Morning Coffee: HSBC tech staff may be first to lose their jobs to Citadel Securities. Goldman Sachs' 26% London pay rise

HSBC isn't always first in the markets business, but now it seems that a claim to pre-eminence has appeared: HSBC is the first major bank known to be contemplating avoiding the huge costs of running a trading platform by shunting the expense onto someone else instead.

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It's not a done deal. Bloomberg reported yesterday that HSBC is at the consideration stage. It's "considering outsourcing part of its sprawling trading business.' Bloomberg doesn't say which part exactly, but HSBC is looking at outsourcing fixed income trading broadly.

Who would the business be outsourced to? Citadel Securities is mentioned. So is Jane Street. Both firms have invested billions in state of the art trading platforms. Citadel Securities is said to have begun selling its own platform on a white label basis last year, with the offer that banks using its services will share revenues while it does the work of managing orders and executing trades. It was initially supposed that Citadel Securities would mostly take on banks' equities trades, but the firm has been busy building up its fixed income trading platform too. HSBC has seemingly had its head turned; Jim Esposito may have been meeting Georges Elhedery behind closed doors.

Where would this leave HSBC's fixed income traders and the technologists working on its trading systems? Traders might benefit from HSBC's renewed success, but tech people might be left out in the cold. Bloomberg says the arrangement is being considered with the express intention of cutting technology spending, implying HSBC's own systems wouldn't be maintained. HSBC insiders say there's already a lot of "concern". Flow credit and rates platforms would surely be the first to go. HSBC would at, least, have the distinction of being one of the first in the industry to be sacrificed to the electronic trading houses' new white label services. Small consolations.

Separately, 2025 may not turn out to be a great year for M&A, but Goldman Sachs' London bankers could at least subsist on the money they made in 2024.

Financial News reports that investment banking fees earned at Goldman Sachs International - Goldman's London office - rose by 50% last year, to $1.4bn. Pay rose too, albeit by a smaller amount. - The average employee at Goldman Sachs International earned $764k in 2024, up 16% on 2023. Even after tax and allowing for deferrals, that should help see Goldman bankers through a fallow patch.

Meanwhile... 

HSBC is a worried that if it outsources trading to Citadel Securities, it might not be able to compete in prime broking. (Bloomberg) 

Investment banking fees are twice as high in the US, where banks typically charge underwriting fees of between 6% and 7%, while costs in the UK are normally between 3% and 5%. This explains why US bankers are paid more. (Financial News) 

If you want to be a metals trader, you want to work for Vitol and Gunvor. The two have been taking huge positions in the aluminium market, of 200,000 tons, when the on-warrant stocks available to buy are only 204,000-258,000 tons. (Bloomberg) 

Now Philip Shaw, Citi's former head of Pan-Asia Execution Services is also suing the bank over his dismissal. He also wants monetary compensation, including retirement and other financial benefits, plus compensation for lost earnings and reputational damage. (Bloomberg) 

“The appetite to look at deals is strong but the appetite to execute deals is not the same. There is a thesis that things could change quite quickly but sitting here now I wouldn’t bet on that.” (Financial Times) 

UBS rehired Carmine Visconti as head of technology, media and telecommunications for EMEA. (Bloomberg) 

There are 1,457 high-speed algo traders— but just 99 are women according to the FCA register. (Financial News) 

It makes sense to have a smaller social group as you're older, because you then have less exposure to airborne respiratory diseases. (BPS) 

Heavy use of ChatGPT is correlated with increased loneliness, emotional dependence, and reduced social interaction. (Platformer) 

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