Darren Dryer started his career on the trading floor at age 19. Now at 46, he’s looking for a new business venture outside the financial markets.
As an independent trader back in the year 2000, when trading went from floor to screen, Dryer made adjustments and found his way for the next 10 years or so. “In the last few years, though, with such emphasis on speed, co-location and algorithmic trading, I decided to assess the upside and found trading is no longer a viable way for me to consistently make money,” he said
It’s not just independents who are struggling. A recent Greenwich Associates study entitled “The Big Sales Trading Upgrade” found that 70 percent of certified trading desks are either to remain flat or decrease head count this year. The report’s authors found an even split, with 35 percent planning to stay flat and 35 percent anticipating a decrease. According to Richard Johnson, an analyst at Greenwich Associates the study also shows that those who lose their jobs will find a long path back in the trading job market. “On the sellside, most of new hires will be junior positions with three to five years of quantitative experience,” he said. “The folks who lose their jobs may have to retool to find other jobs in finance.”
Anecdotally, headhunters see the same trends. According to Lou Ricci, president of financial talent scout HRG. “There are still some traditional trading jobs at some firms, but the business has shrunk. Where there may have been 20,000 jobs at one time, now there are 5,000. The people we are placing have much different skills and backgrounds than [they did] 10 years ago. Our clients want to hire database developers, software engineers, C++ developers, network engineers and the like. Banks are not only competing with other banks for talent, they’re competing with Google, Netflix and Amazon.”
And the shrinking of modern trading floors is continuing. Trading floors that were 100 square feet in the 1990s have shrunk down considerably as high-speed electronic execution and algorithmic trading have stripped away the human element, Ricci said.
So what’s a non-quant, traditional trader to do to stay in the game?
“Technology has made some functions obsolete,” said Roy Cohen, career coach and author of The Wall Street Professional’s Survival Guide. “Unless you are committed and prepared to repurpose yourself, you won’t survive. Change is happening at a pace so fast, traders have no choice but to scramble to keep up, or risk not having a role.”
It’s very important for traders to keep up in their current position because now the job market is tougher than it’s ever been, Cohen explained. “We know Goldman Sachs just had a head-count reduction. When that happened in the past, there’d be a feeding frenzy to hire people who’d been recruited by Goldman. But as technology has dramatically transformed the industry, fewer people are needed overall.”
Linda Kreitzman, director of the Master of Financial Engineering program at the University of California-Berkeley, concurs. “In any finance job, people have to look long-term and figure out what they’ll do if they lose their job,” she said. Kreitzman works hard to make the Berkeley program keep up with the needs of the financial industry, and she places students in financial jobs around the country.
“Banks have been slashing their workforces to maintain profits,” Kreitzman said. “While it’s tough on the investment banking side, I see plenty of trading jobs on the proprietary trading side. I’ve placed several of my students in such jobs in Chicago.”
Kreitzman advises traders who don’t have the quant skills, and who are so inclined, to go back to school and acquire the latest programming abilities. “Learn Python, learn C++ and learn R,” she said, referring to the alphabet soup of programming languages. She added that the Berkeley program takes in many professionals and “gives students the opportunity to recycle their skill sets and improve upon what they are doing.”
One recent grad of the Berkeley program, Andrew Salter, is an example of someone who looked ahead. Andrew worked for eight years as an economist for the Reserve Bank of Australia (equivalent of the U.S. Federal Reserve). He managed a portfolio for the Central Bank in New York, and he was there during the financial crisis. Despite that, he wanted to come back to the U.S. “When I was in New York, I noted that banking and finance was becoming more and more automated and computerized,” Salter said. “I wanted to stay on top of that trend, and the Berkeley program not only helped me improve my tech skills, but it also helped me to relocate to the U.S.”
Salter is going to work for a proprietary trading shop in Chicago this spring. “I’ll be working in the algorithmic arbitrage team, writing code to analyze order flow,” he said. “Much of my time will also be spent generating alpha signals, leveraging my background in financial markets and economics to automate some of the shop’s processes.”
Salter retooled at Berkeley, and while he called it a fantastic program, it was daunting. “It’s kind of like drinking from a fire hose. You are inundated with so much material in the year-long program.”
The Skills in Demand
Another Berkeley graduate, Nicholas Sonnenberg, became a high-frequency algorithmic trader after he left Berkeley eight years ago. He’s one of the guys who can do the job of 20. But he gives proper respect to traditional trading. “You can’t rely on fancy math to try and find a strategy,” he said. “You need to blend an understanding of the fundamentals. You need people in trading who can make sure that economically it makes sense what you are doing. One misconception with automated high-frequency trading is that the trader has low value because the computer is doing everything.”
That said, the computer can only do so much, according to Sonnenberg. “There are a million different parameters for input – risk tolerance, models to use – that’s where the trader comes in. A good trader understands what to change to react to market conditions.”
Of course, not everyone has the ability or inclination to take a year at graduate school to learn new skills, and not everyone has the math- and computer-oriented brain needed for the hottest quant jobs. According to career coach Cohen, “There are plenty of opportunities for traditional traders. It’s important to figure out how to explain yourself, how to tell your story so it’s compelling and it resonates.”
To find your way, Cohen advises traders to think about the future. “If you only dwell on what you are doing now and what you’ve always done, and you have an attachment only to that, any change is going to be tougher and more disruptive,” he said.
Cohen has helped trader clients redefine themselves and find new roles in the financial world. “Some traders who have done extensive analysis can shift direction to a role that’s more analytic, say, at a hedge fund, with the ultimate goal of becoming a portfolio manager” he pointed out. Other traders are gravitating to financial tech companies, and there seems to be hundreds of them. “These companies develop systems and products that are used by the Wall Street community,” Cohen said. “They need people coming off the trading desk, in sales, marketing and product development.”
Cohen has had clients go to work for family offices. “Some affluent families actually manage their own wealth, and a trading background can be very valuable.”
To achieve the change, Cohen advised, “Anyone coming out of trading needs to demonstrate value. You need to be able to show that what you’ve done can be translated into what you want to do, and to what an employer’s needs may be.”
The Skills In Need
Don’t despair too much. All the trading jobs are not going away. Kreitzman, the Berkeley program’s director, places many students in trading jobs, and she said that firms still hire non-quant traders. “The human factor is always important,” she said “As time goes on, programming does become a more required skill set, but good trading teams seem to need both traditional traders and quant programmers.”
Should a layoff come your way, Cohen advises that you “recognize that there are options, and try to get excited about those options.” It can be hard, he said. “If you’ve done the same thing for 20 years and it’s taken away from you, you’re going to feel like a part of you is missing, and you don’t know who you are.”
With a determined effort, old-school traders can find still fulfilling work on the trading floor. Cohen advises that traders who are between jobs or looking for a promotion or the chance to stay recession-proof should look inward as they search. “You ask yourself what interests you and what will leverage your background in a meaningful way.”
