Should I Fire My Trader or Pay Him A Million?

Abstract

Recent decades have seen increasing standards of professionalism being applied to buyside equity securities traders. Traders are upgrading their roles in the investment organization, resulting in a need for quantitative assessments, consistent with how portfolio managers and analysts are rewarded. As quantitative assessment of the equity trading process becomes widely accepted, the natural question arises whether the computed “quality scores” of firms, desks and individual traders should influence trader compensation.

TOPICS: Exchanges/markets/clearinghouses, portfolio management/multi-asset allocation