Welcome
…to the 51st issue of House! After some relatively quiet months, it seems that the investment banking world has started to hire again… Lily Wang joining JP Morgan in New York from Goldman Sachs is a very significant move and her title of Global Head of Compliance Technology is especially pertinent and a key theme we explore this month.
We have also received several enquires from large MNCs looking to enhance their regulatory risk teams, not surprising in the face of the huge governance failure at WeWork. We will explore this in more detail next month..
The growth in Hedge Fund compliance continues as Kevin Farley joins Millennium in New York as their Head of Equities Compliance, Christina Lo joins Schonfeld in Hong Kong as their new Head of Compliance and Debbie Chan joins Hudson Advisors also in Hong Kong, with Tsering Lama moving to a global role in New York.
We also look at the rise of the high frequency compliance office this month following a series of moves at Citadel and other HFTs, and finally we explore whether or not the role of the compliance interim has really taken off…
Compliance 3.0 - The Compliance Technologists
Compliance technologists are the most sought after talent within investment banking compliance teams. As we enter ‘Compliance 3.0’, the key focus is on cost and optimisation, and how to use technology to reduce headcount in the huge compliance teams. The ‘compliance boom’ of 2007-2017 saw global compliance teams grow from a 100-1000 people in many of the larger US and European houses globally, an unprecedented growth that we are unlikely to see again (or are we?). Several CEO’s have mentioned compliance costs in presenting their annual results (most notably Michael Corbat at Citigroup and Tidjane Thiam at Credit Suisse) in the last 18 months. The redundancies and ‘down-grading’ of leadership positions that followed at both organisations were mirrored at their competitors throughout 2018 and early 2019. Whilst we have seen a slight reversal in this tactic in the second half of 2019, as firms start to hire senior compliance talent again, there is definitely a focus on hiring technologists to take away some of the labour burden on share holder value…
But, how do we define a compliance technologist? And, what makes a good one?
Can we teach compliance officers to be technologists, can technologists become compliance officers? JP Morgan hired Lily Wang this month from Goldman Sachs as a Managing Director and Global Head of Compliance Technology. A look at her background suggests banks are looking to hire technologists that they can mould into compliance officers. Lily enjoyed a 15 year career at Goldman Sachs, largely in technology after joining from Bell Communications Research where she was a Software Engineer. She initially trained at Imperial as an electrical engineer.
It will be interesting to see to what extent this area develops, especially as most technologists would appear to want to join the electronic trading teams at banks or focus on ‘digitalisation’ projects. It will be a slow pull to get technologists to compliance, but we believe those that make the move early, similar in some ways to the lawyers that were enticed across in 2007, will be pioneers and likely to see a very steep career path and a renumeration to match it.
High Frequency Trading Hiring on the up…
High Frequency Trading (HFT) firms are a comparatively new entry to financial markets and one which has until recently stayed under the radar. Unlike their Hedge Fund peers, the HFT firms tend to be propriety traders and thus the regulatory burden seemed small. With the release of ‘Flash Boys’ by Michael Lewis 5 years ago, the HFT world was firmly thrown into the spotlight. It has taken a short while for the regulators to catch on, but it seems HFTs are firmly in their gaze and thus the recruitment of regulatory experts to this world has grown…
Citadel, the world leader in High Frequency Trading appear to be ramping up their compliance and regulatory risk functions. In the last year they have hired Rebecca Terner Lentchner as their new APAC Head of Government & Regulatory Affairs in Hong Kong, George Sobek has joined from Jane Street in Compliance, Yvonne Tsui from Blackrock as their APAC General Counsel, Pong Yiu joins from Goldman’s as Compliance Officer in Hong Kong and Michael Loughney has joined from Millennium as their CCO for Global Equities.
Optiver, Jump Trading, Flow Traders, Jane Street and Tower Research have all being growing their regulatory functions across Asia and globally. It seems a new home for regulatory experts has been born as the HFT sector continues to get regulatory scrutiny.
Where do they find compliance officers from?
It seems from the equity compliance functions of the investment banks or from exchanges. Flow traders hired Pamela Choi from Credit Suisse’s electronic trading compliance team last month and Tower Research hired their APAC Head of Compliance, Ben Gatward, from the equity compliance team at Morgan Stanley and the Head of Compliance at Citadel, Glenn Southeren, from the equities compliance team at Bank of America Merrill Lynch.
It seems that as banks look to reduce their equities franchises across the globe, there is a potential solution for equity compliance officers, HFT and equity focussed firms like Citadel and Millennium.
Compliance interims? Are they being used?
We predicted last year that the contingent compliance workforce of the investment banks would grow substantially as banks looked for more fluid solutions to regulatory risk.
Has this happened?
Not as much as we thought it would. In some ways it’s symptomatic of the cutting across investment banks as its not only permanent headcount, but also contingent roles that are being pressured.
The positive news is that we are starting to see a correction and larger firms, most notably Citibank and JP Morgan, are starting to make substantial hires of both permanent and contingent staff once again. In a BAU environment it is surely normal for firms to hire interim staff to cover project work? We will wait and see…