What's happening, who's hiring and how much are they paying in the world of inter-dealer broking?
What's the temperature?
Hotter than a barbeque in the Sahara. The headline-hogging inter-dealer brokers (IDBs) have been smugly claiming that the current market volatility makes them a sanctuary from sub-prime. ICAP, the world's biggest IDB, has seen a 'sharp increase' in activity in the last three months (according to the Financial Times), while the industry's number two, Tullett Prebon, has been making allusions to 'ideal' conditions and 'record' performances.
While bankers are confronted with a distinctly bleaker future, inter-dealer brokers are sitting pretty. Damien Lee, managing director of brokerage-focused recruitment firm Search Partners, says: "Brokers are just like lawyers, win or lose they take their fees."
It helps that trading volumes are rising amidst market volatility. For example daily electronic volumes in both fixed income and foreign exchange reached US$1.3bn on 16 August, an increase of almost US$200bn on the previous record.
The real question should be: Who isn't hiring? IDBs are in expansionary mode, and there aren't enough talented individuals to appease their appetite. It doesn't help that experienced staff are bound by long contracts and brokers have a reputation for litigiousness if contracts are broken.
Lee, whose firm recruits primarily for BGC Partners, says: "BGC would have hired 300 brokers if they had their wish list, but there simply aren't enough qualified individuals out there."
With qualified (aka experienced) types thin on the ground, a growing number of IDBs are training people in-house - ICAP, for example, plans to hire 75 graduates in 2008.
Who are they hiring?
Sophistication is the new buzz word. The industry typically attracted the traditional barrow-boy brokers, but it is now looking to shake off that image. "Essex used to be the catchment area, people who had mates in the industry could get a job," says Lee.
However, well-educated traders who deal with complex instruments expect added value from their brokers. As a result, solid academic qualifications (a 2.1 at degree level) are increasingly mandatory. Ex-military officers and linguists are also popular. "They have life experience, have a degree, have done four years in the Army, often speak languages, don't mind working long hours, and they are great leaders and real team players," says Lee of military types. Linguistically, speakers of French, German and the languages of emerging markets are de rigueur.
How much are they paying?
Seasoned ex-military types can command starting salaries of 50k. Headhunters say the salary spread for more experienced brokers is a broad 80k to 350k. However, bonuses are where the cash starts to roll in. Bigger players pay 35% of the revenues. However, if you want to trade the security of the larger firms for the boutiques, you could take home a mouth-watering 75% of revenues.
On the face of it, the inter-dealer broking horizon looks remarkably radiant.
"Seven years ago, people were worried about electronic trading. There's always something new that could threaten, but the industry looks generally healthy," says Lee.
However, pessimists can be forgiven for squinting at a few clouds on the horizon. Citigroup, for example, points out that banks tend to play IDBs off against one another, forcing down margins as a result. Then there's the little issue of consolidation. Anecdotal evidence suggests banks' traders are increasingly keen on running as few inter-dealer broking platforms as possible. As a result, larger players are going for a land grab - in April 2004 Tullett Prebon had its offer for eSpeed, Cantor Fitzgerald's bond trading network, rejected; Financial News speculates that Tullett will now be forced to merge with US player GFI in order to compete with the bigger beast of ICAP. Consolidation is unlikely to be good news for jobs: the pursuit of cost synergies invariably means redundancies.