Wall Street trading gets Mumbai-ed

Even as the Obama administration in the US frets over H1B immigrants, one more Wall Street job has just got offshored — to the Chandivali suburb on the fringes of Powai in Mumbai.
Come April and a 150-seater trading desk will go live in this upcoming suburb, hours after closing bell on Dalal Street.

Fountain Securities Analysis, a Mumbai firm, has bagged a deal for an undisclosed sum to outsource the proprietary trading activities of a US-based broker.

Going by sources in the know, the company will recruit and train local talent to trade in US securities listed in the Nasdaq and New York Stock Exchange (NYSE).

Fountain, which is said to have a ‘sister concern’ operating in Pune, has sounded out local institutes that train candidates for securities market jobs and the selection process has commenced already.

The company plans to scale up the operations to a 650-strong unit eventually.

Knowledge process outsourcing units focusing on equity research were already operating in the country’s business process outsourcing (BPO) hubs. But the current directionless state of markets in the US has changed the brokers’ focus to more pragmatic pursuits like jobbing and arbitraging. And even here, they want to cut corners.

As G C Sharma, a faculty with BIFM, an institute training capital market aspirants, says a few outsourcing companies focusing on equity research for overseas markets had come up in the last 3-4 years.

“Most worked night shifts. These units were located in Pune, Mumbai, Delhi and Gurgaon. But since the US market is not in a good state, the focus is now shifting towards jobbing and arbitraging as these are considered less risky and more lucrative in the current environment.”

The economies work like in any other BPO as the US entity gets its job done at a fraction of the cost it would have incurred on it in the US.

For young graduates like Rahul, 21, who had shelled out Rs 70,000 for a 4-month securities market course, the opportunity comes as a godsend.

“For beginners, local brokers used to pay Rs 7,000 during the training period. Now, with the volumes so low and there being very little scope for arbitrage, even these jobs have dried up. This is a good opportunity. And at Rs 10,500 to start with, it’s like getting paid for having jalebi,” says the youngster.

Fountain officials have told some of the successful applicants that the selection will be followed by a 21-day training programme, wherein the participants will be given a primer on the US markets. They will also be taught the methods including short selling, arbitraging and other intraday techniques.

The potential recruits are being lured with a 50:50 profit sharing model, which promises to make them millionaires if they are good enough and hang around long enough.

In the first three months, though, the BPO will pay only a fixed sum of Rs 10,500 and hold back the performance incentive (share in profits). From the fourth month onwards, the trader can take home 50% of the profit he makes on trading.

You could be making lakhs, says Raghavendra, a 40-year old Nifty trader, who failed the 15-minute aptitude test on Friday. This is the first level screening, which tests the speed and accuracy of the candidate in solving simple mathematical problems, and is followed by a personal interview.

“I had brought my performance report in Nifty trading. They didn’t even see it. What is the point in asking simple interest? I didn’t even bring my calculator. So I got only four marks,” the Nifty trader rued.

The point to note is that even experienced traders are available for hire as the market volume has shrunk significantly, says Vikram Rathi, executive director of Delhi-based BLB Ltd, which runs one of the largest arbitrage desks in the country with a 750-strong dealer network. “The jobbers here get typically 50-70% of their trading profits. It varies from player to player. Since the markets are the way they are, a lot of people are available.”

Rathi says outsourcing of jobbing is workable given the technology advancements. But he feels working out the cost structure is crucial. “Each player - the foreign client, the local service provider and the jobber - will want his share of the pie. So, the cost structure can get out of hand.”
(Names of candidates changed)