Barclays' guide to fixed income trading jobs as algos eat everything
As we noted last month, the electronic trading systems that came for equities trading jobs have come for fixed income trading jobs. This does not mean, however, that all fixed income traders face annihilation. Some will survive. In a report yesterday, Barclays' credit strategists suggested which they will be.
Barclays' report was first picked up by the FT's Alphaville site, which highlighted some but not all of Barclays' findings. If you're a fixed income trader seeking to perpetuate your career, you may also want to familiarize yourself with the points below.
- You're best off working in convertible bonds, or not
For the moment, electronic trading is least prevalent in the convertible bonds market, which is where the highest proportion of voice traders are presumably to be found. This might be good news, or it may imply that as the inflection point is reached, this is where the greatest number of jobs currently in existence will disappear.
Source: Barclays
2. Trading jobs are safest in volatile markets/US Treasury jobs are going full algo
The chart below has various takeaways. They include Barclays' finding that during markets hit by "idiosyncratic volatility spikes" caused by "a credit rating downgrade or an unfavourable earnings announcement," electronic trading falls 20%. These are the best markets for humans.
The chart also alludes to the fact that 62% of US Treasury trades use Auto-X, which is "algo to algo" trading devoid of immediate human interference. Five years ago, the proportion was 23%.
Source: Barclays
3. You probably want to make the big trades, but...
Another haven of humans involves larger trade sizes.
However, as in point 1, this may simply mean that jobs involving large trades are yet to be automated rather than that they won't ever be automated. Algos are infiltrating at all levels.
4. Algo to algo trading is coming for everything
Auto-x trading isn't restricted to US treasuries. It's everywhere. And it's growing everywhere.
5. Except the most complex transactions...
Only the most complex transactions are immune. Barclays notes that: "The hybrid nature of some asset classes such as, HY and convertible bonds, where characteristics are often tailored to the issuer, makes them structurally more challenging to trade on a platform." This is where you will find the humans in 10 years' time.
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