• Sharebar

Looked through the forums and couldn't find a lot of info on Structuring. What do these guys exactly do and does anyone have a "day in the life" of a structurer.

Am I able to switch to trading and how are exit opps (want to go to buy side/hedge fund later)? This is for SA, for full time I would hope to work in trading, is this possible?

Comments (32)

  • FXTrader's picture

    The transition from structuring to trading is the most natural of any roles...period.
    Whereas the sales guys only need to know high level details to pitch structured products to clients, the structurer has to be THE MOST familiar with the product, all the risk measures and nuances that come with the product. Since trading is essentially the responsibility to hedge the desks exposure to these products (i.e. understand the risks and nuances), you can see why this is an easy transition.

    So exit opps from Structuring:

    1)Structuring
    2)Trading (sell-side)
    3)Sales
    4)Trading (buy-side)

    note: this applies to structuring roles where you actually get to price and develop "interesting" products, not those "structuring-in-name-only" roles where you can recommend buying an ATM vanilla call and selling an OTM vanilla call and refer to that call spread as a complex structure (lol).

    The pay of Flow traders, sales and structuring are all in the same range. (Prop traders obviously surpass this average).
    The thing with structurers, is if you only have 1 or 2, and they're invaluable to the desk, you'll pay them top dollar to keep them around. But if a hedge fund comes along an offers them top-TOP dollar to work for them...chances are you'll lose that key structurer. As was said before, for every 1 structurer, there are probably 2 traders and 3-4 salespersons.

    Day in the life? Ask Revsly. He did Structuring as an SA and will be doing Trading as an FT (exactly what you were looking for)

  • Revsly's picture

    Good summary, I was a SA in FX Options trading and structuring last year, so I can try to answer any specific questions in that regard.

    Jack: They’re all former investment bankers who were laid off from that economic crisis that Nancy Pelosi caused. They have zero real world skills, but God they work hard.
    -30 Rock

  • Jimbo's picture

    "The pay of Flow traders, sales and structuring are all in the same range"

    As you advance this is not true, as structurers do not have pnl. They can attempt to claim some shadow pnl but it's a tough site. Traders and sales will both be better paid.

  • FXTrader's picture

    Not the case at my shop. Deutsche Bank FX structurers are at a 5:1 ratio to sales. The reason they are paid so well here is because ONE deal that they come up with is sold by at least 5 sales persons to at least 5 different clients. At the end, they are viewed as invaluable because if we didn't have that 1 structurer, there's no way those 5 salespeople would've been able to generate that flow (i.e. sales weren't the ones who generated the novel idea, so they owe their sales credit to the novelty of the structurers idea).

    Structurers are paid more for their rarity ...not their "volume" (sales) or PnL (traders).
    And because you have so few of them who are top quality, they are able to command higher bonuses (it's a supply-demand issue).

    These DB structurers know that if their ideas and the resulting flow go unnoticed, Barclays will be happy to pay them.

  • In reply to FXTrader
    Brady4MVP's picture

    FXTrader wrote:
    Not the case at my shop. Deutsche Bank FX structurers are at a 5:1 ratio to sales. The reason they are paid so well here is because ONE deal that they come up with is sold by at least 5 sales persons to at least 5 different clients. At the end, they are viewed as invaluable because if we didn't have that 1 structurer, there's no way those 5 salespeople would've been able to generate that flow (i.e. sales weren't the ones who generated the novel idea, so they owe their sales credit to the novelty of the structurers idea).

    Structurers are paid more for their rarity ...not their "volume" (sales) or PnL (traders).
    And because you have so few of them who are top quality, they are able to command higher bonuses (it's a supply-demand issue).

    These DB structurers know that if their ideas and the resulting flow go unnoticed, Barclays will be happy to pay them.

    any idea how much these DB structurers make, including bonus?

  • FXTrader's picture

    It's hard to pin it down. If your structured products desk is big on vanilla structures that you can almost do through your own retail broker, then Jimbo's point will hold. If your desk is bigger on correlation, volatility, swaps and baskets with barriers and triggers, PnL will increase substantially and structurers will get credit for putting such profitable trades together and concealing the spreads in the product.

    The truth is structurers are harder to replace than traders or sales for the simple reason that there are less of them to go around and you only take a few, so you want to make sure you pick the right one.

    You can imagine what would happen if an Exotic Structuring desk lost their only 2 structurers? the generation of ideas for complex derivatives would be left to sales (because traders are busy managing the existing risk). Salespeople simply do not have the in-depth knowledge to understand the pricing and structuring of the products; again they focus on high-level aspects. Imagine having a salesperson trying to figure out what "divergent volgamma and vanna" means. (That's where your structurer comes in). very few salespeople are actually able to explain the intricacy of the exotic product's volatility profile to a client (again, the domain of a structurer).

    I've seen it happen and it's not pretty; the desk feels disjointed for awhile because clients call looking for some new idea to take advantage of some change in their market view; and the sales team feels out of their element trying to generate ideas and explain why it works. Result? Clients pull back their flow (very bad PR for that desk). So that's the key reason, the reputational and profitability damage that can be done by losing 1 structurer is too big a risk to take. (especially since some desks only have 1 structurer to begin with)

    Revsly, on the desk you were on, how many structurers did you have?

    My Exotics desk had about 20 sales, 8 traders and 2 structurers.

  • Revsly's picture

    Only a few in NY, London is bigger.

    Jack: They’re all former investment bankers who were laid off from that economic crisis that Nancy Pelosi caused. They have zero real world skills, but God they work hard.
    -30 Rock

  • FXTrader's picture

    No comp. sci background is required... at all.
    Let's put it this way... someone who trades derivatives (e.g. exotics) is typically more "quant-ish" than someone who trades delta one (e.g. cash equities). So a structurer needs to be just as quant-ish as the exotics trader, with the added element of "creativity" to devise new ways of structuring the products.

  • tan86's picture

    Sorry for the newbie question, but is the structuring team responsible for creating structured products such as (I'm sure the names will vary depending on the firm) RENs (return enhanced notes), BRENs, etc?
    If so, I know on the PWM side such products are very popular with clients and are pushed into a lot of portfolios to offer protection, etc. What is the demand for structured products on the institutional side (i.e.; are Pension funds, money managers buying a lot of pre-made structured notes or are they going to the desk and asking for a structure that fits their own markets views?).

  • Jimbo's picture

    I can't leave this

    "Structurers are paid more for their rarity ...not their "volume" (sales) or PnL (traders).
    And because you have so few of them who are top quality, they are able to command higher bonuses (it's a supply-demand issue).

    These DB structurers know that if their ideas and the resulting flow go unnoticed, Barclays will be happy to pay them."

    How many actual bonus numbers do you know, for structurers/sales/traders at vp level and above? I see from your other posts that you were an analyst on the desk, so I'm figuring the vp's aren't sharing their bonus figures with you. Top Structurers do not make as much as top traders or salesman, and the average line structurer is also going to make less. I know lots of traders and sales people who's total comp is in the 500k-2mm range, and structurers in the 250-750 sort of range. The head of structuring group will still make less than the head of the trading desk he structurers for. It's still a lot of money, but structurers simply don't earn as much as trading or sales.

    Oh and barclays doesn't pay.

    Jimbo

  • FXTrader's picture

    I'll go about this another way, and hopefully my point will be clear.
    This is the true reason I tried adamantly to have my position changed from trader to exotics structurer.

    It's based on a conversation at the end of my analyst stint with my senior mentor (who happened to be an FX MD).

    He was discussing how the firm goes about deciding bonus numbers. They key was, "how little can we pay this employee such that he doesn't think its worth it to switch firms" (i.e. find the threshold at which the employee will say "fuck it, doesn't make sense to move across the street"). And what he emphasized was that because our sales force is so large, you pay a few star salespeople and you can nickel and dime some others because losing one salesperson of 35-40 isn't going to hurt us that bad. However, losing one structurer out of 3-4 can really slow things down (and replacing him may prove very difficult). So when paying that structurer, we consider the downside of losing him much more acutely than with the dime-a-dozen salesperson.....I was honest with him and told him, "I want to be valued in that manner" (we had a pretty open relationship, since he was my assigned mentor).

    Next, let me go into detail a little further regarding how DBFX runs their desk. Sitting on top of FX Market share, DB likes to "put their money where there mouth is" with respect to structured FX products for clients. So in addition to developing ideas and structuring the products, our FX Structurers get to run a substantial "replication book" where we actually put our own capital at risk on the very idea we are pitching to client, in an effort to make them feel like we're not just trying to generate commission;but also stand behind the idea. Since this replication book is proprietary, the structurer gets credit for any gains (or blame for losses) associated with it. In essence, this gives some of our structurers an actual PnL to stand on.

    This last point applies really to our London operation. Being the center of FX worldwide, London is always a battle ground for key FX talent. It's chief rival in this location is Barcap. We've always experienced a shuffle between the two shops in FX sales/trading/structuring/strategy. So even if Barcap likes to stiff employees in other areas of the business, they certainly dont pinch pennies when they lure DBFX staff across the City...it's honestly a perpetual contest to see who can poach the most valuable members from their respective FX desks

    so as a general rule as we've all agreed, traders are the best paid. period. And on average, yes, a run-of-the-mill structurer will earn less than S or T. However, the role of the structurer varies from product area to product area and from shop to shop. As a result, their value and corresponding compensation isn't necessarily cut-and-dry (I've tried to show some examples here of where the added-value can occur)

    Hope this helps clear some things up

    --FXTrader

  • untilted's picture

    FXTrader, i agree with some of your arguments, seeing you are talking from the exotics structuring perspective.

    but somehow i feel most people who go into structuring stay on the slightly more plain vanilla perspective...maybe a few one touch notes and range accruals here and there, but a lot of basket notes/etc for retail/private banking clients...not as hardcore as some of the exotic stuff you speak about...

    i've spent a few weeks of time with both fx structuring and commodity structuring...

  • FXTrader's picture

    Untilted, I'm definitely not talking about the standard, low-risk typically principal-protected range notes, and one-touch structures that PWM clients are interested in. My desk was pretty hardcore exotics and our client-base were interested in pretty complex stuff. Things such as:

    1) Correlation swaps, american variance swaps/vol swaps, cross currency swaps
    2) asian options, faders, quantos, powers, lookbacks, compounds (lol i love these! options on options!)
    3) Capped/Floor variance swaps on baskets (for vega dispersion), Best-of; worst-of
    4) accumulative forwards, installment options, auto-renewal forwards, amortizing forwards.... and much more
    5) proprietary custom index products (this stuff takes a little longer, but when we do release it, the flow is heavy!)

    The group who deals with the standard vanilla stuff you mentioned (range notes, etc.) we typically refer to as "Sales-Structuring". (i.e. they dont really need to have an in-depth understanding of how we price and develop these, they kind of just put together low risk run-of-the-mill stuff for risk-averse clients).

    So you can see what I'm getting at when the desk is able to find people who understand the ins-and-outs of some of those products i listed (it's really a catch when they do and a substantial setback when they lose them)

    --FXTrader

  • untilted's picture

    ya i see.

    but just want to point this out to ppl on the board.

    coz i dont think the sales-structuring guys get paid as glamorously as a lot of the traders and straight salesppl...but i feel most structurering guys go into those seats, with very few highly quantitative and sought after guys doing exotics.

    creditderivatives, do you trade/structure creditderivatives? just curious.

  • Revsly's picture

    I don't recall whether this was said before, but if you are a very good structurer and the traders trust you, they might let you open a prop book.

    Jack: They’re all former investment bankers who were laid off from that economic crisis that Nancy Pelosi caused. They have zero real world skills, but God they work hard.
    -30 Rock

  • creditderivatives's picture

    I'm not even in fixed income lol. I trade Equity Derivatives.

    But this exotics stuff really applies to FX for the most part. Very few product desks see much volume in exotics the way FX does.
    And your right, there are probably like 2-3 guys MAX in FX Exotics Structuring (Revsly confirmed this for CS-NY), so chances are the role isn't going to be available anyway.

  • FXTrader's picture

    Revsly i touched on that a bit here:

    "Next, let me go into detail a little further regarding how DBFX runs their desk. Sitting on top of FX Market share, DB likes to "put their money where there mouth is" with respect to structured FX products for clients. So in addition to developing ideas and structuring the products, our FX Structurers get to run a substantial "replication book" where we actually put our own capital at risk on the very idea we are pitching to client, in an effort to make them feel like we're not just trying to generate commission;but also stand behind the idea. Since this replication book is proprietary, the structurer gets credit for any gains (or blame for losses) associated with it. In essence, this gives some of our structurers an actual PnL to stand on. "

    our replication book=your prop book

  • Revsly's picture

    Ok great, figured someone covered it. It definitely helps if the structurer is thinking about moving to the buy side at some point. Gives him a track record, along with a reputation with clients.

    Jack: They’re all former investment bankers who were laid off from that economic crisis that Nancy Pelosi caused. They have zero real world skills, but God they work hard.
    -30 Rock