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Traders of rate-based products face sour bonus season: consultant
November 13, 2013 / 7:56 PM / 4 years ago

Traders of rate-based products face sour bonus season: consultant

Traders stand outside the New York Stock Exchange prior to the opening bell October 31, 2012. REUTERS/Brendan McDermid

NEW YORK (Reuters) - Senior Wall Street traders who handle bonds and derivatives tied to interest rates are likely to get a sharp paycut this year, according to the talent and compensation-consulting firm Options Group.

Overall, those who work with rate products like U.S. Treasury bonds, agency mortgages and interest-rate swaps will get a paycut of 19 percent, on average, Options Group said on Wednesday. Those who sell rate products will see their compensation fall by one-third, while those who trade and perform research in that market will see pay drop by 20 percent, the firm said.

The pay cuts align with a difficult environment for rates trading, with investors putting off trades until there is more clarity about the U.S. Federal Reserve’s plans to pull back on monetary easing.

Banks including Goldman Sachs Group Inc, Morgan Stanley, JPMorgan Chase & Co, Citigroup Inc and Bank of America Corp each reported fixed-income trading declines last quarter, and some set aside less pay for their securities businesses.

Overall, the average Wall Street pay package - including salary and bonus - will rise 4 percent, according to Options Group. The firm’s estimates reflect the top 25 percent of workers in a role, but excludes the highest 1 percent of pay packages.

While those who work in most areas of fixed-income trading are expected to receive lower pay this year, on average, those in equities will receive a 12 percent compensation bump, and those in investment banking and wealth management will see compensation rise 6 percent, Options Group said.

Michael Karp, CEO of the firm, said it has been “a very challenging environment” for the banking industry the past four years. As a result, banks can no longer lure top talent with huge paychecks, giving smaller boutiques and investment firms an advantage, he said.

Options Group’s report comes a week after another pay consulting firm predicted that bonuses would rise 5 to 10 percent this year.

Reporting by Lauren Tara LaCapra; Editing by Bernard Orr

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