Phasing out currency traders Merging of banks, electronic brokerages contribute to decline

NEW YORK — NEW YORK -- In the glory days of the early '90s, an ever-growing legion of currency traders handled orders with shouts, gestures and phones glued to their ears. Now those ranks are thinning.

Take Matthew Lifson. A 22-year veteran of the foreign exchange business, he was told three months ago by Chase Manhattan Bank that his services were no longer required.


For four years, Lifson handled the currency trades Chase did on behalf of smaller banks, such as National City Bank in Cleveland and Comerica Bank in Detroit. But with the growing use of electronic brokerages -- computer systems that match buyers and sellers automatically -- the smaller banks can do their trades directly, eroding that business for big banks like Chase.

"Chase told me they let me go because they were moving in another direction," said Lifson, 43, of North Brunswick, N.J. "The business I was doing was one they no longer wanted to be in." Chase declined to comment.


Lifson, who since 1994 has served as president of FOREX USA, a trade association for currency dealers, isn't alone. Banks from New York to London to Tokyo are trimming currency personnel. The cuts have been driven by new trading technology, a slew of mergers, and relatively stable exchange rates this year that have reduced profits.

Some industry veterans say many of the jobs won't be coming back anytime soon, and that more cuts are on the way.

"In three to four years, there will be significantly less participants in foreign exchange," said David Puth, managing director of foreign exchange at Chase Manhattan.

"In North America, possibly less than 50 percent" of those with foreign exchange-related jobs will still be in the business, Puth said at a currency conference in October. Analysts estimate about 3,000 people work in the U.S. currency market now.

Even Citibank -- "the undisputed heavyweight champion in the world" of currency trading, according to Guy Whitaker, its global head of foreign exchange -- hasn't been immune. The bank has cut its global currency staff to about 700 from 800 two years ago. In 1989, Citibank had 39 dollar-mark traders in Europe. Now it has four, Whitaker said.

North America isn't the only continent affected. The Bank of Tokyo-Mitsubishi, the world's biggest bank, plans to reduce the 190 traders and staff in its Tokyo trading by 10 percent to 15 percent in the next few years, said Haruo Kimura, general manager of foreign exchange for the bank.

In Europe, BZW cut eight jobs in its foreign exchange division three weeks ago, while Bank of America in October axed 30 people in foreign exchange and other areas of its global capital markets group in London.

What's more, with a single European currency, the "euro," scheduled for launch in 1999, currency trading between member nations will dry up. That may leave a lot of traders who used to deal in those currencies looking for work, analysts say.


Monetary union "threatens to pull away a lot of trading volume," said Richard Koss, a currency strategist at consulting firm MFR Inc. and formerly head of currency sales at Union Bank of Switzerland and CIBC Wood Gundy. "So you get staff consolidation around that."

The widespread reductions are hurting people like Lifson. "It's not like anyone is beating down my doors," he said, even though he was head of currency sales at Merrill Lynch & Co. and led a team of exotic currency traders at Chase.

"In the old days when someone was knocked out of the saddle, they were back the next day," Lifson said. "I think I'm a victim of a malaise in the market."

One reason for the cutbacks is the increased use of electronic brokerages. Since their inception in 1992, they grew to account for 4 percent of trading volume in Britain, 6 percent in the United States and 9 percent in Japan as of 1995, according to central bank statistics. And that growth is expected to continue.

Technology also has helped change currency trading into a commodity-like business. A proliferation of financial data services has made currency prices more accessible to traders and investors, making it difficult for banks to charge customers much more to buy a currency than the banks would pay for the currency themselves.

That helps explain why currency traders are losing their jobs even though trading volume grew 45 percent to $1.9 trillion a day in April 1995 from three years earlier, according to the Bank for International Settlements.


A spate of bank mergers also led to layoffs. The combination of Chemical Banking Corp. and Manufacturers Hanover Corp. in 1991, and the subsequent marriage of Chemical and Chase Manhattan Corp. this year, provide telling examples.

Before those mergers, Manufacturers Hanover had about 50 currency traders and salespeople in New York, Chase about 70 and Chemical about 80, said Tony Mecca, a foreign exchange consultant and recruiter in Greenwich, Conn.

Now Chase has about 100 traders and salespeople in New York. "That's about 100 people just gone," Mecca said.

More mergers are expected. "I wouldn't be surprised to see [only] five to six major participants in the market" within the next four years, said Chase's Puth.

Pub Date: 12/02/96