The Specialist Screwing
What, did somebody forget a zero?
Traders Monthly
That’s what a lot of NYSE specialist traders were surely asking at year’s end when notified that bonuses, in many cases, would be no higher than around $20,000. “The specialists got screwed,” confirms a former employee at a major Big Board trading firm. “They’re crying watching everyone else haul it in.”
We suppose a light-to-nonexistent bonus check is better than a pink slip, which is what about 30 LaBranche employees got around Christmas; another 70 or so employees of the venerable specialist firm were let go the first week after New Year’s. A LaBranche spokesman would not comment.
In contrast to Goldman Sachs, which in December revealed it had earmarked $16.5 billion for employee compensation, LaBranche revealed in October that it was setting aside $80 million, or about as much as one highly paid Goldman principal-strategies trader could expect to receive. “Maybe that $80 million number won’t be there next year,” said CEO Michael LaBranche back in the fall during a third-quarter earnings call — hinting, perhaps, that his traders would be paid in vintage comic books or bags of circus peanuts.
The belt-tightening on the Big Board floor came as no big surprise; volume has increasingly been shifting to electronic platforms for years, destroying margins for floor operations. Well-placed sources tell Trader Monthly that specialist traders accustomed to chunky six-figure bonuses in years past — amounts even went as high as several million during the late ’90s — were lucky to get anything, while floor brokers for the banks and two-dollar broker firms considered it a coup merely to continue to receive a regular paycheck.
Similar bottom-line decisions spurred layoffs at the floor-trading operations of some banks, such as Jefferies, which trimmed its floor staff by a reported 40 percent. Every year, of course, some bank, desk or individual trader ends up getting an epic shaft, although recruiter sources generally accustomed to feeding off the disgruntled and underloved this time of year report that, for the most part, 2006 was compensation heaven.
They offer few anecdotes of traders having found themselves on the butt end of some bean counter’s cruel joke. Assorted reports of hedge-fund screwings, meanwhile, have trickled in, but the pain felt down at the NYSE appears to have been singularly vicious.
But at least John Thain is sharing in the suffering. His reported compensation for 2006 was $6 million — down from a reported $6.24 million in 2005. |
