Bonuses - in MoDeration

So, the MOD has paid £47m in bonuses to civilian staff in the first six months of this year, and nearly £300m since 2003. That's rather a lot compared to the £20m cut in TA funding and it's shameful that they considered their own wellbeing ahead of the troops. What's interesting, though, is that this story is being spun in two different directions.

The BBC story above takes the tack that, as it's split 50,000 ways (out of 85,000 staff), the average payment is less than £1000 - though other reports note that some senior officials are getting £8k and some got bonuses of £17k in 2007-8.

However, Alan Johnson - yes, the home secretary is taking point on a defence story - is pushing the angle that the civil servants are being paid "danger money" and in lieu of overtime for their work in the field. Afghanistan is mentioned and the implication is that the bonuses are going to those people.

Clearly both cannot be true: the number of unique Brits in Afghanistan in 2009 is unlikely to get anywhere near 50k, even including the troops. Main Building and Abbeywood haven't suddenly decamped to there.

The truth of the matter, as I suspect any intelligent reader has figured out for themselves, is that the MOD has decided to make moderate discretionary payments to a bit over half of its staff, and a few larger ones for extraordinary circumstances. Rationally, that's not a big deal - it's a tiny proportion of the wages budget (85k people x £30k salary = £2.55bn), so why the need to lie and spin?

Surely the bigger scandal is why we're paying billions in wages to office workers who have repeatedly failed to deliver.

- KoW

EC insists banks pay larger bonuses

On page 2 of City AM this morning is a story entitled 'EC gets tough on derivatives'. Apparently the European Commission plans to drive more derivatives trading onto exchanges and hence "under the gaze of regulators".

I think this is great. New categories of exchange-traded instruments means loads more front-office IT work doing exchange connectivity, more autotrading, and - since it's not possible to get everything 100% perfect at 8am on Day One - a lot more opportunities for arbitrage and high-frequency trading. The banks or hedge funds with the quickest developers and the sharpest quants always have a new market to themselves for a while, and make a ton of money off the low-hanging fruit. I expect to see some great short-term (<1s) opportunities where price movements in the underlying asset aren't reflected in the derivative price but there is sufficient liquidity on the exchange to execute a trade. Which, of course, means more profits for the bank (yay!) and large bonuses all round (yay!).

Good to see that the Law of Unintended Consequences is still in effect!

- KoW