a.m. and calls people on his daily morning walks. He is now looking for the fourth CEO of his chairmanship, for which HSBC has frozen many other hires. (Bloomberg)
The focus of AI is shifting to smaller, 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 sell tens or even hundreds of millions of dollars’ worth of shares in a secondary deal in the coming weeks. (Sky)
Ronan O’Grady, a former Goldman Sachs employee, was convicted on June 28 at the Criminal Courts of Justice in Dublin of child sexual abuse. He was an executive director of the wealth unit. (Financial Times)
Last week, a federal judge upheld a challenge to the FTC’s ban on non-compete agreements, saying it wrongly “imposes a one-size-fits-all approach with no expiration date.” (WSJ)
Bill Ackman wants to use his Twitter account to raise money from private investors. (Sherwood News)
No one has quit their jobs in recent years and now everyone is bored. (WSJ)
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