I recently stumbled upon this site again after many years. I was active on here as a student (under a different username) and it proved quite helpful to me at the time, so I thought I would give back. Feel free to ask me anything and I will try to answer in as much detail as I can, although I will be a bit vague/give ranges with information that could reveal my identity.
Some background about myself: been working in FICC for the last 5 years, moved to my current trading desk around 3 years ago, and primarily focus on DM rates.
Hey, thank you for your QnA session. I hope you are doing well.
Thank you.
I started in FICC straight out of university and have been there since. I don't have a masters degree.
I got my own book as an analyst within the first 3 months of starting, however it was a small book trading a product/market that the other members of my team didn't care about (understandably). That book by itself did not justify a headcount though so I also worked on another team that sat with my main team and ended up spending 80% of my time assisting the secondary team. The other team did not really take any risk though, so I didn't really learn much that helped me with my current risk-taking while spending time with them. Due to some departures on my main team, I was given a bigger book on my main team towards the end of my time as an Analyst (mainly as an interim trader while they would look to hire someone senior) and luckily I managed to do well during tricky markets, which led to the head of the desk deciding to let me just take over the book rather than hiring externally. I've held that book since and been able to pick up one or two more, once again due to departures at fortuitous times for my career. To be honest, doing well when covering a book post-departures is the story for most junior traders that work their way up to bigger responsibilities early in their career. Having a great manager that is willing to take a punt on a junior that shows potential is also a necessary ingredient.
As far as trading stress, dealing with that comes with experience. It's very common for analyst traders to feel imposter syndrome and hard to break away from the academic mindset of aiming to be right at least 90% of the time, but it's necessary to do it if you want to be successful as a trader. At the end of the day, it's a confidence game. Initially it is hard, but as you begin to make small amounts of PNL, your confidence will grow and it becomes recursive. I still remember fretting when I lost 10k PNL on any given day during my first few months as an analyst, but then that grew to 20k, 50k, 100k, 500k, 1mio and so on. To be fair, a 1mio drawdown will still spoil my mood for the day but that's just my personality.
As far as learning is concerned, you can and should ask as many questions as you can from the more senior traders. But you also have to be aware of the fact that there are many different styles of trading so its always good to try and understand that particular senior traders' approach as a foundation for the advice they give you (are they momentum traders, do they trade very directionally or do they do a lot of relative value, how do they handle drawdowns etc.). Once you've done that, the most important step is to actually try and take risk yourself. I learnt the most from the mistakes I made, particularly with regards to not trading emotionally and being honest with myself about having the wrong view and therefore chopping the risk.
I'm at a BB. I won't state my comp as that could potentially be giving away my identity but I can give some rough ranges from the numbers across a wide range of colleagues/friends with varying levels of profitability and also at different banks. All these numbers are for traders that have their own books (i.e. a number next to their name). Some got lower comp than others despite higher PNL because their books are understood to have more franchise value.
Analysts: 150k to 350k (getting more than ~250k requires some serious outperformance)
Associates: 225k to 1.5mio (I know six separate individuals in the 600k-1.5mio range across 3 different banks, some of whom earned these numbers multiple years as Associates. Getting through the 7-figure threshold at this level requires senior Director/MD level PNL and also a track record of outperforming your peers at a similar level.)
VPs: 250k to 2mio (At this point, it starts to become quite meritocratic. If you don't make money, you'll just get your base and a small token bonus. If you make a lot of money, you'll get paid. While I don't personally know any cases beyond the 2mio mark, I would bet that there are a handful out there.)
The key to getting paid is knowing what your PNL would be worth elsewhere and for management to know that you know. I've seen a fair few cases of people being underpaid massively only to get counteroffered what they were initially due when they resign for another bank (think counteroffer of 2-3x what they were paid).
I've seen a few posts on here that talk about how bad the pay is in trading nowadays and how you'll be lucky to be a VP earning 300-400k. These are posts from people that either have no idea what they're talking about or do not understand statistical distributions. Pay in S&T is highly variable and it is not normally distributed. You're floored at your base salary (unless you get let go) and your tails to the upside are quite big and asymmetric (see here: https://www.efinancialcareers.hk/news/2022/01/goldman-sachs-bonuses). For that reason, you can't look at trader pay using averages. Hell, I know franchise traders at tier 3 non-BB shops that don't take much risk if any and get paid 600-800k all-cash. Most traders will know roughly what percentage of their PNL to expect in terms of comp even though it's discretionary and not baked into your contract, because traders on the floor do talk with one another. That being said, there are diminishing returns to comp so you can't expect to be paid 3x in your 60mio PNL year compared to your 20mio PNL year.
Rant over.
I've always considered being a PM at a HF and have been offered such roles in the past. Ultimately for me, I'm trading in a similar way already and running a much larger "book size" in my current role than what the HFs are offering me. So even if I make the same returns, their 3x payout on a book which is a third the size gets me to the same number. To leave an environment I'm intimately familiar with and a great team/work environment to start new for the same short-term end goal doesn't make sense to me at this point. Of course, if I do well at a HF, my book size and therefore my earnings could grow massively but I guess I just don't care about money that much. Side note, it's also a lot easier to do well as a trader if you really enjoy what you do and the people you do it with.
Trading derivatives is a good way to build the exact skillset that is utilized by HF PMs in that space. Avoid the micro-space (e.g. equities and corporate credit) because you're competing with people from IBD/PE/Research backgrounds as well for those roles and if I had to guess, you'll be outclassed.
There is one thing I want to add on the comp side of things. The variability is always going to be the case when you have a number next to your name. It may not seem that way when you look across at IBD and see that they average out to slightly higher numbers at the Analyst-VP grades. This is simply because they're putting in more hours and do not have a number next to their name. In their world, the PNL-responsibility only comes at the Director/MD levels. But once you get to those levels, it is almost as variable as S&T. Hence, it is not an apples-to-apples comparison.
Regarding Volcker, I'll just copy and paste my comment from another thread: "Volcker doesn't make much of a difference. Traders can just say their risk is in anticipation of client flow. Funnily enough, while that may seem like a cheap way to get around Volcker, it's actually true if you're a profitable trader. If it's the right trade that ends up making money, inevitably there will be clients asking you for a price who are looking to do the same thing at some point. As a market maker, it's your job to decide whether you want the client to take you out of some of your risk for a bit of spread or if you think the trade has a lot more to run and you price wide enough to miss."
Honestly, I don't know enough about how the commodities trading operation works at Gunvor/Glencore to comment on this and don't want to speculate at the risk of giving you incorrect information.
Thank you so much for sharing your experience. I am extremely interested in trading however missed the application for summer program. Graduated from France, I find quite a few traders have strong quantitative background and thus they prefer students with similar background. Also, there are some traders coming from quants.
1. My first question would be do you think quantitative academic background is becoming more and more necessary for being a trader from the perspective of recruitment?
2. My second question would be what do you think algo trading and how do you see algo trading evolve in the future? Do you think there would be less trader needed due to automation by machine/codes?
3. This one is from my personal career development. I am determined to be a trader, however there are few available roles for junior. I am offered a structuring analyst role for securitization (ABS/MBS products). What's the chance to transfer to trading desk? Could you please also share your thoughts on mortgage products/markets?
Appreciated!
1) I think it will always be good to have exposure to derivatives. How much exposure you'll be able to have from your desk is dependent on how much freedom your bank allows your desk.
2) I have absolutely no interest in DCM or syndicate. It's basically a sales job and you're just a grunt as a junior.
3) I think that moving to the buyside to be a PM is much harder when you're looking at micro products (equities & credit), because you're not really gaining the skillset that is needed to fundamentally understand and invest in those products. I suppose there are always systematic and RV shops where you could go but the options are more limited. Comparatively speaking, in the macro space you're directly learning the skills that you need to be successful as a PM so the role has a much more direct crossover.