The hard-charging traders dubbed “Masters of the Universe” in Tom Wolfe’s 1987 novel The Bonfire of the Vanities have seen better days. Since the 2008 financial crisis, the ranks of Wall Street traders have been thinned by regulations that limit how much risk banks can take and by the computerized automation that every industry faces. There are signs, however, of a comeback.
Banks are rebuilding their sales and trading desks for bonds, betting that a shift in the Federal Reserve’s monetary policy will cause profitable price swings in everything from government debt to company credit, according to a report by Greenwich Associates. James Borger, a managing director at Greenwich, said the advisory company hasn’t “seen this level of bank-to-bank personnel movement since pre-crisis years.”
Big Wall Street dealers, European banks, and regional specialists are all hiring, according to the report. Investment firms like pension managers and hedge funds have, on average, added one to two new counterparties in the past 12 months, and banks outside the top ranks have often been the beneficiaries.
Recent years haven’t been easy for traders, but they could get better if the Trump administration manages to roll back some regulations, which it is actively reviewing.
If the Masters of the Universe have anything to fear, it’s probably robots. That’s even though the bond market is more bespoke and complicated than stocks and currencies, which are already highly automated. About 45% of US fixed-income trading is electronic, and Citigroup, Goldman Sachs, JPMorgan, and Barclays are the leaders in that space, according to Greenwich.
Still, the industry is trying to automate the fixed-income world further. In the past year or so, Goldman has more than tripled the number of corporate securities its algorithmic trading program quotes, to 7,000, according to the Financial Times (paywall). Whether automation frees up dealers to focus on big, important trades, or replaces them entirely, making software engineers the new Masters of the Universe, is an open question.