Bonus/Layoffs Watch '13: Bond Traders

Author:: Bess Levin
Updated:: Jan 14, 2019
Original:: Oct 16, 2013

The bonus is you get to keep your job.

With anemic bond trading revenue over the past few months hurting Wall Street profits, pay cuts and even layoffs are back on the table just when the future had started looking up for traders. Overall, bonuses on fixed-income, currency, and commodity trading desks will likely be down 10 percent to 15 percent, said Alan Johnson, head of the Wall Street compensation consulting firm Johnson Associates. It could be the third or fourth year in a row in which some Wall Street bond traders get $0 bonus checks, he added. Just two months ago Johnson had predicted bonus increases of 5 percent to 15 percent for fixed-income traders, but since then the Federal Reserve has decided not to start winding down its bond buying stimulus program, and gridlock has hobbled Washington. Both have alarmed investors who are unsure of where markets are heading, and are reluctant to make huge bets that could quickly turn against them.
If fixed-income trading volumes do not improve, banks may be forced to reduce headcount again, adding to the tens of thousands of jobs the industry has already shed since the financial crisis of 2008, recruiters, analysts and other industry sources said.

For U.S. bond traders, the Grinch may steal bonuses [Reuters]

Both are expected to go down shortly.

Back in January, Morgan Stanley CEO James Gorman sent a simple messages to his employees, who had been grumbling about their pay: STFU or GTFO. "You're naive, read the newspaper, No.1," Gorman told Bloomberg he would say to any members of his staff that wanted to give him lip about their compensation to his face. "No. 2, if you put your compensation in a one-year context to define your over all level of happiness, you have a problem which is much bigger than this job. And No. 3, if you're really unhappy, just leave." Today, in an interview with the FT, Gorman reiterated his stance and added that in addition to reducing compensation for current employees, the bank will likely be drastically cutting pay for future analysts. If anyone has a problem with that, consider applying for a gig at Bank of Mythical Pre-Crisis Era Bonuses. Alternatively, Gorman is happy to discuss a compensation plan in which you'll be awarded shares of his foot in your ass, which vest immediately. In the latest sign of the pressure Wall Street is under to cut costs and address high pay levels, James Gorman, chief executive, said that staff and remuneration would have to be sacrificed as banks cope with lower profits. “There’s way too much capacity and compensation is way too high,” Mr Gorman said in an interview with the Financial Times. “As a shareholder I’m sort of sympathetic to the shareholder view that the industry is still overpaid.” Morgan Stanley itself is already axing 4,000 jobs, 7 per cent of its workforce, by the end of this year. In the new year, Mr Gorman said, the bank will consider its next round of cost-cutting, including lower pay and bonuses. News of further pay cuts, including potentially for new entrants at the investment bank, comes just weeks after Goldman Sachs confirmed it was overhauling its well-known entry-level programme for analysts. Goldman was said to have tired of the number of analysts in the programme who left the bank for hedge funds. Mr Gorman said that Morgan Stanley will probably keep its own analyst programme, but pay could be reduced significantly. Morgan Stanley Chief Warns On Wall Street Pay [FT] Earlier: James Gorman To Employees: STFU Or GTFO

From the front lines:

In pay, promotions, and r-e-s-p-e-c-t.

Dick Handler ended up doing pretty okay for himself.