They don't. I work in in the trading department of a large bank - directly in finance, not IT. Have been here 10 years.
Here's what I have seen. For more "liquid" markets - like delta-one blue chip equities, IR swaps, spot FX - jobs ARE moving quickly. People are not complacent. Competition comes from firms that are much faster in execution, having automated most of the process - and presumably having lower hedging costs by being able to move quickly. Or just basing their decisions "better" on history.
Having said that, you have to remember that:
a) Size of balance sheet matters. A large bunch of clients of such firms trade with them due to "synergies". Large shops are one-stop shops. They don't just sell you a swap. Its usually a loan/funding + an option to hedge it + some tax advice thrown in. Its hard to break it down into components and trade individually, as most other players may not be even willing to face such counterparts. And shopping for each component separately might mean larger time and friction costs. Here being a large bank helps massively. Basically - capital is hard to be automated, decision making is easier.
b) There are a large number of markets that cannot be automated anytime soon. These are "illiquid" or "exotic" markets. The data on them is scarce and trades happen in a lot less frequency, then say swaps or delta-one equity. Throw in some options, and your model might say here's a price, but there's no guarantee on it. Then you have to balance it compared to your book size, and the price is not discoverable, or even same across firms (for good reason - my cost of cash liquidity might be different to yours). Sometimes counterparts will trade with you even if you have a worse price, because there's lower risk of you falling down in 10 years on a 20 year cross currency trade or inflation swap.
c) Good traders are very defensive and paranoid. They don't work under the paradigm that history will repeat itself. They will try to look for risks that might seem to have nothing to do with their market. I know some traders who have been making good money every year in these exotic markets, regardless of crisis or not. Some of the sharpest people I know - and they love their job. Not just the money aspect. They just love the whole high pressure environment and everything it entails. Now they are being drowned in regulation. Don't get me wrong - regulation is good, but right now we have a mess. I won't try to convince you - and unless you work in a bank, you will not agree with this.
d) Management is old. Might seem obvious, but most of the people at the top have made their money the old-style way. After a certain amount of time, you tend to trust your own instincts more than other things, especially if you've been successful (which may have just been a random process to start with). So they think this is just another fad and it will pass. These things have come and gone - we're still here. This is a prime reason why some banks fail suddenly. The top guys just didn't see it coming.
Here's what I have seen. For more "liquid" markets - like delta-one blue chip equities, IR swaps, spot FX - jobs ARE moving quickly. People are not complacent. Competition comes from firms that are much faster in execution, having automated most of the process - and presumably having lower hedging costs by being able to move quickly. Or just basing their decisions "better" on history.
Having said that, you have to remember that: a) Size of balance sheet matters. A large bunch of clients of such firms trade with them due to "synergies". Large shops are one-stop shops. They don't just sell you a swap. Its usually a loan/funding + an option to hedge it + some tax advice thrown in. Its hard to break it down into components and trade individually, as most other players may not be even willing to face such counterparts. And shopping for each component separately might mean larger time and friction costs. Here being a large bank helps massively. Basically - capital is hard to be automated, decision making is easier.
b) There are a large number of markets that cannot be automated anytime soon. These are "illiquid" or "exotic" markets. The data on them is scarce and trades happen in a lot less frequency, then say swaps or delta-one equity. Throw in some options, and your model might say here's a price, but there's no guarantee on it. Then you have to balance it compared to your book size, and the price is not discoverable, or even same across firms (for good reason - my cost of cash liquidity might be different to yours). Sometimes counterparts will trade with you even if you have a worse price, because there's lower risk of you falling down in 10 years on a 20 year cross currency trade or inflation swap.
c) Good traders are very defensive and paranoid. They don't work under the paradigm that history will repeat itself. They will try to look for risks that might seem to have nothing to do with their market. I know some traders who have been making good money every year in these exotic markets, regardless of crisis or not. Some of the sharpest people I know - and they love their job. Not just the money aspect. They just love the whole high pressure environment and everything it entails. Now they are being drowned in regulation. Don't get me wrong - regulation is good, but right now we have a mess. I won't try to convince you - and unless you work in a bank, you will not agree with this.
d) Management is old. Might seem obvious, but most of the people at the top have made their money the old-style way. After a certain amount of time, you tend to trust your own instincts more than other things, especially if you've been successful (which may have just been a random process to start with). So they think this is just another fad and it will pass. These things have come and gone - we're still here. This is a prime reason why some banks fail suddenly. The top guys just didn't see it coming.