Are banks' algorithmic traders underpaid?

8 July 2009

2 minute read

Are banks' algorithmic traders underpaid?

Following the arrest of Serge(y) Aleynikov after his alleged robbery of algorithmic trading codes from Goldman Sachs, algorithmic traders contemplating pilfering a section of code from Goldman (or any other bank) are likely to think twice.

But assuming Aleynikov really did steal code rather than simply download a few programmes to work at home as he claims, why would an algorithmic trading type want to risk his/her career in the first place? According to the Reuters journalist who wrote the original article it might be because they’re not paid enough.

Bloomberg would seem to confirm this. It reported yesterday that 39 year old Aleynikov was earning $400k at Goldman, and planned to triple this by moving to hedge fund Teza Technologies.

Recruiters say Goldman has lost several of its algorithmic traders as result of bonus issues. “The common thread in all the ex-Goldman algo traders we talk to is that they have only got a fraction of the bonus they expected from the profits they generated,” says Dominic Connor at P&D Quant Recruitment.

“Senior algo traders have an incentive to move to hedge funds where they can get a percentage deal instead of a discretionary bonus,” says another recruiter.

Goldman Sachs declined to comment on claims of other algorithmic trader departures.

However, allegations of modest pay don’t sit well with algo traders’ importance. Rochdale Research analyst Dick Bove released a research note yesterday attributing Goldman’s success to its trading systems, and claiming that the bank now employs more IT staff than traders or investment bankers.

Now that Aleynikov has highlighted algo traders’ significance, maybe their pay will rise in order to buy their loyalty. Alternatively, maybe algo traders will now be loyal anyway - Aleynikov's arrest is also likely to put anyone else off leaving.

AUTHORSarah Butcher

Global Editor

Sa
Sarah, Editor, eFinancialCaree
9 July 2009
I am not AGM. Nor have I ever worked at Goldman Sachs or consciously aspire to work there. Subconsciously, however, I may possibly be camped outside 133 Fleet Street every night.
Reply
Ta
Tay
9 July 2009
Sarah, we await your comment on the alleged bias towards Goldmans....
Reply
An
Anderson
9 July 2009
This article is irrelevant because Serge was not an algorithmic trader.
He was a programmer. Programmers simply help to implement the strategies developed by the quants/traders. Or develop the platforms upon which those strategies are traded.
Goldman are not going to pay one of their programmer $1.2mln.
Reply
Ma
Maru
9 July 2009
The real question here is surely what this will mean for Algo / HFT generally. Goldmans claim that the system he took would enable someone who knew how to use it to "manipulate markets". This comment could lead to significant investigations into whether this system therefore allows Goldmans to manipulate markets.
Reply
HF
HFT
9 July 2009
SB: "Aleynikov's arrest is also likely to put anyone else off leaving"
or joining for that matter which is the real challenge.....
Reply