NEW YORK ( TheStreet) --Bonds are the new stocks, at least where Wall Street spending is concerned.
A few years ago, being a fixed income trader was a reliable path to riches on Wall Street. That has changed, even as financial institutions are upping their spending on fixed income trading technology.
A report released Tuesday by consulting firm Greenwich Consultants provides the latest evidence of the latter trend. In a survey of buy-side institutions, Greenwich found that fixed income desks are the most likely to increase spending on technology.
"Several factors are driving the desire to evaluate current systems for potential change, including the need to keep pace with new regulations that are changing the market structure in derivatives and imposing taxing new compliance demands across asset classes. With the fixed-income market arguably undergoing the most change at this point in time, it comes as little surprise that buy-side investors in this asset class are both more likely to be looking into ways to improve systems and to be spending more on technology," the report states.
What's interesting about this technology spending increase is it comes just as pay for fixed income traders is down. Compensation for fixed income traders likely fell between 0-15%, the worst performing of 13 categories in a November report from compensation consultant Johnson Associates
Fixed income markets have long offered less transparency than equities markets, but new regulations are changing that dynamic. Fixed income securities such as swaps must increasingly be routed through central clearing facilities. While part of the spending increase is merely to connect institutions to those new facilities, firms wouldn't make those expenditures if they didn't continue to see potential profits in fixed income.