Bonuses on Wall Street this year have left a lot to be desired. Pools have been shrinking since the financial crisis and 2017 has no plans to reverse the trend. One division is in for a pay bump though – rates traders. Traders had a phenomenal 2016 with a revenue of $1 billion for the first nine months of the year, according to Coalition.
Trading activity heavily impacted the last quarter of 2016 for the majority of bulge-bracket banks. Goldman Sachs’ trading unit reported a 25% increase in revenues led by a 78% increase in activity within fixed income currency and commodities trading. Total trading revenue at JPMorgan came in at $4.52 billion, a twenty-four percent increase year over year.
As a reward, rates traders are in for a much bigger bonus season than other industry professionals. A new report by Bloomberg cites an anonymous source within JPMorgan Chase quoting a twenty percent boost in the 2016 bonus pool for traders tied to government bonds, swaps, and other assets involving interest rates. Morgan Stanley and Bank of America are also expected to increase bonus sizes for rates traders by an estimated ten percent.
Options and treasury traders are expected to have the biggest jump in compensation across the board due to their high in-demand skill-set. Companies are doing their best to retain their talent at these levels to avoid astronomical replacement costs. As a result, options and treasury traders can expect their compensation to increase by approximately fifteen percent.
Trading revenues was one of the few bright spots for Wall Street’s 2016. Unfortunately other roles, whether buy-side or sell-side, will most likely be seeing a ten percent cut this bonus season due to lower activity across the industry.