Traders screwed?!?

I'm often concerned about my peers in the Sales & Trading career track. While many of them seem to think they will be the next big HF PM and such (and I am certain that a few of them will be) I have a hunch that the vast majority of them will be either unemployed within a couple of years or cut at a mid-level management role, either from poor performance, a bad mistake, and/or automation, and then have nowhere to go.

Does anyone have any insights on what happens to those who go into trading out of undergrad say 10-20 years out? Seems like a dead end for most since they would have built little to no transferable skills to enable them to change careers after they get fired

 

A lot of people lateral out to other areas of the bank at junior levels. Some people go to completely random sales jobs that may not be finance related. Others go to business school. Your transferable skills are very product dependent, so it’s hard to give a good answer without knowing which desk they’re on.

I think the people who get on good desks and perform very well are in a great spot. Sales and trading is a great career if you’re in the right product or you get to move up quickly due to unexpected exits by people more senior than you

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Exit opps are what you make of them, although will be somewhat desk dependent. All high volume products will continue to be automated (think rates and etc.) leading to further spread compression and making it more difficult to generate huge PnL (as we've seen with equities). However, on some lesser liquid products you'll still need banks with balance sheets to take risk and provide liquidity. I'd suggest reading this post if you want a better understanding of each desk and its pros and cons:

Picking The Right Trading Jungle

 

as a trader myself...this rings true in a very hurtful way. The exception is the superstar.

The superstar trader can make millions to billions...and will quickly eclipse most ibankers. Every person who goes into trading thinks THEY will be the next superstar. If you don't think you'll be the next superstar....then you don't belong in trading.

risk vs reward...ibanker is the statistically better job...but if you are playing for the extreme edge, then trading offers the gambler an opportunity that ibanker does not.

just google it...you're welcome
 

People are throwing ms at this post but having worked in S&T for a year before moving over to IB, all of that is pretty much true. I worked in equities, which has seen a lot of restructuring (& continues to see it moving forward) and those guys who got cut ended up in pretty rando sales gigs. Seeing that was a big factor behind my move to IB.

Like want2trade says above, a lot of sales & trading is banking on yourself and in the majority of cases, the gamble doesn't pay off especially in an era of rapid technological change that's shrinking rev pools and headcount.

 

yea - unfortunately the guy has a point. Might be exaggerating as to the amount of traders getting cut, but it's pretty brutal. Also bonuses for juniors are still not that bad and 50-100%, although maybe he is right and that has changed as well. Before after 10 years on a trading desk you could retire, never again can you do that... Anyways - bottom line is the guy has a point and even if it might be exaggerated it's not far from the truth.

BS: on the hours though - traders have better hours no matter what

 

its rare for a 1st year trader to make more than that...because most 1st year traders aren't actually trading...they sit next to a senior guy, do all the bitch work...and are paid to learn thru osmosis for the 1st year. Most 1st year traders lose money in their trading books (if they actually have their own book)...some make a little...but its VERY RARE for a 1st year trader to make significant money trading. Trading takes years to learn...and in the meantime, the job is to not lose money. Around year 3, BB traders are expected to start making real money.

just google it...you're welcome
 

Agree that it is all about what desk you are on and where you want to go. For instance - I had a conversation with a macro HF last week - where trading (structured products in particular) was the only realistic way to land a gig there if you werent a quant with a phd, pricing in the background. Wasn't too partial on any trading any other product, particularly (to be expected) FX which makes sense. This is obviously very specific. No one from IB and almost no one from a research background - which seems to be supported by other posts about macro HFs on this site.

“I’m not fat. I’m cultivating mass.”
 

For someone 5 years in on a fixed income desk, I'd say 250-275 area. Ofc, if you're at a lower tier bank or are a low performer you'd get less than at a top 10 bank and are performing well, so it could easily range. A senior associate doing well at a BB could be making 300. You'd probably be working a bit less than 60h per week. If you have a good rep, are really good, or get along with people well, you'd probably have other options, but they may not necessarily be worth the risk.

 

S&T used to be better hours, same base, better bonus upside, more fun/fratty/freewheeling, more quantitative/abstract/intellectual with regards to IB (like over 10 years ago).

Now, the hours have gotten worse, the base is lower than IBD, the bonus upside is gone because you can't take risk (and with MIFID II, in Europe, barely talk to clients), tons of compliance/watching your ass (fratty atmosphere is gone), more coding less finance, and yes, you're slowly being replaced by software, while your boss sees his retirement getting pushed further out with each disappointing bonus, and no longer even pretends to care about your career.

If you're on a good desk, and your skills match the desk perfectly, it can end up making more sense than Banking. Banking is also mired in regulations and is just as boring as ever (PPT formatting, typo-catching, save-as Pitch_v41, etc), but it hasn't deteriorated as much as S&T has.

The tables have definitely turned.

The truth is you're the weak. And I'm the tyranny of evil men. But I'm tryin', Ringo. I'm tryin' real hard to be the shepherd.
 

Agree with all of this.

Most senior guys at my desk know this is the final act and are preparing for retirement. Factor funds, indexing and cheap online trading platforms ruined active management. Trading volumes and margins are lower than ever making it impossible to get a big bonus in flow trading, and the few prop traders that exist are often times limited to algos or extremely strict trading rules.

I think the guys that are at risk are traders with 5-10 years of experience. No pre-2007 bonus to fall back on and a skillset that is too narrow for a lot of corporate roles.

Oh, and fuck MIFID II - can´t even take a client out for lunch anymore without starting a compliance paper mill.

I don't know... Yeah. Almost definitely yes.
 

So for a freshie entering the business, is it better to be on the sales side or trading side? who will have a job for the foreseeable future? is it possible to make 500k after tax in this business and how?

 

once you are in the BB trading biz for 3-4+ years, your base gets pegged around 120-200k (depending on the bank)...and it pretty much never goes up from there.

At a BB, as a trader, your bonus is between 4-6% of your P&L...which can vary from zero to infinity...as a trader, its up to YOU to make your P&L. Nobody else is responsible for your P&L.

A trader who makes 60 million dollars trading can get a 3mm bonus (this trader should go to a hedge fund to collect the 20% to get 12mm). This 60mm trader will almost always have multiple hedge funds to choose from. Its very rare for a BB trader to stay at the BB making that kid of money, because the hedge funds pay so much better. Its also very rare for BB trader to make that $$ in the first place...because trading is so incredibly hard (hence, why hedge funds pay so well).

just google it...you're welcome
 

Well, a lot of those 60mm traders do go to a hedge fund only to find out that they don’t really know how to make money :)

I have a friend who lives in the country, and it's supposed to be an hour from 42nd Street. A lie! The only thing that's an hour from 42nd Street is 43rd Street!
 
want2trade:
once you are in the BB trading biz for 3-4+ years, your base gets pegged at 150-200k (depending on the bank)...and it pretty much never goes up from there.

At a BB, as a trader, your bonus is between 4-6% of your P&L...which can vary from zero to infinity...as a trader, its up to YOU to make your P&L. Nobody else is responsible for your P&L.

A trader who makes 60 million dollars trading can get a 3mm bonus (this trader should go to a hedge fund to collect the 20% to get 12mm). This 60mm trader will almost always have multiple hedge funds to choose from. Its very rare for a BB trader to stay at the BB making that kid of money, because the hedge funds pay so much better. Its also very rare for BB trader to make that $$ in the first place...because trading is so incredibly hard (hence, why hedge funds pay so well).

Really curious where you got this 4-6% number from, and being a trader at a hedge fund does not entitle you to 20% of profits. You shouldn't comment on this stuff without xp

 

20% for trader at hedge fund is only slighter higher than the market rate. It’s probably 17% on average. All multi-strats pay in that range.

Different if you are execution trader. But that is fairly standard at macro/multi strat. At the bigger prop groups 30-40 is standard ,

Honestly I’m not even sure what the difference is between multi-strat and a drw. Probably a slight difference between position building versus daytrading but they both do both.

 
GoIllini][quote=WellsFargoBaker]Looks like trading is getting fucked</p> <p><a href=http://www.reuters.com/article/2011/07/08/us-compensation-banks-idUSTRE76741R20110708[/quote rel=nofollow>http://www.reuters.com/article/2011/07/08/us-compensation-banks-idUSTRE…</a>:

Traders definitely are getting fucked more than investment bankers...I mean they have more time for it. :)

Yes, because they're getting laid off and replaced by computers.

 

When markets are doing hot, your EV is much higher because no one gets fired and the $ upside is massive. With regulations, technology etc, you are not gonna make as much money. The trade (i.e. doing S&T) doesn't look as attractive. We are never going back to the heyday.

HOWEVER, i gotta address some of the myths posted above regarding life as an analyst on the desk.

Hours: Except for some very specific desks, no one on the floor works 70hrs+, not on a regular basis anyway. For juniors, a 60hr work week (12hr/day) seems more like the norm.

Comp: You get paid if your bank/group/desk make $ and you perform. That's why with all the restructuring sh!t going on, some banks just don't pay their juniors anything. That's because they have a smaller bonus pool and they still gotta pay their material risk takers first. Comp also varies more between the top and bottom bucket than in IBD and it's not a standardised X% per bucket like in IBD. Basically you can get paid >100% and you can also get 0.

Not all seats in S&T are the same. It depends on the product, your bank's relative position within that market, your boss etc and the thing is most graduates just kinda luck into their seat/desk.

 

There are like three threads covering this exact topic,,,most of them made it to the front page.

"Greed, in all of its forms; greed for life, for money, for love, for knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA."
 

If this new regulation actually passes, no doubt prop desks will be hurt. By how much, I'm not sure.

Luckily, investors aren't stupid, and they know where the talent is. So when Joe Trader and his entire desk get let go, he'll take them all to create Joe Trader Capital LLC. He'll just drop a line to the most likely numerous people he knows and say, "Oh, you remember Goldman's FI prop desk? Haha, yeeeah that was me. You can make your check out to my firm, talk to you at the end of Q4."

Like you said, it would may end up being great for the traders. I'm guessing the reason they didn't leave in the first place was working for a firm with a bit more capital behind them (a bank vs. a hedge fund that could tank at any point) and then comp they were given was too enticing to leave.

Just my thoughts though.

 
Exclusive8:
so would this regulation no longer let market makers take some prop positions?

Market makers inherently take prop positions by being market makers, the difference being is that its prop in the sense that you are taking the other side of the trade and if you do not hedge then its a prop bet. You cannot actually be a market maker without some 'prop' element to it.

http://convertyourbond.com Free market commentary and trading insights to help with interviews
 

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