Sales & Trading
What is this industry?
Sales and Trading (acronym: S&T) is the division of an investment bank that is responsible for “market making” (aka matching a buyer and seller) of financial securities. An S&T division at an investment bank is known to be part of the “Sell Side” in the finance world. S&T groups are responsible for primary issuance (taking to public markets the bank’s bond deals and IPOs), working with the buy side financial institutions, and handling the investment bank’s own securities on their book (balance sheet). S&T is on the public side of an investment bank’s material non-public information (MNPI) and cannot collaborate with investment bankers on proprietary information.
Since there are many different types of financial securities, S&T groups are typically organized by asset classes that handle a specific type of security across fixed income, equities, or derivatives. Asset classes are further separated into desks in which a desk handles a specific product group within an asset class.
Examples of Desk* Breakdowns: FIXED INCOME
- Rates Desk (government bonds including treasury bills, treasury bonds of different maturities that are heavily influenced by the Federal Reserve’s interest rate decisions. Also can include interest rate derivative products such as futures and options)
- Emerging Markets Desk (debt from countries like argentina, brazil, china, india, mexico, indonesia, poland, south africa etc.)
- Securitized Products Desk (Asset Backed Securities, Mortgage Backed Securities, Collateralized Loan Obligations etc.)
- Investment Grade Corporate Bonds Desk (bonds from companies who have a credit rating of above BBB- on the S&P and Fitch Rating Scale)
- High Yield Corporate Bonds Desk (bond from companies who have a credit rating below BBB- on the S&P and Fitch Rating Scale)
*NOTE: when talking about desks – sales and trading desks literally refer to a PHYSICAL desk in which traders, sales people, analysts, and quants alike sit on a row of one desk known as a trade floor style office setting.
What is a “day in the life”?
S&T hours are heavily dependent on what desk a person belongs to, and when the market opens and closes for said product group in an asset class. Some desks may open earlier than others but typically hours can span from 6:30am – 5:30pm.
Each desk is different and has different needs and support functions for the people who sit on a trading desk.
- Analysts are typically the first ones on the desk that run reports in the morning to guide the traders on different metrics used to find their daily pulse of the markets. First year and second year analysts are typically not allowed to trade yet due to the copious amounts of training and tests that need to be passed before trading efficiently. Most of their day is shadowing the traders and sales people on the desk to learn about clients and the bid/ask spread of their specific product group. Additionally many analysts will need to be quantitatively strong to understand and manipulate data to make ad-hoc reports for the traders and sales people.
- Traders are the main vector of how trading securities actually happens. Most of the day they cannot leave the desk because they actively need to be watching client requests come in with bid/ask spreads to make markets. Traders must be very familiar with all details of their product group and the kind of securities they trade. Traders and salespeople have an ongoing dialogue throughout the day to keep track of their desk inventory or “book” to fulfill client orders/requests of specific securities. Their profit and loss of trades are calculated daily.
- Salespeople are crucial to the desk function because they handle the clients and are the point of contact for a trading desk for requests to buy and sell securities from the buy side. They are on the phone most of their day speaking to clients and building relationships with buy side or investment management firms.
How to ace your interview
Know the product group of the desk you would be sitting on. Really understand the in’s and out’s of the financial security and how it works and trades in the markets. Also know what kind of macroeconomic events affect the yield or return of the product group is important. Be able to give concrete examples of your quantitative and data skills. Coding and strong excel skills are preferred for these kinds of roles. Additionally, highlighting strong communication skills and being a client facing person is important in sales and trading – given that you are talking to people all day. If you know how to use bloomberg terminal that is also key because most trades are executed through the bloomberg terminal.
Resources for learning about this industry
Having general market knowledge of what is happening in the news with respect to publicly listed companies is the best way to keep up with the industry. The Sales and Trading industry is heavily influenced by macroeconomic trends, and central bank policy. Additionally, flows of trades will occur with optimism of different companies and their profitability/growth or ability to pay down debt. Earnings season which happens 4 times a year (once per quarter) is when a lot of banks, and asset managers assess their knowledge and opinion of a company.
Typical challenges in this industry – and how to deal with them
- The hours of S&T personnel vary and can be very early in the morning. Getting used to being at work by 6:30/7:00am is an initial challenge, however easily adaptable into one’s personal schedule.
- Headcount and return targets can be tough to meet. Job stability is not as certain depending on what trading desk you are on and how the market is for a certain product in a given year.
- Traders and sales people will leave to go to other firms quite often.
- The discussion of automation of the industry and high frequency trading replacing traders and sales people is often a hot topic of debate.
Typical industry entry process
- New hires straight out of college can be brought on to the team through campus recruiting or interns who have received full time offers.
- It is common to see people from Capital Markets Groups move onto the trading floors due to the high levels of interaction between the groups in a sell side investment bank.
Typical career trajectory
Chain of command goes as follows:
- Analyst // Quantitative Analyst (Quants)
- Vice President (trader or sales person)
- Executive Director (trader or sales person)
- Managing Director (trader or sales person)
Exit strategies/opportunities: exits from S&T would include moving to different firms and product groups across banks. Some people may choose to recruit for hedge funds and the buy side after spending a couple of years working on the sell side S&T trading floors.
Companies to know in the industry
Asset Manager/Securities Broker arms of Bulge Bracket banks such as: JP Morgan Chase, Morgan Stanley, Goldman Sachs, Barclays, Bank of America Merrill Lynch, Citi, Credit Suisse, UBS
On-Campus resources related to industry
wwib, isoc, smart women securities