Two ex-derivatives traders have come up with a clever way of sidestepping investment banks' ever-increasing notice periods.
Adrian Ezra and Richard Shah, both one-time derivatives traders turned headhunters, have set up a company that will allow banks to buy out the notice periods of employees they're hiring.
Called FlexExchange, the compensation system will only be open to member banks. When a member poaches an employee from another member, it will have the option of compensating its rival. And in return, the rival will then release the former employee before the notice period is up.
"Notice periods have increased from one month to three months, and even more than that at some banks," says FlexExchange director Ezra. "In areas like corporate finance and M&A, notice periods are needed to protect the confidentiality of big deals that are happening. But in areas like global markets, or sales, trading and research, there's much less time sensitivity and people could easily move sooner," he adds.
The Flex system is designed to formalise the kind of bilateral agreements that emerge when two banks hire from one another simultaneously. In these cases, Ezra and Shah say arrangements to reduce notice periods are common.
If it takes off, the system could net the two men a reasonable profit - as long as hiring remains robust. A bank that hires someone on a 280k package and eliminates their notice period would be expected to pay FlexExchange 2.2k for its intermediation services.
FlexExchange is due to launch in May, but will only go live once it has five members - several of whom are in the pipeline, according to the directors.
Whether banks will truly tune in to the new idea remains to be seen, though: "It seems a bit silly that as an industry we made the decision to impose longer notice periods, and we're now looking to pay an outside industry to help us sidestep them," says the head of HR at one US bank.