FX bonuses set to plunge on probes, low volumes

London's currency traders are set for a dramatic fall in bonuses, amid foreign exchange (FX) investigations and low trading volumes, a new report has found.

Traders could be in for a 42.9 percent drop in bonuses during the next payout season in 2015, according to a report by salary benchmarking website Emolument. It forecast bonuses would be slashed from the average £148,000 ($242,572) handed out this year to £85,000.

NYSE New York Stock Exchange traders markets
Brendan McDermid | Reuters

FX trading has been in the spotlight, with U.S. and U.K. regulators investigating alleged manipulations of the $5.3 trillion-a-day market. The probes stem from allegations that the interest rate benchmark known as the London Interbank Offered Rate (Libor) was rigged by traders from 2005 onwards.

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Currency markets have also been suffering from low volumes and low volatility, which some analysts attribute to the U.S. Federal Reserve's quantitative easing program.

"It's been very low volatility, so there have simply been very little opportunities to make those big profits," Tom Elliott, international investment strategist at DeVere Group, told CNBC by phone. "Dig below that and you tend to get the response that it's the effect of QE. Money is being hosed everywhere and has decreased volatility across all asset classes."

Revenues earned by the world's 10 largest investment banks from G-10 currencies suffered a 35 percent decline in the first half of 2014 compared with the same period last year—the biggest fall since 2008, according to data from Coalition. Deutsche Bank and UBS are among the major investment banks hit.

Banks are also scaling back the size of their FX businesses. Headcounts in the world's 10 largest investment banks' fixed income, commodities and currencies divisions, fell 9 percent in the first half of this year compared with the same time in 2013.

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Other traders also look set to suffer lower bonuses. Emerging market and rates traders are set to see a 30.8 percent and 19.8 percent fall in bonuses next year respectively.

Commodities traders however could see a 41.2 percent surge in bonuses, while M&A and equity capital markets staff may be handed out a bonus rise of 26 percent and 39 percent, respectively.

"We expect to see intensely polarized businesses—at one end sky-rocketing results on the deal-making side, and currencies at the other, probably negotiating internal subsidies as we speak," Emolument CEO Robert Benson said by e-mail.

By CNBC's Arjun Kharpal