A bank is establishing a fixed income trading department.It is considering whether to hire a team of star traders or to invest a similar sum of money in developing a proprietary,automated trading system.The most valid reason for investing in the automated trading system in preference to hiring star traders is:
A)The proprietary trading system is likely to generate better returns since star traders are in a powerful position to negotiate pay packages which appropriate the major part of the profit they create
B)Advanced software is better than human intuition at identifying mispricing in financial markets
C)Star traders are difficult to manage and can easily become "rogue traders"
D)It's difficult to motivate traders once they have earned their first few million.

Question

Quizplus · Accepted Answer

The proprietary trading system could potentially retain more profit for the bank, as star traders often command high salaries and bonuses that can significantly reduce the bank's share of the trading profits.

A Bank Is Establishing a Fixed Income Trading Department