The Regional Bond Dealers Association (RBDA) is pleased to present the results of the first annual Regional Dealer Fixed-Income Compensation Survey.1 At the outset, we wish to gratefully acknowledge the leadership of our Steering Committee for its support and advice in the development of the survey instrument and presentation of the results, as well as the regional dealers who participated in the survey. The survey definitions and methodology may be found as Annexes to the report.
The decision to produce this report was a member-driven one. At the beginning of the process, we consulted with members about the idea of producing a survey. There was a strong response from the membership that a compensation survey that addressed both compensation (including salary, commission, and bonus) by position trends and broader strategic issues, as they relate to staffing and compensation policies, was needed and would be of great value to regional fixed-income dealers and their managements. As a result, the survey was developed and this report was produced.
The timing of the first survey report covering 2007-2008 is somewhat propitious and perhaps uniquely valuable to the regional bond dealer community as the organizations begin their planning for the coming year. As we know too well, the last few years were a challenging period for our markets, punctuated by dislocation and turmoil, until the beginning of the credit market recovery in 2009. What began as a mortgage, and more specifically subprime mortgage market problem, eventually engulfed all credit markets, bringing securitization to a halt. Fortunately, the recovery and turnaround began and was expedited through the efforts of the industry, Treasury and Federal Reserve.
Regional firms may perhaps be better positioned in the developing marketplace. Within this environment, insights about compensation levels, trends and policies would appear to be valuable tools for the regional dealers as the firms begin to develop and implement strategies and decide how to allocate resources, grow and manage capital in 2009 and beyond. To enhance the value to regional firms, responses, where appropriate, are presented nationally and segmented by primary geographic region, revenue level and Full-Time Equivalent (FTE) staff size.
The results are divided into the following six sections. We encourage you to read the methodology and definitions annexes at the end of the report in conjunction with the tables and results. By doing that, you will have a fuller understanding of our approach, the definitions used in the tables and how we arrived at the reported data.
Compensation by position: 56 positions, including executive management and departments: compliance, trading, sales, investment banking, public finance, operations and technology research, risk management and accounting. Within each department, compensation results are separated between senior, intermediate and junior positions, generally based on level of responsibility and seniority.
Data are presented nationally and by region (three regions – West, Midwest, and South & East), FTE (two peers, up to 100 and above 100) and revenue (two peers, above and below $80 million in 2008 fixed-income revenue) peer groups.
Trader compensation by market: Average, maximum and minimum salary, and bonus compensation for municipal, agency and government, securitization, corporate bond and money markets for senior and mid-level trading professionals nationally. Averages are presented for municipal trading by primary region (3 groups), FTE (2 groups) and fixed-income revenue (2 groups, above and below $80 million annually) peer groups. This section was incorporated to provide more detailed breakdown for trader compensation among market sectors than is provided in the general compensation tables.
Sales: Percentage payout of all net transaction revenues and separated by primary market and secondary market transactions segmented by market sectors – municipal, corporate bond, Treasury/agency and securitization.
Public Finance Banking and Trading: Percentage payout for primary market and, as appropriate, broken out between negotiated and competitive sales.
Investment Banking (excluding Public Finance)
Bonus payment frequency:
Whether sales professionals are paid by commission only or commission and salary.
Whether traders are paid bonus in equity, cash or other form, and frequency of compensation (quarterly, semiannually or annually). Results are presented in percentage terms.
Whether objective quantitative basis, subjective basis, or combination of subjective and objective factors.
Responses are divided by trading – traders and trading desk managers; sales – sales professionals and managers; investment banking and public finance.
Revenue & Staffing Trends
Responses to questions about trends: Whether staffing will change and in what direction in 2009 by department (compliance, sales, trading, investment banking, research, operations); whether revenues changed in 2008 and are expected to change in 2009, and in what direction by market sector (government, Federal agencies, municipal bonds, corporate bonds, securitization).
Operating & Technology Expense Ratios
Operational expenses as a percentage of revenues: Total non-interest operating expenses, technology expenses, Bloomberg and other data service expenses.
Responses broken out by national, FTE and fixed-income revenue peer groups.
Annexes provide detailed explanations about the methodology behind the survey.
We hope you find the information useful. We welcome any comments, questions or suggestions for future surveys.