How do sales credits work for a Salesperson? Does it depend greatly on the asset? For example, I was speaking to a FX Salesperson the other day and he told that he completed a 100million dollar trade while we were talking. Now, if that's the only business that he did all year, this one lousy 100million dollar deal, approx what will his year end bonus be? How do other products work (equities, credit, commods, etc.)?
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assuming it was a vanilla trade, if that's all he did.... he'd likely be fired.
so for example, it was a 1 month EURUSD call--$100 million notional. In sales credits he made about $15,000.....(bid/ask spread was likely about $60,000)
You can see why he would be shown the door.
Thanks for the reply. Now how does the bank make money on this trade? That entire 15,000 will be part of his bonus?
More than likely, the answer to your question will depend on the comp structure of the firm he works for so a blanket answer will be difficult to find.
First, all trades are risk managed in aggregate, so on every deal, the goal is to charge more for the risk than it will cost you to offset it there are many ways to make and lose money on a trade like that. 1. maybe you hedged spot poorly 2. you weren't able to hedge volatility at an attractive rate
As for how much of it "goes to his bonus"... none of it
Sales Credits are an approximation of how much business you brought in... which is good if its high, but it doesn't tell you anything about your final bonus number
On any given deal, you're not going to be able to say: "ok, at the end of the year I should get x% of this deal"
Remember its one thing to point to bid/ask spread as theoretical profit, it's another thing to monetize it (i.e. have the trading book be profitable at the end of the year)
At year end, upper management looks at everyone's sales credits and the total PnL of the book,then determines what percent of the business (obviously an approximation) was driven by the sales person's client flow and tries to allocate the bonus pool accordingly
Couldnt do the math off the top of my head but 6 pip spread.... have no idea if thats a big spread or not not too familar with the liquidity in fx.
So you say 15k goes to the salesman is that just their allocation of the 60k spread?
So whats a good day for a fx sales guy how many credits? 100k?
Can you explain more on how the bonus is determined? Mostly am curious what % of sales credit you keep for your bonus because obviously the % is extremely low at a bb and at a smaller shop could be 40% (Inter Dealer FX Brokers)
For FX options, we dont think of the cost in pips... we charge a spread for how much vega is in the option we speak totally in volatility terms. So in that one for example... let's say EURUSD 1m vol was 14%, our bid/ask was 13.7/14.3, which is 0.6 vols on about 100k vega: that works out to 60k bid/ask. Most firms i know allocate about 1/4 of bid/ask to sales credits, so 1/4 of 60k is 15k.
A good day (in sales credits) is determined by the expectations set at the beginning of the year. If your MD says, "I expect you to generate 25 million in sales credit", then 100k a day puts you right on target (252 trading days)...note: always better to surpass expectations...
As for relationship between credits and bonus... again.. very difficult to say
What if total sales credits for the sales team is $500 million, but the book is up $800 million... and what if sales credits are $500 million... but the book is only up $250 million...
see the problem?
Thanks again. I know traders make profit on big/ask, meant to ask if the bank make a profit from the sales guys as well. Got it now.
No problem, remember everyone is paid from the same pool... sales, trading, structuring, research, middle office, back office.... it's the "revenue generating" role haha... . so in essence that 60k has to pay all the roles i mentioned just now (now u see why there's no way to say the sales guy will get 15k in his bonus of the 60k).... it's simply an approximation of the amount of business he brought in
Wow I did not know fx options priced things speaking totally in vol that is interesting but makes perfect sense.
What if total sales credits for the sales team is $500 million, but the book is up $800 million... and what if sales credits are $500 million... but the book is only up $250 million...
So using that example could you give a rough ballpark on what the salesman would make if they did 25mm in sales credits. Are we talking about 300k? 2.5mm? Give me a range because I dont know at all whats realistic. I know the answer is it depends same as asking "what does the average prop trader make" but I think this is a little easier to answer so please do your best.
Can you explain more on how the bonus is determined? Mostly am curious what % of sales credit you keep for your bonus because obviously the % is extremely low at a bb and at a smaller shop could be 40% (Inter Dealer FX Brokers)
was speaking to someone mentioning how in many cases fx inter dealer broking (say ndf's or optoins) can be better paying than fx sales?
can anyone comment on this
I don't know how Sales Credits and RC's work but it's very different from IDB brokerage. In IDB you receive cold hard cash for each trade you do and that gets billed monthly. Much easier to approximate your bonus pool because it's clearly stated in your contract. Typical clause -> make 2.5 times your salary and then everything after that is x % of your brokerage in excess.
Don't some banks on the street also have trading platforms where the trader decides the size of the credits for the salesperson depending on the price and volume?
Do all sales people get sales credits? (Originally Posted: 07/16/2007)
I am going into trading and I am just wondering how sales people get paid. A lot of the back office people I hear fighting for sales people over who gets the "production credits." Do these credits get converted into a hard dollar amount or does the firm use them to track salespeople's productivity? Also, I heard that some firms do not pay sales people commission. Is this true at all? Does the compensation structure for sales people differ between products? I have also heard that some sales people can mark up the price over that the trader has quoted and then keep this additional amount. Basically, if anyone knows the ins of how sales people get paid, I think everyone on the forum might benefit.
Thanks.
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