A hotly debated subject, particularly when considering the ratio of men to women on the trading floor and the investment banking’s attitude towards women, despite the best efforts of banks to create diversity and equality in the workplace.
For the fewer women that are on the trading floors globally, there are certain attributes that bring into question why investment banks and more have not strived to build a better balance between men and women. Studies have shown that:
- Women trade fewer times than men, quite a relevant stat when considering brokerage fees and settlement costs and with the need to keep costs down in this day and age, in a stringent regulatory environment making it all the harder for banks to deploy capital in a world where investors continue to demand double digit return on equity.
- By using more men on the trading floor, the soaring volumes of trades requires a far more sophisticated risk and compliance network, with all the high profile cases involving law suits filed against banks, in recent years, involving male traders, risk and compliance systems are still not rigid enough to cover all the bases, costing banks billions of Dollars in settlements, not to mention a tarnished reputation.
- Studies have in fact shown that male traders are 2.5x more likely to break trading rules than women.
- The same study also showed that male traders were more erroneous at taking short positions than women traders, with more than 58% of women placing short trades correctly, at the time of the study, compared with less than 53% of male traders.
- Overly male oriented traders are said to be driven by hormones and remuneration sentiment, male traders being more likely to chase losses as a result. Sentiment may have been that women traders were more likely to be effected by hormones, but studies have shown that it is in fact the reverse.
- Returning to ego, men are less likely to admit they are wrong, which can be particularly costly on the trading floor, with women regarded to be able to better maneuver through a crisis situation, the ability of women to say no paramount on the trading floor.
- Finally, the study that had been carried out by Financial Skills, showed that female traders lost less money than male traders, male traders willing to take more risk, resulting in not only breach of regulations but larger losses on the P&L.
The study of man versus woman has not stopped, trading a prominent business segment of any investment bank, before even considering hedge funds and asset managers.
The innuendos and sexist jokes persist on the trading floors of large investment banks despite the best efforts of compliance and human resources to clamp down, the significantly fewer women traders ultimately able to cope with the continued noise, which has resulted in women reaching the higher echelons of the food chain, but still few when compared to the boys club.
With so many studies and so many results, the change of mindset has yet to emerge, women only trading floors certainly more akin to a sci-fi movie than real life, but if history is anything to go by, banks will have to consider a rebalancing, should losses and fines continue to balloon, not only bringing the trading floor into disrepute, but also the institutions themselves, who have largely ignored the results of numerous studies.
Until such time that there is a shift on the trading floor, FX trading reviews will continue to be influenced by the trading habits of the majority, such reviews of particular influence to the direction of FX markets intraday.