Charlie Stenger, a currency-broker-turned-recruiter, has seen it all. One fired trader wept in his office. Another admitted he hadn't told his wife he was unemployed, and left the house every day in a suit to sneak off to a coffee shop. Then there are the delusional guys, who carefully explain how they're not interested in jobs that don't pay as well as those they just lost.
Stenger, who was laid off from ICAP in 2013 and now works for Sheffield Haworth, tells the men and women he counsels: Take the pay cut. Oh, and don't wait for the phone to ring.
"This is crunch time -- it's not looking good," Stenger said. "This is a shrinking pond."
The investment banking business has shed tens of thousands of positions since the end of the financial crisis, and the downsizing has been hard on foreign-exchange desks at many banks, including Morgan Stanley, Barclays and Societe Generale. The industrywide job-axing sweep coincided with a shift to automation, which slashed staffing needs and spawned a new, and small, generation of quantitative traders whose decisions are driven by mathematical models.
There were 2300 people working in currency-market front-office jobs at the world's biggest banks in 2014, a 23 per cent drop from four years earlier, according to Coalition Development, an analytics firm.
Humans versus algorithms
The layoffs have continued and are unlikely to stop in the $US5.3 trillion-a-day market. Revenue from from foreign-exchange divisions hasn't bounced back after falling to $US6.5 billion in 2014, down almost 45 per cent from 2009, Coalition data show. Currency trading in the UK and North America shrank by more than 20 per cent in October from a year earlier, according to central banks in those regions. London is the biggest centre for foreign-exchange trading.
"The business has to be downsized," said Keith Underwood, a foreign-exchange consultant who ended a 25-year trading career, including at Lloyds Banking Group, in 2014. But it's not easy "for people who have been in a market for many, many years to see that they've been replaced by an algorithm."
Humans are up against formidable opponents across the industry. Take Virtu Financial. Deploying sophisticated technology in the business, the company's computers can trade more than 11,000 securities and other products on more than 225 trading platforms in 35 countries. Because automation is so deeply ingrained in its business, it had only about 150 employees last year -- generating more than $US5 million per worker.
From his office at Sheffield Haworth in Chicago, Stenger doles out advice to friends still on foreign-exchange sales and trading desks. First, prepare to be laid off. When you look for work, plan on having to take a 25-per cent reduction in pay. "Your stock goes down once you lose your job, and that's just the nature of the beast," said Stenger, whose clients typically earn annual salaries of $US250,000 to $US1 million.
Some ex-traders have moved to smaller houses or pulled kids out of private school. Those waiting for the ax to fall hoard paychecks. Stenger was out of regular work for a year after he lost his job; he was told about the lay-off four days after he learned his wife was pregnant with their first child. "There were periods where I wouldn't make money for 90 days at a time," he said, "and the insurance bill was still due every month, and the rent and the car payments."
Underwood, the consultant, said he left the market because regulators were cracking down on his niche by implementing stricter derivatives rules after the financial crisis. "My style of trading went out of vogue," he said. So the former head of foreign exchange trading for the Americas at Lloyds, who also led teams at Credit Agricole and Lehman Brothers in London and New York, reinvented himself.
"I couldn't be more happy," said Underwood, who described the hourly rates he charges as comparable to those of a senior lawyer. "There is more empowerment, with control of my future."
Many traders have discovered they have transferable skills. Some have landed work as salespeople or executives at financial technology companies, payment providers or trading platforms and exchanges. Others are using their knowledge to bolster banks' risk-management operations. Franz Gutwenger, a recruiter in New York, said one of his financial-institution clients has expanded its regulatory-compliance staffing by a factor of five.
"I don't think there's a whole lot from my generation that are still in the industry," said Guy Piserchia, who during a three-decade career led North-American foreign-exchange trading at Bank of America and Paribas, a precursor to BNP Paribas, in Asia. He left Wall Street in 2012 to become mayor of the 8700-person township of Long Hill, New Jersey. Now he's deputy mayor, but said he wants to get back into the business in a role that combines his financial and government experience.
"With automation and electronic dealing, I think there are going to be fewer people" on foreign-exchange desks, Piserchia said. "The ones that have evolved and survived may be some of the better ones -- or, as in life, may be some of the lucky ones."