Intro: Experienced Trader - Q&A

To answer your last question first: to move into Trading, I think the best area is Market Risk. 

It has the most day-to-day interaction with trading desks so gives you the best exposure. I have also seen people move from market risk to trading. The key is that you are seen as someone who is smart, with attention to detail and understands the trader's point of view, which is easier said than done. For this it is important that you understand well the products that the desk is trading and the risks involved. You can stand out by doing some kind of extra analysis on a desk's risk for example that gives some real insight that benefits the traders also.

Well done on getting this role and good luck with it!

Thanks for the question. I should have mentioned something about that in the initial post..!

I traded with end-clients structured products with underlyings mainly interest rates and FX, but also equities, commodities, credit. These products would have some sensitivity to volatility in these assets and to correlations between say rates and FX. To hedge the book I would trade 'vanillas' in the underlying markets, such as spot FX, FX options, swaps, IR futures, swaptions, caps/floors, etc.

I think this type of desk can still be a (very) good place to start. As long as you move within at most maybe 2-3 years then I think the risk of being pigeon-holed is not too great. 

What is impossible to learn is all the practical aspects of trading and you will get good exposure to that in this type of role as well as exposure to other trading desks and other parts of the bank. 

In terms of actually making a move internally to another desk. As a junior employee you can always ask various desks to spend a bit of time with them to see what they do or to have a chat. Some traders will not be interested in this at all and others might be very happy to help, so definitely worth a try.

Your background seems like it could definitely be very suitable for a macro fund in the future.

1. Yes, I think this is still a very good option. By market making you will learn so much about trading. Now we have the Volcker rule etc to limit taking prop positions, but in reality you can take lots of positions. The reason is that there is no requirement to hedge one for one everything you trade with clients, so if you trade say a 5y swap with a client you can "hedge" it with a 10y swap, if you have a view on 5s10s. And so on, you almost have to have a view as otherwise you are paying away all the bid-offer that you earn from clients to other banks.

2. A lot of the inter-dealer brokers seem to speak French, but I would not see much value in learning it for our purposes. I always recommend reading Hull's Options, Futures and Other Derivatives for someone with a somewhat quantitative background. And I think the writing of the FT is great but that is just my opinion.

   I also got an internship applying from mainland Europe so hopefully you can do the same!

As part of managing a cross-asset derivatives I have had crude positions but always small relative to positions in rates and FX. Regarding stat arb: I have only looked at things in that way when the assets are more closely correlated and have a stronger connection than crude and equities for which I see less of a reason why they absolutely have to be correlated or revert to some mean. Though as I said I have never looked at oil vs equities in great detail. 

Having worked in both kinds of environments, I would say when you are starting out and learning the cut-throat culture is better. You'll be more stressed but you'll also be sharp and forced to have great attention to detail, as you don't you want to mess anything up. This was you'll learn not only practical skills but also how certain desks get that better performance. Then later on in your career you can move to an environment that is a bit more relaxed. 

The answer depends on which kind of person you are. If you are confident that you can swim with the sharks in that cutthroat environment, and sort of have a type A, aggressive, competitive personality, I would choose that cutthroat firm. But if you are more of a careful, risk aversive, methodical person, you would do well in the less competitive environment. Your plan would be to excel in the latter type of firm and work your way up to upper management, and then you could switch to the cutthroat type of firm, where you're floating above the sharks. 

Sure, happy to share. 

I studied Business majoring in Finance in mainland Europe, at a well-regarded university. I applied to probably about 20 investment banks to work in some kind of markets area. I only got one interview, which was when I applied to the office of a major bank in my home country. This went well so to London for more interviews, in which I also did very well because I had spent so many hours preparing. 

I got an internship in Trading which converted to a full-time role in exotic derivatives trading which was a very profitable area at the time. After two years I left for another bank to do the same thing. Because the desk I was on was very profitable and I was doing well I got promoted every 2 years up to MD when I was 30. 

Lots of change after the Financial Crisis and the more complex products I was trading became less popular because of limits on risk taking both at banks and at clients. I took a few sabbaticals, did a Maths degree, and then worked in Risk for quite a few years. 

I now try to spend my time passing on my knowledge in various places (on here, YouTube etc) so hopefully someone can benefit. 

I personally have not seen that (though I think I might have seen someone on here say they had, but I can't remember who it was, so might be worth asking in a separate post if you want to find out). This of course does not mean it is not possible. I could see it maybe if it was some trading role where the valuations etc knowledge from IB would be valued. 

"Is there going to be more competition for good trading candidates between HFs and banks?" I think so yes. It seems some HFs pay massive starting salaries to graduates, so inevitably I guess some of the top candidates will go there. I still think initially working as a market-maker at a bank does give very important skills that HFs will continue to value, but then again a lot of the market making is becoming ever more automated. As a student now, yes I would definitely consider starting at a HF. Going back to banks I have seen work for people who then become say some MD in charge of a bunch of trading desks, but not as a trader.

I agree with you that change will probably be slower than many expect in established organisations like the large banks that have been around for a long time. All the places that I've worked in have old systems that will take forever to replace. Change will be quicker in newer and smaller companies that can start fresh.

I guess any job has an element of doing similar things every day. But I always felt trading was interesting and never boring as though similar, no two days were ever the same and there are always new clients, new transactions, new problems to solve. And it is quite fast paced, so you have to think on your feet so to speak. I've never worked in IB, so don't rely on this, but I would have thought there is also a large element there of doing the same stuff every day, like staring at similar powerpoints and spreadsheets. Just I think less fast-paced and longer hours. 

The most exciting part and also the most stressful was probably executing large transactions with end clients. For derivatives the price changes constantly as the values of underlyings changes, so you really need to be on top of things all the time.

I started the maths degree part time and then completed it full time. I guess I’d always wanted to do a maths degree both as I found it interesting but also to show myself I could do it.
I’d say for the vast majority of trading roles a maths degree is not needed at all, say trading cash equities, bonds, etc. But on the other end of the complexity spectrum a maths or physics degree is very useful and for some jobs even a requirement,like for trading complex derivatives as you need to be able to speak to the quants who are building the models.

Well done on getting the two internships. Once you are doing these you will be in a great position to speak to people internally to get a good feeling about who is doing well and potentially hiring. This will be a bit of trial-and-error: some traders will not be interested at all to speak to you but others will be happy to let you sit with them to see what they are doing and ask questions. In terms of preparation reading probably the common recommendations of Hull, Natenberg and I also liked Taleb's Dynamic Hedging. 

1. Yes, I have seen that. In such a role you have visibility to a trading desk. If you can do some analysis that is useful to them or in general with your regular interactions show you have the right knowledge and insights. It is particularly important that you show you can see things from the trader's point of view and are not overly theoretical and rigid in your approach.
2. As you say it is more common for people to start in the role at a younger age, so it is important to show that in the extra years have gained practical insights into risk management and trading that the younger ones do not have.
3. In banks there are through the Volcker rule limitations on prop trading, so indeed what you might call quant trading is more common in say hedge funds.
4. Yes, those moves I have definitely seen. Maybe less so to HFT as some roles there sometimes emphasis a lot coding skills etc.

It might still be worth a chat with your boss or someone else a bit more senior in your team. They'll likely know whether or not your contract would be extended etc so even if they don't say it directly you can still get a good sense from them. You can say that you would love to continue on your current desk but you realise that may not be possible so do they have any advice. Also if you are at a larger place there might be other internal opportunities, potentially advertised on some internal website. Otherwise, yes I guess you have to look elsewhere.

Anway, good luck!

For equity traders (and maybe also credit) those could definitely be options, with L/S and LO I guess more obvious options as a move up to a hedge fund, though I could see ER for people who want to move away a bit from Trading.

For rates, FX etc I guess similar moves could be made to macro-focused funds.

It sounds like it will be hard for you to grow much on this desk and I agree it seems unlikely that much will change. I personally would go for the the MCSCF program. From there you should be in a better position to get into the buy-side or at a bank in a role that suits you better. Of course you will be giving up your salary etc and need to pay for the degree, so worth thinking through carefully but seems like it could be a good investment.

I guess you could work on any desk but if you liked the type of work and thinking you needed to do for your degree you might enjoy more trading products on the more complex end of the spectrum. So any kind of derivatives desk or structured products could be a good fit.

Sorry about the slow response. Yes, Rates (like swaps and also derivatives/“vol”) tend to be desks to take significant positions. D1 desks could also do that but might do so less often. For all of these it depends a lot on the trader how much risk they want to take. Some credit desks also can have significant positions, though sometimes less liquid. Good luck!

The desks I was responsible for traded derivatives/structured products where the biggest risk positions were in more exotic parameters, and remarking those at each month end based on consensus market data led to the biggest p&l swings, often say 5 to 20 mio usd. As part of risk managing the book I could definitely also take risks in delta and vega with smaller risk limits than more vanilla desks. Largest prop risks I might run in delta would be something like 100 mio USD equivalent FX position, or something like 1mio usd per bp in a curve spread say 10s30s. Vanilla desks would often run much bigger risks.

I am not very familiar with it but I’ll tell you my thoughts anyway. Any kind of quant AM will mean using mathematical models and algorithms probably both to make investment decisions and for trade execution. A typical day won’t be as fast-paced as a flow trader, it’s more about monitoring models, digging into data, researching new strategies, improving code, and managing portfolio risk. Interviews could be pretty intense on the quant side: probability, stats,logic,puzzles and depending on the role also coding.

I'm liking the videos, both the career/job prep ones as the math/finance educational ones. 

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