Technology is Putting the Squeeze on Equity Traders

Job prospects for buy-side equity traders remain up in the air. While the downturn has taken its toll, tech advancements, high frequency trading and a move to more passive investments are having an impact, according to Matt Simon, senior analyst for The Tabb Group, a research and strategic advisory firm focused on the capital markets.

Tech's certainly a boon in many ways, but it's a real killer of jobs, Simon notes. "A desk with six to eight heads might be down to a mere two or three people." Larger firms may be great on technology, but the smaller players are still playing catch-up. Expect more cuts at the smaller players left standing as they adopt better trading platforms - which require less heads.

Market Fragmentation

Simon notes that electronic and high frequency trading have fragmented the market. "It's much tougher to put on large positions," he observes, adding that high frequency traders do over half of the share volume and big players continue to dominate the market. That doesn't leave much room for the little guys.

The move to more passive investments has also hurt those on the equities side. "Dealing with a basket of securities, such things as ETFs and investment funds, for example, requires a different style of trading versus a single stock trading environment," says Simon. Some make the transition, but others can't.

Exit Strategy?

So, what's the best way to fight the changes? It helps to become indispensible by staying ahead of the technology. "In the equity trading world, it's important to transition from the trading desk to the technology proficient user."

It might also be time to consider a move to the back or middle office as those parts of the business grow to deal with a more stringent regulatory environment. As the SEC and CFTC continue to amp up rules and regulations, it takes many more people to understand and navigate the complexities of the market.