Automation Takes Toll on Corporate Bond Traders

Automation in the bond market is ending the era of the corporate bond trader. Increased transparency of prices and streamlining facilitated by technology have sliced margins and made it nearly impossible for traders to squeeze a living out of their transactions.

Some 25 percent of the jobs for corporate-bond traders, analysts, brokers and salesmen have been eliminated since 2004, write Bloomberg's Mark Pittman and Caroline Salas. Since fixed-income prices began appearing on the NASD's Web site in 2002, "bond salesmen have lost their advantage," they say. In September, institutional investors paid $1.24 per $1,000 bond trade, compared to $2.80 four years ago.

"You're lifting the veil of ignorance'' in the market, Peter Campfield, head of taxable fixed-income trading at Charles Schwab Corp., says of electronic reporting. Before, "Price discovery was a challenge," he says. "You had to hunt and peck and dial numerous dealers to ascertain what a real market looked like.''

Today, corporate bond staffs simply aren't creating enough revenue, Bloomberg says: Between mid-2002 and mid-2003, they surrendered an estimated $1 billion in fees. For experienced bond traders, the opportunity to continue working lies in the credit derivatives and structured credit space.