* Currency traders suspended, fired amid FX rate rigging
* Banks reluctant to hire lest replacements also tainted
* Forex a major source of income already under regulatory
* Suitable staff already scarce as automated trade thins
By Patrick Graham and Clare Hutchison
LONDON, Feb 21 A void is appearing in the upper
reaches of the world's biggest and most powerful financial
market as banks struggle to replace currency traders suspended
or fired during a global investigation into allegations of
foreign exchange rate-rigging.
Recruitment firms and sources at some of the banks at the
centre of the probe say there is huge reluctance to hire
externally because replacements could be tainted by allegations
of collusion themselves.
That leaves managers with the choice of promoting more
junior staff into powerful chief and senior dealer positions or
appointing staff from other units of the bank who are less
familiar with the daily workings of the $5.3-trillion-a-day
While the hiatus may be temporary as the investigation
unfolds, it comes at a time when machine-driven algorithmic
models have already replaced around two thirds of the spot FX
dealers operating in London a decade ago, and there are growing
concerns about staffing numbers in the industry.
The financial impact for the banks remains unclear, but it
adds pressure on a major source of income that is already
suffering from a wave of regulations clamping down on the amount
of risk dealers can take.
With prospective bans on proprietary trading spelling a
change in how lenders do business, the fallout from the scandal
further clouds the outlook for many department managers.
"Certainly it might only be 20 people so far who have been
suspended, but it has created one hell of a cloud above the
industry," said one well-known headhunter in London, who also
declined to be named.
"We have had calls from people who haven't been in the
market for a while who think there might be opportunities for
them. But I think it's very difficult. Until more decisions are
made, there is going to be a little bit of a stand-off."
Regulatory authorities are looking at whether traders at
some of the world's biggest banks colluded to manipulate
benchmark foreign-exchange rates used to set the value of
trillions of dollars of investments.
Banks have taken action against 21 traders, and financial
institutions including Royal Bank of Scotland, Deutsche
Bank and UBS are now said to be reviewing
the rules governing how traders make bets with their own money.
All of the banks who have taken action against traders since
the start of the probe declined to comment or had no immediate
comment on the resulting recruitment and operational issues.
Among other things, industry players say investigators will
have to trawl through millions of chatroom conversations and
other correspondence for dozens of traders, potentially
including some who have since moved on to other jobs.
The head of Britain's FCA financial sector overseer has said
its probe is likely to drag on into next year, leaving the banks
nervous about hiring anyone with a history of trading at a major
"This is not any sort of downsizing, so all these people
will need to be replaced," said a senior manager in foreign
exchange at one bank in London, who asked not to be named.
"But banks will need to be extra careful when they look at
candidates' history, whether it is internally or externally.
Certainly if you are a bank and you want to hire a high flier
from another bank, you have to think twice."
The headhunter said banks' other practical problem for the
moment is that most of the disciplinary action so far has been
in the form of suspensions rather than outright dismissals.
"If you are a big bank who has someone suspended at this
time, until a definitive decision is made it's very difficult to
go out and hire people purely to fill in a space for someone who
is only suspended," he said.
"We can all hazard a guess as to what is going to happen to
anyone who is suspended, but we don't know."
A handful of top banks control the multi-trillion-dollar
market tied to the benchmark exchange rates. The top five FX
dealing banks see around half of the forex market's average
daily flow, and the top 10 banks account for almost 80 percent.
London-based recruiters say the spot FX market in major
currencies in the city adds up to around 125-150 dealers at 25
banks - as little as a third of its size a decade ago.
"Electronic solutions are coming in and doing the job that
people used to do. The banks also are not taking the same amount
of risk, so there is less of a requirement for people, and
increasingly it's a different skill set," the headhunter said.
"Banks more and more are just offering an execution service
to clients. The rules on (limiting or banning) proprietary
risk-taking are making the banks into a different model now
which can require a different kind of trader."
A separate investigation last year into rate rigging in
another major centre, Singapore, found 133 traders tried to
manipulate lending and foreign exchange reference rates, many of
whom banks have struggled to replace.
Adriana Swift, Head of Capital Market Sales and Trading at
financial recruitment firm Selby Jennings, said those involved
would find it hard to move into other parts of the business and
will often be forced to change career, unless they are at a
junior level and formally cleared of any wrongdoing.
"People generally don't want to hire FX dealers for sales
and trading roles in other asset classes because they want
people with experience in the sector they're hiring into," she