Electronic trading salaries are much higher outside banking
Traders are some of the best paid people in banks (and the world, really). That’s not news. But a lot of people hire traders – and they pay them differently. So who pays them best?
The bottom line is – and this is an expected one – that banks don’t pay as well as hedge funds and trading firms. We know, we know, shock horror. But the disparity is pretty fat.
Banks that have openings for electronic or quantitative traders pay a salary (not including bonus) between $192k - $235k for VPs, based on New York’s pay disclosure law and the H1b visa database. At Jane Street, which is known for being a big payer, comparable salaries are in the range of $250k-$300k. At hedge funds like DE Shaw and Two Sigma, salaries are more like $200k - $250k, with juniors earnings around $100k-$175k.
Banks are pretty demanding about the people they hire for their less-well-paid jobs. At Bank of America, for example, a VP earning $235k needs at least three years' experience plus requirements listed in six individually listed bullet points. It’s hard to see any individual human being applying with less than six to nine years of experience.
By comparison, Jane Street is positively… Relaxed. For a power trading job that pays more than BofA’s ($250k-$300k, to be exact) you “only” need 3 years of experience trading power. “Coding skills are a plus”, a meager five words, and 100 words less than BofA’s technical requirements.
Counting words might seem more the purview of fearful bureaucrats trying to parse if the CCP is going to cut the state budget for plant studies, but it’s pretty relevant, especially when the shorter one is the one paying an entire human being’s salary more than the other. s.
Requirements at hedge funds seem as minimal as Jane Street’s. DE Shaw requires “two to three” years of experience, as well as a strong regulatory base of knowledge. Two Sigma requires just one to two years, although the role is more junior.
It’s also worth pointing out that bonuses are better at hedge funds. Banks pay anywhere from 3% to 5% of profit generated (PnL) as a bonus to a trader, whilst hedge funds, whilst varying wildly, from 15% to 30% (that’s just at BlueCrest, though, not quite anywhere). Our salary and bonus guide might give you a better idea of what bonuses look like at either.
We should probably point out that a lot of electronic/quantitative trading opportunities exist at hedge funds – and hedge funds are rarely based in New York, preferring the wild steppes of Greenwich, Connecticut. There’s a variety of reasons for that, and it’s pretty much entirely unrelated to the New York pay transparency law (more to do with the fact that the state didn't levy personal income tax until 1991).
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