Wall Street’s Old, Unwanted Bond Salesmen Find a Home in Chicago

Arthur Main learned the hard way that Wall Street is a young person’s game.

After a quarter-century at Morgan Stanley, Main -- like countless old-school types who came of age in the ’80s -- was kicked to the curb as banks turn to youth and technology in the face of tighter regulation and lower profits.

And so, at 54, he’s working at one of the last stops in high finance: a small Chicago firm called TJM Institutional Services. He considers himself lucky.

“Being my age is a hindrance for a lot of people,” says Main, keeping his eyes fixed on charts and chat boxes arrayed across his computer screens. “They don’t continue to learn, they don’t embrace technology, they try to fit that square peg in the round hole, and their skill set doesn’t apply anymore.”

From the ninth floor of a modest office building wedged between a 7-Eleven and shoe-repair shop, TJM is making a name for itself as a refuge for Wall Street’s graying castaways. The idea is that by using their wits, experience and connections, they can still produce by getting hedge funds and pensions to trade with them in niches where computers have yet to take over.

For Main and others like him, it’s a shot at finishing their careers in finance.

“I’m the home for the last of the Mohicans,” says Steven Beitler, TJM’s chief executive officer. “Everyone we’re hiring is coming from a bank. The market for talent has been the best I’ve seen it, because they’re all getting fired.”

Generational Cull

In the new Wall Street, there are simply fewer jobs. Post-crisis rules to curb risk-taking and shrinking bond-trading revenues have compelled banks to cut costs. Electronic trading platforms have let clients bypass salespeople. In the past five years alone, the biggest global firms have cut almost 10,000 trading and investment banking jobs, according to research firm Coalition Ltd. Older, higher-paid traders and salespeople have been especially vulnerable. 

Cheerful and profane, Beitler, and his partner Thomas J. Murphy, are taking advantage. In the past three years, TJM has doubled in size to 160 contractors. They’ve added brokers in government bonds, equities and currencies, and opened outposts in New York, Boca Raton and London.

To keep costs low, TJM offers little more than a workstation and a phone. New hires must come with their own clients. If they don’t generate commissions in a given month, they don’t get paid. There are no departments to produce research or issue corporate bonds to entice money managers to call. They’re pretty much on their own.

The trade-off is that brokers get to keep up to 75 percent of their commissions, more than at bigger rivals like Cantor Fitzgerald or Jefferies.

Identity Crisis

For Main, it’s a far cry from his days at Morgan Stanley, when the derivatives salesman catered mostly to proprietary traders who invested the bank’s own money. Banks had to walk away from such trading because of financial regulation. To survive, he’s had to adapt.

In May 2012, when Main got a plaque for his 25th anniversary, the clerk who handed it to him joked that the last person who got one was dismissed. Four months later, he got the call: It was his time.

“After being there so long, it becomes a part of your identity,” says Main, his voice trailing off. “It was pretty devastating at the time, but it’s worked out OK.”

For the past few years, his corner of the world has been in eurodollars, an interest rate linked to U.S. currency held at foreign banks. Because of their complexity -- there are thousands of possible combinations of strike prices and expiration dates -- the contracts have so far resisted the move to computer screens. Some three-quarters of eurodollar options are traded on the floor, according to CME Group Inc., which operates the Chicago Board of Trade.

Old Fashioned

Main tries to give his clients insights they can’t get elsewhere. He’s built a database of large options trades, which helps him divine the intentions of big players and generate trading ideas. As more markets shift to self-service electronic platforms, Main is an old-fashioned, high-service specialist.

During the bond heyday, the question of who brought value to clients and who merely accepted orders wasn’t really a pressing matter. But that’s changed. Last year, the world’s biggest investment banks generated $70 billion in fixed-income revenue, half of what they brought in during 2009.

“The environment has given banks a lot of good material to figure out who is really talented and motivated,” says Jessica Lee, a director at recruiting firm Options Group. “People just rose with the tides and got raises year after year.”

For those making a go of it alone after a lifetime on Wall Street, having strong relationships is just the start. Once on the outside, brokers who match buyers and sellers of, say, corporate debt can’t count on getting calls from clients eager for a slice of the next hot offering.

Lifestyle Adjustment

At the major investment banks, “a lot of salespeople thought the job was easy,” says Franco Mancini, an ex-Goldman Sachs broker who now works at Tradition, an independent bond shop. “Then they go out and realize that the minute you step into a brokerage firm, the phones stop ringing, completely.”

Many can’t hack it and eventually land in wealth management or move out of finance altogether, says TJM’s Murphy. And even if they’re willing to hustle and pick up the phone, success can often mean earning far less.

“People used to making $800,000 a year have a hard time adjusting down, their consumption changes, they have to sell their house, pull their kids out of private school,” he says. For those guys, “there’s not many opportunities. If you’re 55, the best you can do is turn on your computer and use Excel. You’re not programming algorithms.”

The difference between a good day and a bad one can be vanishingly small. In mid-September, Main lost a commission to a competitor who bested him on price by 0.0002 percentage point on 175,000 eurodollar contracts. Low volatility in recent years has compounded the problem, as fewer trades mean clients have time to eke out the lowest prices.

Adapt or Die

It’s hard to know what his future holds, Main says. Volume has come back in a big way since the presidential election in November, leading to TJM’s best month all year. The phones are ringing and trade commissions are up.

But it’s only a matter of time before eurodollar trading moves to screens as well. When that happens, the Chicago Board of Trade, a grand Art Deco landmark built in 1930, will see one of its last pits close. Main can’t say whether he wants to stick around after that. He might join one of his client’s firms or start a business outside finance.

Regardless, he knows the forces of change can only be delayed, not stopped.

“I wouldn’t say it’s bad,” Main says. “It’s progress, like the horse and buggy going away. You adapt or you die.”