Bulge Brackets Seek More Algorithmic Skills

The increasing use of algorithmic trading will benefit those with the right combination of IT skills, trading knowledge and expertise with quantitative trading strategies.

Especially in demand are those with quantitative research skills, as well as individuals who can bring their own trading strategies to hedge funds and bulge bracket firms, according to Lou Ricci, president of the Hagan-Ricci Group, a New York City firm specializing in front office hiring in IT, trading and quantitative research.

"On the lower end, the ideal job candidate in the algorithmic trading arena is the person with the right programming skills. At the top of the game are the Ph.D. types who can build the algorithms, as well as traders who can bring together the strategy and IT side of it," Ricci says.

Annual pay ranges from $250,000 to $1 million or more, he adds, depending on skill sets, job experience and rank.

Increasing Demand, Opportunities

Brokers and buy-side firms are significantly increasing their use of algorithmic trading strategies, writes the Aite Group in a report, Algorithmic Trading 2006: More Bells and Whistles. The Boston-based research and advisory firm notes that by the end of 2006, "the share of algorithmic trading will approach 33 percent of total equities trading volume. By the end of 2010, Aite Group estimates that approximately 53 percent of all equities trading will be done through algorithmic trading." Such numbers indicate ever-increasing opportunities for those in the field.

Those looking for positions should concentrate on bulge bracket firms and agency brokers. According to Aite Group estimates, bulge bracket firms account for over 65 percent of all algorithmic trading volume, and agency brokers 31 percent.

Even the most efficient and helpful technology can present challenges. The Aite Group says "the rapidly changing market environment" means the sell side "continues to function as valuable execution consultants by providing guidance on algorithms, issues surrounding regulatory and market structure changes, and the adoption of technology." In addition, technology providers are gearing up for the demand in algorithmic trading strategies, providing order and execution management systems and data infrastructure services.

Job opportunities are also increasing abroad, as firms in Europe and Asia adopt algorithmic trading models. "Large brokers have already moved into major European markets and, to a lesser degree, Asian markets to provide their various automated trading strategies to the global buy-side clients," the Aite Group notes.