The mood at the Park Avenue Ferrari dealership may be more dolorous than usual this bonus season. Traders may be about to take a big hit.
Historically, Wall Street traders have received the highest bonuses on The Street; this year, with trading profits down 12% so far, there may be some belt tightening by the boys and girls on the trading desks.
At Goldman Sachs , where most revenue is generated by trading, there has been a 26% reduction in average compensation for the first nine months of 2010. Still, in relation to the other big banks, Goldman is set to pay out the largest dollar figure amount in total compensation, according to the article cited above: a total of $387,655 in total compensation per employee.
(If $387,655 doesn't sound like enough cash to lead the lifestyle of a Goldman Sachs trader, fear not: the money isn't distributed equally.
Total compensation per employee is derived by taking the total dollar value of the compensation pool and dividing it by the total number of employees. And, while Goldman administrative assistance are very well compensated for their services, the lion's share of that comp money is going to revenue producers.)
And, of course, things may be about to get much worse: "The Dodd-Frank financial reform law passed in the U.S. in July requires regulators to write stricter rules for proprietary trading, or bets firms make with their own capital, and derivatives trading, which was one of the fastest-growing sources of investment bank revenue before the crisis."
The life of prop traders just won't be as much fun if they can't make huge bets with shareholder capital — especially if you take away the 30+-to-1 leverage. It's enough to make you sigh. Still, there are bright spots in the numbers cited by Bloomberg.
Morgan Stanley and UBS have increased their average pay per employee.
Average pay at UBS is up 14%.
One interesting data point of note from the article is this: Average pay per employee has dropped .8% this year at the eight banks sampled — however, average pay has fallen 11% at the six banks that focus most intensely on trading, including the two banks with the highest per employee compensation numbers: Goldman Sachs and Credit Suisse.
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