Funding/Short Term Trader
What is a funding trader, or short term trader. I know they don't sit in securities but inside the treasury division, but I am not quite sure what their daily role entails. Is it more a button pusher position or are they actively making trades? Where is the money they trade coming from? Is their goal to maximize profit or mitigate risk? Any help is greatly appreciated.
People who do the funding trade. They make decisions that have an impact on PNL. However, this PNL is most commonly not theirs, which is why their function is perceived to be auxiliary. A treasury guy's goal, like that of any trader, is to maximise profit while minimising risk.
What kind of decisions are they making?
To fund or not to fund... One of the most basic questions in trading of any kind is the one of duration. People who do the funding make decisions regarding the term of the arrangement (e.g. repo, etc), which has an impact on the overall duration of the portfolio.
So they have the power to say who gets what money for how long?
Well, not quite... They decide, for instance, for how long to lend out the firm's cash and securities in the mkt...
I'm still not quite sure what they're role is....do you know anywhere I can learn more about them?
Are they traders trying to make a profit for the firm? I thought they were a more middle office role?
Well, I think the best place for you to start is to learn more about how money mkts work. Once you have an idea of what people in the money mkt do, your questions should be easily answered. I think there are some threads here on this site that talk about these things and have some links.
How much leeway in terms of making a profit they have is dependent on the firm. But funding can be done in more ways than one which is why there are funding traders in the first place. And their goal is of course to fund things in the most advantageous way possible i.e. make money for the firm or at least not be paying out the opportunity cost of being funded in a sub-optimal way.
The London Whale incident may have slowed a lot of people's rolls in the field but having a small prop book is not too uncommon for these guys. You don't get P&L though, it's just a way to keep smart people from getting bored and gives you more incentive to do your job well.
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