Based on conversations with niche financial technology recruiters, as well as our own predictions, we look ahead to what the coming year could hold for recruitment in the IT in finance sector.

2012 could be a good year for:

1) Regulatory-driven technology recruitment

The technological impact of the various regulations hitting the banking sector – from Dodd-Frank to Basel III to living wills – was a key concern throughout 2011, but most banks have been employing a 'make-do-and-mend' approach to recruitment. People were redeployed from front office projects or business analysts and project management were drafted in to assess what changes need to be implemented.

Next year, however, recruitment looks set to take off.

"These are non-negotiable projects and so will have to be done and will be a hot topic in 2012," says Ed Ekins, managing consultant financial services technology at Twenty Recruitment.

"Financial institutions are under increasing pressure to ensure that their risk and compliance functions are both resourced and effective as they gear up for new regulatory directives," adds Philippa Anderson, associate director at McGregor Boyall.

2) Project managers and business analysts working on OTC derivatives clearing projects

The proposed shake-ups of how on-exchange derivatives are traded and cleared coming from the European market infrastructure regulation (Emir) are not yet set in stone, with banks currently balking at the technology cost of implementing the changes.

According to TABB Group, around 70% of European banks are actively lobbying against the reforms, which could suck a minimum of $100m a year out of each of their tech budgets.

“Whether it be trading connectivity, reinventing prime broker systems for client clearing, implementing straight-through processing software or revamping single-dealer platforms, these dealers are dedicating valuable resources to new technology roll-outs, despite such capital constrained times,” said Will Rhode, senior research analyst at TABB.

Still, recruiters are predicting that next year could see roles created for those leading the OTC derivatives tech projects.

"Even in Q4 of this year, banks have been looking at what changes to their technology they will need to comply with OTC derivatives regulations, and are quickly realising that they don't have the manpower to complete the projects" says Andrew Keene, director of IT in finance recruiters Thomson Keene.

3) Risk management technology

Yes, you may well be tired of hearing how banks are being required to tighten up their risk management practices, which is spurring ongoing recruitment of technologists to work on transformation projects. Still, this is not stopping.

"Banks are seeking to leverage IT risk management to boost competitive advantage," says James Richmond, sales director at recruiters Cititec. "We have seen them already strengthen their management structures, improve approaches to liquidity risk and enhance existing reporting systems.  The more recent and planned new developments seem to emanate from the culture sweeping organisations of 'shared ownership of risk'."

4) FX technology

In the current period of extreme volatility, the FX desks of (some) banks tend to perform reasonably well, and – as we pointed to previously – it's an area of the business that has been comparatively sheltered from job cuts.

Ongoing investment in technology is paramount and it's not a good move to take your foot off the peddle when it comes to this (as UBS proved in 2008). Recruiters are expecting more opportunities here in 2012.

"When it comes to FX technology, the major players continue to invest in new initiatives and remain interested in hiring candidates who can deliver for them," says Paul Bennie, director of IT in finance recruiters Bennie MacLean. "Algo trading has moved from being an equities only play and now dominates thinking in FX."

"Given the volatility on these markets, they will be hot next year," adds Ekins.

And 2012 could be a bad year for:

1) Front office technology projects

In a good year, perhaps it wouldn’t matter too much if banks had to shell out more money on regulatory tech projects, as IT budgets would just be increased accordingly. In 2012, however, it looks more likely that budgets will be gobbled up by these mandatory projects and front office initiatives will fall by the wayside.

At the high profile Bloomberg Enterprise Technology Summit in London earlier this month, nearly a third of the attendees were anticipating double digit falls in 2012 tech budgets and that it was innovative projects that were likely to suffer.

"With the key drivers on IT projects for many banks being to simply spend money to keep things going and lower transactional costs, the demand for new talent into the front office is likely to be at very low levels," says Cititec's Richmond.

2) Contractors

In 2008, when contractors' day rates were cut across the board by at least 10%, it was assumed that it would just be a matter of time when they bounced back as demand for their services from banks picked up again.

This time there's a bit more pessimism. At the start of 2011, it was assumed that many investment banks would be looking to reduce their reliance on contract resources anyway and recruit more permanent staff. When the situation looks better, this may be the route that banks choose to take.

"From a P&L perspective it's now irrelevant whether an employee is a contractor or permanent, as both have to come out of headcount budgets," says Keene. "In the short term next year, this will mean banks have to rely on expensive consultancies to keep projects going, but when they're able to recruit again, most institutions will realise it's ultimately cheaper to take on permanent employees rather than contractors."

3) Graduate prospects

In recent years, the number of graduates recruited by investment banks' for their technology teams has been gradually increasing. Not surprisingly, these roles have proved less popular than front office positions, and many banks have extended the recruitment process into the new year.

Next year, recruiters are predicting that graduate intakes will decline in line with IT budgets.

"The graduate intake for financial services technology will be down, so there are bleak times ahead for graduates who wish to get into banking," says Ekins.