The only traders seen scoring pay bumps run electronic platforms

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(Bloomberg) -- Notch another victory for the machines -- or at least the people who operate them.

Most bond and equities personnel are getting smaller 2017 pay packages because of low volatility and a lack of disruptive events compared with last year, which included the U.S. election and Brexit referendum, according to recruiter Options Group Inc.

But one group is faring better: traders and salespeople who work with banks’ electronic-trading platforms. They’re the only ones in the U.S. who will get pay increases of at least 3 percent, Options Group said in its annual compensation report.

Credit traders and salespeople in the U.S. are heading for a down year, with average compensation seen falling 11 percent, Options Group said. In cash equities, the decline is 9 percent. As broad categories, fixed income and equities compensation are both expected to be 7 percent lower.

“People involved in new technologies are insulated from the trends faced by other traders,” said Options Group Chief Executive Officer Mike Karp. “There’s high demand for people who understand both technology and markets and can operate these new platforms.”

The heightened demand makes sense. Wall Street’s clients have been migrating to cheaper electronic-trading platforms over using human market makers, and big investment banks have updated technology to keep pace with ever-more sophisticated users.

Outside of trading, investment bankers and wealth managers can also expect bigger packages this year. Fueled by robust issuance in equity and debt capital markets and mergers transactions across the world, bankers in the U.S. will get a 9 percent increase, according to the report. Rising markets have helped the wealthy clientele of financial advisers and private bankers, who can expect a 10 percent increase.

Technology also plays out in Options Group’s hiring forecast for 2018, a new feature of the annual report. From rates to foreign exchange, most trading desks will probably hire only to replace personnel who have left. In cash equities, the asset class where electronic trading has gone the furthest, there is little hiring of any kind. It’s a similar story in back-office operations, where automation and cost-cutting efforts are starting to take hold.

Who has the best hiring prospects? Information technology workers, electronic-trading personnel and quantitative research and analytics, according to the report. Demand for data scientists and machine-learning professionals in finance “far exceeds the current supply,” Options Group said.

The search firm’s 2017 compensation report is based on surveys of 8,000 participants and conversations with bank personnel. The estimates represent the salary and bonuses that will be awarded to the top quarter of performers at global investment banks, excluding the top 1 percent of earners.

Other observations:

  • The creation of a formal ecosystem to trade digital currencies like bitcoin could spark a growth wave.
  • The MiFID II regulations will probably cause “significant” pay declines in the developed world in 2018, while emerging markets will be somewhat insulated.
  • Investment bank traders who joined hedge funds in recent years came back to the sell side in 2017, and that will increase in 2018.
  • 2017 was about banks hiring senior trading and sales managers. 2018 will be about junior traders moving as the new leaders seek to fill out their desks.
  • Canadian and Japanese banks will continue to expand globally, hiring from leading rivals.

--With assistance from Hannah Levitt

Bloomberg News