Equities Delta One - Hot or Not?
Heya guys, I was wondering what's the consensus on equity delta one trading desks? - What are exit opps to the buy-side like (which funds typically take on delta one traders, if any) - How transferable are the skills to other desks - Compensation - Longer term prospects including how susceptible are the roles to automation
Thanks!
It’s pretty balance sheet heavy biz. So would expect the p/l to be pretty much weighed down by that.
bump. would like to know as well.
Generally works OTC, so does this imply that it is one of those desks that is less likely to be automated the near future than its other counterparts in equities?
yes - farther away from automation than other trading jobs since the market is OTC. Algos have not made their way into the space to the same extent as cash trading
lol. you do know delta one is under cash equities for many banks? in US, delta one is getting automated. when you can cheaply replicate index using etf or undelying stocks, why bother with swap?
Bump. Very interested in the answer to the OP. (I need to choose between this or strategy consulting). Thanks.
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There are no exit opps to the buyside unless you want to work on a securities lending desk at a l/s or multi-strat fund, which typically sits under HF's Treasury. I've also seen a move to buy-side execution although this is less common. Like many S&T roles (which are diminishing by the way), the skill set is niche and you won't find obvious exit opps besides moving to another D1 desk at a diff bank.
As stated above, the securities lending and synthetics business is very balance sheet heavy and banks are seeking efficiency and higher ROA these days. That said, Delta One is a profitable business for large banks and you can do well if you choose to stay long term. However, it will not provide you with the skill set to move to a buyside analyst role if that is what you're after.
not necessarily...depending on how you hedge (or don't hedge)...a delta one trader can take on significant market risk...and therefore have significant P&L...which means that a risk taking seat at a hedge fund could be a viable exit opp...but that assumes you are a good trader...and if you are that good...well....for trading, the exit opp is....trading.
Risk taking seats at most if not all HF's are occupied by portfolio managers running an asset class specific strategy (ie Equities Relative Value, StatArb, Merger Arb are a few of the dominant strategies that major HFs employ). A delta one trader will not have the skill set to add value within the context of these typical HF strategies except perhaps event arb for the stock loan piece - taking risk and making money on the sell side does not a buy side PM make. PMs typically work within a relatively tight risk framework and within their strategy mandate.
D1 traders are able to make money using the bank's ample balance sheet and trove of assets across institutional/retail accounts (ie boxes) to create ETFs/Indexes, facilitate swaps and other synthetic products, borrow and lend stock/internalize etc...this activity is not directly relevant to most portfolio management/investment groups on the buy side. Anything is possible tho
Why all the talk about D1 of late? Have banks been ramping up recruitment in this area? If so, why now?
job opening on indeed.com
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