I hear that the troops at Deutsche are relieved today is the last FX Poll votes can be cast. They are looking forward to not having to listen to their illustrious leader each time they turn their computers on.

You don’t get nuffing for nuffing

They used to say in the FX market that what you got paid was highly correlated to what you achieved in terms of revenue generation. It’s always struck me as a false claim, one that is completely at odds with the guaranteed bonus culture that has taken hold over the past couple of decades.


Years ago, when I was at Nomura, we were desperate for a spot dollar/yen dealer. My boss, the great Tom Elliot, identified a ‘Billy big dog’ who apparently met our needs and arranged to meet him at some swanky restaurant in Chelsea. When Tom arrived, ‘Billy’ was already there. Tom ordered a gin and tonic and before he had barely taken a sip, Billy put his cards on the table: “I’ll come round if you give me this, that and the other.” Tom replied: “I’ll give you all of that, if you make me this every year.”

Billy’s jaw dropped. “I’m not guaranteeing that,” he spluttered. At which point, Tom asked for the bill from the waiter.

“What are you doing? We’ve not even ordered yet,” Billy gasped.

“It’s bad enough you wasting my time, but I’ll be f**ked if you’re going to waste my money as well,” was the gist of Tom’s response as he got up and left.

Guarantees are fine, but they should work both ways. Recently, I’ve heard of bonuses paid to dealers who had terrible years and prop traders turning down hedge fund jobs because they pay on results only. It’s not as if base salaries put traders on the poverty line, but it seems nobody, at least on the sell side, is prepared to make a stand and say the present bonus system is out of control. I cannot see how a guaranteed bonus acts as an incentive. Anyone with even a basic level of psychology will tell you that, long term, intrinsic motivation is far more powerful than extrinsic. What banks should do is engender a sense of pride in their dealers if they achieve their true potential.

Oh, and pigs might fly.

FX temps

The transfer season is well and truly in full swing (see People moves). Certain institutions are facing a tough time maintaining staff levels and it must be hard planning for the year ahead when there is a risk that entire teams will head off to where the grass is greener.

The problem is being compounded by a shortage of quality traders. I jokingly suggested to one mucker that he lure my wife out of retirement to help him solve his immediate problems. I was thinking of setting up a recruitment company called Pimp my wife, but my wife – not surprisingly – vetoed that name straight away. However, she’s not against the idea in principal. She was a cracking options trader in her day, so I reckon I could be on to a winner.

I ran the concept past two other acquaintances. I was astonished when one of them said that the bank he works at is seriously considering employing temporary dealers. Another said that when his firm set up its FX desks, it did so with two traders on short-term consultancy contracts. They were both known as reliable, safe hands who were able to manage risk and get the business up and running.

There is undoubtedly a talent pool out there of successful traders who no longer want to participate fully in the macho FX environment that stupidly demands needlessly long hours. But they could still offer a lot. It’s not unheard of re-employing sales staff after maternity leave to work reduced shifts, but it seems that doing so in the trading arena is, for the moment, a step too far. My view is that banks are turning away a lot of talent as a result.

Retail punters, aka reverse barometers

When I used to report on equities, a lot of my best predictions were as a result of trawling around internet bulletin boards. I noticed that once the mug punters start getting into something, it was almost invariably the top of the market. Back in November I was sent an email alerting me to the fact that US retail investors were able to invest in Deutsche Bank’s Currency harvest index. “US investors can now buy the carry trade... very, very scary. More evidence of the disaster that has to come,” was the warning I received.

Now the timing in this instance was out by a few months – far too long in market terms – and the carry trade unwinding has not, so far, led to any disasters. Over the last month I have read a lot of comments on boards about the benefits of investing in high yielders, which were posted at broadly the same time as many started to predict the market was becoming over exposed.

I get the impression that most banks have done well enough, embracing the return of some volatility. On the flipside, I think a lot’s been given back by the investment community. Perhaps they should have kept an eye on the bulletin boards and what the mug punters were putting on.