Equity derivatives professionals at bulge bracket firms in the U.S., Europe and Asia are likely to see a 20-50% drop in their annual bonuses this year as investment banks look to cover loses incurred by a plummeting stock market, according to market officials. Most U.S banks began their annual review process for bonuses last week, according to headhunters.
The dismal performance of the cash business will eat into derivatives bonus pools, according to Bob Reed, managing partner at the Options Group in Tokyo. He predicts that equity derivatives pros in Japan and the rest of Asia will likely see their bonuses shrink by more than 30% as the Nikkei 225 has sunk to 20-year lows. But even London-based equity traders, who have had a relatively good year providing hedging tools and capital guaranteed products, are dreading the summons to discuss bonuses with their bosses. Many believe they will have to subsidize payments to their colleagues in cash equities.
An equity derivatives marketer with three years experience and an average annual base salary of USD100,000 and a USD150,000 bonus last year would likely receive a USD120,000 bonus this year, according to one recruiter. Professionals higher up the food chain, such as managing directors, will have minimum guaranteed bonuses. For example a managing director and head of equity derivatives trading would receive a basic salary of USD100,000 and a minimum bonus of USD1 million. The rest of their pay will depend on the team's performance and how the manager decides to cut the cake.
