Wall Street traders, usually among the best-paid employees in the industry, may see drastic cuts in their take-home pay, Bloomberg News said.
Revenue in trading divisions has fallen by an average of 12% so far this year. Goldman Sachs (GS), which makes most of its money from trading, saw average compensation drop 26% in the first nine months of this year.
New regulations and public scrutiny mean that the days of huge trader bonuses may be gone for good.
"The industry will be significantly less profitable going forward, also significantly less risky," said Douglas J. Elliott, an economics fellow at the Washington-based Brookings Institution and a former JPMorgan Chase & Co. banker. "The lower profitability means there will be less net revenue to distribute between the shareholders and the employees. I do think there will be a squeeze on compensation over time."
In the world's top eight banks, average pay per employee has dropped by 0. 8%. For banks that focus on trading, it has dropped 11%. Bond traders could see their compensation fall as much as 30% this year, according to consultants Johnson Associates.
"There's been a drop-off in activity -- predominantly around client volumes and related trading flows -- that has impacted the revenues," said John Lee, a New York-based partner at recruitment firm Heidrick & Struggles International Inc.