Dan Gallagher’s Blog on IT Careers in Investment Banking

Is there anyone out there wondering where to get hold of a decent business analyst with an understanding of products traded in the rates or credit world? It seems that BA’s with any front office experience are in short supply at the moment and if you happen to have the aforementioned skills you will find yourself with a range of opportunities out there. Having spoken to quite a few people about this problem a common theme has appeared in that the BA function in some investment banks is now part and parcel of the analyst developer’s day to day activities. This in turn has led to fewer BA’s coming through the ranks.

I’m currently looking for at least ten business analysts to work in front office positions focussing on structured product integration. The roles allow the business analyst to own the relationship with the business users thereby giving them exposure to new products and to gain further experience in one of the most innovative trading environments.

Typically, the BA will look at trading and risk management systems in this area and hope to build and deliver applications offering trade capture, calculate risk analytics and PnL. The need for BA’s is such that we are now looking at candidates who come from an operations or middle office product control function. If they have an understanding of SQL and know rates or credit products inside out then this is the time to move across to a high visibility area.

So if you’re a BA reading this and you have experience in any of the following; trade capture, risk management (VaR and market risk), managed trades, trade processing, electronic trading then feel free to give me a call to discuss the positions that I have open.
+44 777 1538973 or +44 207151 5105.

And if you want some general information about what a business analyst does then you could do worse then check out this link, http://www.egothemag.com/archives/2006/04/post_12.htm

It was interesting to read the findings of a recent survey that spreadsheet development has increased over the past two years. These findings are not surprising when you see the salaries of VBA developers, however it is interesting to read that middle, back and front office users are using spreadsheets in anger. For the most part we see VBA developers with derivative experience in high demand. They spend their day integrating new products and building tools for the desks. Along with this they are also heavily involved in risk management and running p&l calculations.  

The main reason for the surge in spreadsheet use is the increase in new derivative instruments and structured products being traded on the global markets. Traders and desk managers alike will use spreadsheets to model, develop and trade these new instruments that cannot be handled by existing applications. If you are an Excel VBA developer and have decent product knowledge around derivatives, structured products or any financial product for that matter give me a call. I have quite a few managers who are looking for good people to sit with the traders and build trading tools. This is also a great time for VBA developers looking to move from the middle to front office.

Right then, I have a project here that should be of interest to a lot of Java developers who enjoy using the latest technologies. The architecture of the system is based on a Java Eclipse RCP client running on the desktop, but it also uses Spring and Tomcat as well as the Microsoft .net framework. This team facilitates the structuring and modeling which the traders undertake on a day to day basis. As a result it is a high visibility project to the head traders and is seen as a key project for 2007. They also use Excel VBA in this team which is now undergoing a C# makeover to allow the sheets to communicate between different applications.   

To be considered for this role you will need to have experience of building complex multi-tier enterprise applications and frameworks with XML, messaging and workflow. Knowledge of Eclipse is a given however any strong Java front end experience will be considered (ie Swing).  

If you are interested please call me on 020 7151 5105 or 0777 1538973.

See updated comments on Program Trading IT and Credit Derivatives IT for full details.

The economics of business is changing. The majority of trading is done electronically with tighter spreads and smaller commissions on each trade. With the acceleration of trading risk mangement has become much more important, as has the need for quality risk solutions. Banks are looking to build cross asset risk management platforms to enable their business lines to expand. This means that they need an integrated data and IT architecture with a heterogeneous set of applications and databases.

As risk becomes more real time the need for SQL developers with an understanding of derivative products becomes even greater. These SQL developers play a key part in ensuring that live market data is quickly captured and consolidated into a single, powerful risk and trade data repository. Investment banks are building in-house applications that can look at proprietary positions, customer positions, trading volumes and offsetting verses aggregating risks.

For SQL developers, whether Sybase or Oracle, this represents a great opportunity to work in a complex yet highly visible project to the front office business.

If you are an SQL developer with an interest in analytics or derivative products and would be interested in working on a risk management project then call me on 0777 153 8973 or 020 7151 5105.

The value of the credit derivative markets has doubled in value over the past few years and with it the need for technologists with an understanding of the rates world. Along with the rapid growth of the derivatives industry we are also seeing rapid growth in the exotic and hybrids market. With the advent of synthetic products many banks are crying out for business analysts and developers to work on pricing and risk management projects.

If you are currently working as a business analyst or developer in an interest rate derivative or fx options project than you should consider a change into the world of exotics and hybrids. As this is a relatively new arena it would be a good move in terms of building upon your existing product knowledge. With retailed structured products and exotic commodities becoming the norm the opportunity to help build leading edge technology solutions has never been so strong.

Don’t worry I’m going to pontificate about the state of the environment but rather take stock of how the recruitment market is behaving at the start of Q4. Traditionally, at this time of the year banks will put a freeze on all hiring while they put together budget proposals for 2007. This year has been significantly different in that most banks are still interested in hiring candidates who bring sought after skills to the table. Top tier banks will no doubt play coy when it comes to buying out bonuses but for the right candidate they’ll do what it takes. And as strong candidates are hard to come by this is happening more than ever.

It’s an interesting time of year and I don’t think we’ll see a huge amount of hiring over the next month. December on the other hand is alway’s an interesting month. Last year we had UBS start their recruitment drive and the year before that it was Barclays Capital. So who will it be this year?

Whatever happens the first two quaters of 2007 are going to be very interesting. I think we’ll see contractor rates surge in the new year and of course those banks who don’t pay out decent bonuses leave themselves open to loosing key staff.

The commodities market has grown significantly over the past 20 years and with it the need for complex IT systems to handle a wide range of trading and risk management functions. Major players in the market place scaled down their trading activitives after Enron but in the last 2 years we’ve seen a number of investment banks build out their energy trading capabilities.

As a result of the fallout from Enron and the robust growth in the trading of oil, gas and electricity IT departments have had to deliver software solutions for new trading strategies. We can see how straight through processing has allowed organisations to lower transactional costs while allowing traders to be more efficient in the market place. A number of these applications have quite similar traits to a fixed income of fx trading application, with a true three tier platform used to handle increased trade volumes and to capture the vast amounts of data used.

An energy trading application will be set up in a multi-tier stack with numerous functions of the trade life cycle held within. On a technology level we would need people who have skills in building risk management applications, from experience with VAR, position management and MTM. The first step in risk management is to focus on the underlying model behaviour. The second step is to look at how these products are priced and the final step is the achievement of a risk measure. These risk applications can be the most complex within the group and are mainly built using C++. With a lot of interaction with the quant analysts this is a role that allows individuals with a strong analytic and math background to work on building pricing engines and to help integrate hybrid products into a trading environment.

The main trading application is very similar to any etrading system. We have a user interface layer built with C# or Java front end technologies, a middle tier or messaging bus built using Java or J2EE that plugs into plug into a number of exchanges (the main ones for energy trading being Chicago Board of Trade, Euronext.liffe, London Metal Exchange and the New York Mercantile Exchange). And finally we have the database on the backend which can be either SQL, Sybase or Oracle depending on the organisation.

If you are a project manager, business analyst or developer with an intererst in commodities than contact me to discuss market opportunities. With products such as precious metals, liquified natural gas and exotic hybrids the energy trading world offers a great opportunity to get involved with cutting edge technologies due to the growth in the industry.

Up until recently I had no idea what Program Trading was all about, other than the fact that anyone who has worked in the area tends to be highly sought after due to the nature of the business.

Program trading can mainly be found in sell side institutions and the main players are Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Lehman Brothers, Merrill Lynch, Morgan Stanley and Citigroup. It offers products such as DMA (Direct Market Access), Algorithmic trading and Prop trading.

The technology behind program trading is used to allow financial institutions to computerise or automate trades that were previously done by hand. With the advent of algorithmic trading banks can now apply an algorithim to the program to break up the trade in order to maximise profits.

All this is made possible by having a very stong, reliable technology infrastructure. Banks allocate millions of pounds to creating cutting edge platforms for program trading. The majority tend to build their own in house applications and each system is made up of four key components; trading software, order routing, data feeds and risk/position management.

The trading software is the user interface for the application and is known as the GUI. This is generally developed using front end technologies and it appears that C# or Java is the language of choice.

Order routing applications allow banks to route trades to exchanges and ECNs. As program trading is reliant on speed of execution it is critical for these systems to be well built. It is in the space that we see FIX (Financial Informaiton Exchange) and messaging technologies such as Tibco RV.

DMA is a method of looking at liquity across different markets and time zones and there are many products which can be used that allow this to happen. Companies such as NYFIX and GL Trade provide custom built solutions for financial institutions.

Another key component for program trading is the handling of data. Data feeds handle real-time and historical data which are used to monitor and model market movements. This is what allows institutions to build algorithims which can then be tweaked in order to create market winning strategies.

Risk and portfolio management is an essential component of any program trading set up. It allows traders to watch how the profit and loss potential from any trade as the market moves. Pricing engines or analytic engines are built using C++ that aggregate risk by trade or book. Complex data is stored in specialized databases such as KDb which allows fast access to information.

From a recruting perspective what makes program trading so interesting is the need to find candidates who have very specialized experience in one of the above areas. My experience to date tells me that it is very hard to find people who have an indepth knowledge of all facets of program trading. However, for those who do work in the area it is one area within finance technology that needs continuous investment in order to keep up with your competitors.

If you have experience in program trading and would like to explore new opportunities please feel free to contact me.

One thing for sure is that the market for permanent staff is looking extremely positive. Long gone are the days when IT staff had to sit contently and work all the hours under the sun to be rewarded with a meagre bonus at the end of the year. These days if you decide to change job you can expect to increase your compensation by at least 10% to 15%.

At the moment banks are struggling to recruit experienced IT professionals with financial domain experience. As a result basic salaries have increased since September 2005. For example, the average minimum wage for IT staff in the city last year was £53,970, one year on it has increased to £57,202 (http://www.itjobswatch.co.uk/jobs/uk/investment%20banking.do). This is an increase of 5.6% and should the market continue in the same vain we expect salaries to increase in Q1/Q2 of next year.

Having placed candidates from outside the banking industry this year on salaries that range from £50,000 to £60,000 this figure of £57,202 seems to be accurate. For those who have worked in the industry for more than 3 years your value on the market will be £65,000 and upwards. Obviously, this is dependent on the technologies you are working with and the business area you sit in.

Those with front office business knowledge coupled with the latest technical skills can expect a premium for their services. A project manager with 5 years experience in delivering front office trading applications can expect a basic salary circa £85,000-£105,000 with bonus expectations of anywhere between 40%-75%. These premiums can also be seen in the development arena, specifically with C#, Java, J2EE, .Net and C++. Experienced business analysts and programme managers should also see these premiums.

While these salaries are excellent I commonly hear that developers within banks are not being paid these rates. This is a contentious issue as you may have been originally employed back in 2003 when recruitment was at a low point. If your basic salary was £45,000 back in 2003 it is more than likely that you will not have seen a huge increase in your salary year on year. Most people receive an additional £5,000 for each year served. Now, take into account that people with no investment banking experience are getting an average salary of £57,202 and compare it with those who have 3 years plus. Is it any wonder that banks are struggling to hold onto staff with this amount of experience?

I believe that it is this disparency which has driven so many into the contract market. If you are working in a major financial institution you will find it challenging to increase your basic salary toit’s true market value. This is because it is quite difficult for HR to increase an individuals salary by anything more than 10% (except in mitigating circumstances). If you are to realise your true worth then the best option for you will be to look for a new position.

As banks are now coming to realise that they need to renumerate staff at their market value we are finding permanent compensation packages to be just as attractive as contracting rates.