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* Thousands of traders squeezed out as banks slash costs
* Industry faces tough regulation after global crash,scandals
* Traders increasingly replaced by automated algorithms
By Jamie McGeever
LONDON, Nov 24 (Reuters) - Once dubbed "masters of theuniverse", it seemed the party would never end for a professionoften associated with a champagne lifestyle of fast cars andfaster living.
But those days are over for London's financial markettraders. Perceived by the public to have lived in a bubble formuch of the past 30 years, thousands are now being forced intothe "real world" as banks slash costs and shrink tradingoperations.
The effects of increased regulation on an industry whosereputation has been battered by the global crash of 2008 andmyriad market-rigging scandals has been compounded by a rapidadvance in technology that is seeing traders replaced by quickerand cheaper computer algorithms.
In third-quarter earnings updates, banks took another scytheto costs, with expensive traders and trading desks in London's"City" financial district feeling the pain.
"In the early days it was great. You had big teams and itwas 'seat of your pants' stuff. As traders you felt that even ifyou had a bad day the next day it was all to play for. Going towork was fun, I didn't really think of it as work," said formercurrency trader Philip Rands.
After joining Japan's Sumitomo in 1987 straight from school,Rands worked in a variety of roles at European and Asian banks,reaching chief dealer at Sumitomo in 2000. He held various jobsafter that before leaving the industry in 2013, as work becameharder to find.
He now works in the business of importing and exportingcommercial LED lighting.
"I'm not an archetypal City person, but you are in a bubble.It's not the real world. You realise it's quite difficult totransfer your skill-set to the real world," the 47-year-oldsaid.
While the number of financial and professional services jobsin London has risen since 2009, the number of those directlyinvolved in "securities dealing" has plummeted, according tofinancial industry lobby group TheCityUK.
At the end of last year there were 9,400 people employed insecurities trading, down 42 percent from 16,400 in 2009, theearliest comparable figures available. Total employment infinancial and professional services rose 17 percent to 248,600over the same period, the figures show.
WELCOME TO THE MACHINE
There are no comparable figures available, but "peaktrading" in London in terms of employment is widely thought tohave coincided with the zenith in overall financial servicesemployment in 2007, just before the global crash.
Advances in technology over the last decade have led to adramatic increase in automated trading, however. In currencymarkets, for example, algorithms now account for about 70percent of trading on major platform EBS, up from around 30percent in 2007, according to a study by the Bank forInternational Settlements.
The squeeze on costs is most acute in banks' fixed income,currency and commodity (FICC) operations, where post-crisisregulation has been tightest. Some banks have exited certainbusiness lines entirely.
Banks are less able and willing to act as market makers infixed income securities trading because they are now required tohold more capital and liquidity, making it more expensive andrisky to keep assets on their balance sheet.
Figures from financial industry analytics data firmCoalition showed FICC front office headcount at the top 10investment banks in London fell 3.5 percent in the thirdquarter. It is down nearly 30 percent over the last five years.
"Automation, a change in attitude towards risk, increasedregulation and shrinking liquidity has meant a reduction in thenumber of traders," said Fraser Younson, partner at SquirePatton Boggs, a law firm specialising in City employment.
"The trading community is shrinking."
Few people see London losing its status as the world'spre-eminent financial centre any time soon, even if Britain doesvote to leave the European Union in a referendum to be heldbefore the end of 2017. But it could be a leaner City.
FEAR FACTOR
Several banks said in their third-quarter earnings reportsthat tens of thousands of jobs would be axed. London tradingfloors will not be spared.
Credit Suisse cut 100 fixed income and foreignexchange jobs in London earlier this month, with another 100 tofollow. That is part of a larger drive to cut 2,000 roles inLondon, mostly back-office positions.
Deutsche Bank said it would cut 9,000 fixedpositions and has already moved thousands of back-office jobsout of expensive London to cheaper Birmingham. StandardChartered said it would cut 15,000 roles by 2018.
Earlier this year HSBC said it would slash 50,000jobs in total, while last year Barclays said it wouldcut 19,000 jobs over three years.
"For banks, peak trading is history," said Peter Hahn,Senior Fellow in banking at Cass Business School and a formerbond salesman himself.
A series of market-rigging scandals since 2008 has onlyserved to tarnish traders' image further in the eyes of thepublic, regulators and banks' shareholders.
Banks have paid tens of billions of dollars in fines andsettlements for failing to prevent their traders attempting tomanipulate global interest rate, FX and commodity marketsthrough communications via electronic chatrooms.
They have cracked down on chatrooms in recent years, andmany have banned mobile phones from trading floors.
In a sign of how their stars have fallen, staff in the salesand trading divisions at one global banking giant have to payfor their personal mobile phone bills, whereas those in theinvestment banking division can still get theirs funded, onesenior banking source told Reuters.
"There's a fear factor. People nowadays will do nothingrather than something that might be wrong," Rands said.
"It's all about looking after the customer and doingeverything by the book rather than old school taking risk. It'sjust a service industry now." (Additional reporting by Anjuli Davies; Editing by Pravin Char)
