Salary survey: Structured equity derivatives specialists in demand
Pay packets for many equity derivatives employees this year look fairly buoyant, with staff shortages still apparent in complex areas, a survey shows.
Salesmen of structured equity derivative products in top tier banks are among the best paid individuals in the derivatives sector, the survey by the headhunter Sheffield Haworth suggests.
The average pay in 2002 of senior salesmen in firms such as Goldman Sachs, Morgan Stanley, Merrill Lynch and Deutsche Bank, is likely to be nearly 1.2m (€1.9m), including a 1m bonus.
People working in relative value sales, such as risk arbitrage, are also likely to be highly paid. Raj Sitlani, equity derivatives specialist at Sheffield Haworth, said this was due to a shortage of experienced practitioners.
Salesmen of 'vanilla' or OTC equity derivatives are likely to fare less well, with those in top tier banks pulling in an average of 625,000, comprising a base salary of 125,000 and a bonus of 500,000.
Traders of OTC derivatives are likely to do somewhat better than the salesmen, earning an average of 1.1m at top tier banks.
Information for the survey was collected in August and September
this year and includes expectations of bonuses.
Despite this year's significant reduction in M&A arbitrage, relative value experts remain in strong demand.
Sitlani says the gap between pay for salesmen and traders in the vanilla sector is due to traders' formulaic pay structure and their ability to make money on the flow of client business, while salesmen merely compete for lower margin brokerage income.
"The more business and risk appetite a bank has, the more money salespeople and traders are likely to make. It's exponential but for traders it's particularly exponential," Sitlani said.
People trading OTC derivatives in second and third tier banks are paid substantially less than their top tier rivals. Not only are their trading limits likely to be smaller but there is less customer flow in these institutions and products tend to be less complex, said Sitlani.
Senior OTC derivatives traders at second tier banks take home around 725,000. At third tier banks, total remuneration for senior traders drops to 400,000.
The greatest distinction between pay at the different types of institution comes, however, in the OTC derivatives sales sector. Here, mid-ranking individuals can more than double their pay by moving from second tier to first tier institutions. While second tier mid-level sales people are paid 190,000 on average, their first tier equivalents earn a total of 390,000.
This gap is the result both of the greater complexity of products offered by first tier houses and their first-rate infrastructure, Sitlani said. He added that electronic markets are making commissions in the vanilla sector much more visible and they are falling as a result.
On the whole however, the survey shows that the difference between the pay of equity derivatives specialists in first and second tier institutions is marginal, except for senior positions. Salaries are often roughly equal, and bonuses at top tier institutions not dramatically higher.
Pay at third tier institutions, such as boutiques and small brokerage houses, tends to be significantly lower . Sitlani said this was the result of limited product ranges and very low sales volumes.
