Massive hike in credit derivatives pay, survey shows

London-based managing directors running exotic credit trading businesses at top-tier investment banks can expect pay increases of almost 50% from what they got last year, according to a survey.

On the back of growing demand for single-tranche collateralised debt obligations (CDOs) and the profits involved in trading the correlations associated with them, a London-based managing director in exotic credit at a top trading house will average a basic pay of £125,000 (US$230,000) and a bonus of £1.5 million (US$2.8 million) this year, according to recruitment agency Napier Scott. In 2003, a similar position would have paid the same basic salary but an average bonus of £875,000 (US$1.6 million).

“The business of exotic credit trading and credit structuring has not only gone from strength to strength, it has surpassed all expectations,” said Napier Scott in its survey. “There is an ever growing demand for single-tranche CDOs and the profits involved in trading the correlations thereof, together with the big push on all aspects of index trading. There is a queue of more exciting, utterly exotic structures moving along the production line and straining to parade themselves before the market.”

A US-based managing director leading an exotic credit trading business at a top bank can expect to take home a basic salary of US$200,000 with a US$1.9 million bonus.

The survey, which Napier Scott said covered approximately 1,500 traders, also showed that a London-based managing director of an integrated credit trading desk at a leading bank can expect to make a £125,000 (US$ 230,000) basic and a £950,000 (US$1.7 million) bonus this year. The New York equivalent can expect a basic of around US$215,000 and a bonus of US$1.3 million.

“Many institutions realised the benefits of the continuing integration of their flow cash and single-name credit default swaps operations, thereby offering a single platform to trade these closely related products,” said Napier Scott.