Algo traders paid up in US v UK

US algorithmic traders are in the money, but Europeans may not be quite as flush.

News reports suggest US algorithmic traders have seen a massive increase in pay over the past year, driven by talent shortages and increased demand for algorithmic expertise - particularly from buyside firms. But European recruiters say the same cannot be said this side of the Atlantic.

"Demand for algorithmic traders has recovered from the difficulties faced by statistical arbitrage desks in 2002-2003," says Johanna Cohen, a London-based consultant at recruiter Huxley Associates. "But it's not exactly soaring."

Cohen says hedge funds such as Citadel Investment Group and Millennium Capital are hiring algorithmic traders in London. David Korn, European managing director at search firm Options Group, says mainstream investment banks like Merrill Lynch, Credit Suisse, Goldman Sachs and Morgan Stanley are also looking to add algorithmic talent in Europe.

Cohen says most houses are interested in picking up people who combine quantitative expertise with commercial trading knowledge: "The ideal is always to find someone who has enough programming ability to write their own algorithmic model, combined with enough understanding of what makes a trade work to decide whether the trades suggested by the model should go ahead."

Although people devising successful algo models for hedge funds can make millions, Cohen says people fitting this description usually command around 250,000 ($437,000) in London.

Compared to the US, this doesn't sound particularly generous. According to a bullish article in this week's Wall Street Letter, pay for US algorithmic executives has risen from $300,000 to between $400,000 and $800,000 over the past year, and is set to continue rising as brokerages and buyside firms pile into the area. The article says US recruiters estimate algorithmic trading desks could see staff numbers rise 20% in the following year.

Recruiters in the UK are a little more circumspect. "Pay in the algorithmic area is definitely being forced upwards by rising demand and tight supply," says one. "But has it doubled over the past year? I don't think so."