Government regulations have ruined bond trading, thwarting the so-called “Masters of the Universe” who once ruled Wall Street. That is likely to be one of the takeaways from a survey by Greenwich Associates that found most fixed-income traders would choose a different career if they had a chance to do it all over again.
The ambitious traders that featured in Tom Wolfe’s 1987 novel The Bonfire of the Vanities now work in a more staid, heavily scrutinized world. Regulations introduced since the financial crisis have made buying and selling debt less lucrative, and banks that have been hit by billions of dollars in fines for manipulating markets now monitor every channel (paywall) of trader communications for signs of wrongdoing. Transgressions on Tinder are reportedly grounds for dismissal these days.
Years of unprecedented monetary stimulus has also made trading a difficult business. Central banks like the US Federal Reserve, European Central Bank, and Bank of Japan have been pumping money into the financial system to ease borrowing for businesses, muting the price swings that traders can benefit from. And of course, Wall Street is looking to automate many kinds of office jobs, including those done by traders.
While job satisfaction has dropped, there could be better days ahead as banks look to rebuild their sales and trading desks, according to an earlier survey by Greenwich. There’s also potential for a softer touch on regulation from the Trump administration. That could bring back some of the fun (and money) back to trading. And following a round a stress tests, US banks have also amassed enough capital that regulators are giving them the green light (paywall) to focus on other things.