Derivatives make decade's biggest market dent
For the last few weeks we've run a poll asking for readers' opinions on the most significant area of development in the financial markets over the past decade. Your answer: derivatives.
More than half of you voted derivatives as the up and coming business area with the most influence on financial markets during the past 10 years, compared to 20% for the related area of hedge funds, and just 5% for programme trading.
In the spirit of celebrating Financial News' ten year anniversary edition this week, we asked a few headhunters for their reflections on how the derivatives job market has changed over the period. There was unanimity on two points: derivatives jobs and derivatives pay have gone through the roof.
"Ten years ago, top derivatives swaps traders were earning anywhere from $500k to $1m," says Michael Karp, co-founder and managing director of international executive search firm Options Group. "These days, a top derivatives trader can make $10m (5.7m)."
The rising number of derivatives roles is reflected in the increasing proportion of search firm profits derived from the area. Shaun Springer, chief executive of fixed income search specialist Napier Scott, says the firm didn't do any business in the derivatives area ten years ago. Today, he says 70% of the firm's mandates stem from derivatives work.
It's a similar story at the Rose Partnership, where Monique Cohen, head of the global markets team, says 70% of her team's revenues are now derived from derivatives roles. There are of course exceptions. Sheffield Haworth, which started out as a derivatives house, has diversified into corporate finance, and other areas for example.
With margins for derivative products falling as new banks enter the area, has derivatives pay peaked? Recruiters think not. "There is always a new generation of derivatives that initially allow for wide margins and thus high profitability," says Springer.
Cohen says that while credit derivatives pay is looking somewhat deflated, hybrid products will yield the biggest bucks in the years to come. "There is real demand for people who can turn their hand to cross asset class products," she says. "Pay for hybrid specialists is rising."
