What do senior people in trading do?
Distinctions between junior/senior roles are very clear-cut in various career paths in finance. Senior bankers go out playing golf with clients while juniors make powerpoint slides. Portfolio managers in hedge funds make investment decisions while junior analysts create models and pitch ideas in a more supporting way. However, S&T is one area in finance that seems like seniors positions are not fundamentally different from junior positions in terms of what they're actually doing.
So what are some high-level senior roles in trading like? Do most of them still sit in front of nine monitors and execute flow trades with a 21-year-old next to him? I've seen couple MDs who actually do. Was it just them, or didn't I get to see the really high profile ones who are sitting in their cells doing some other, more important stuff?
And if trading is all about trading in the end, doesn't it make economical sense for the firm to lay off senior guys and fill their seats with cheaper juniors? Clearly, it's not like banking where each year of experience adds exponential value to your worth. I'm not saying trading is a bad profession, it's just that there are much less information about S&T than banking so I'd like some clarifications on my perceptions. Thank you.
I'm assuming your asking this question from a sell side perspective. This can depend if you are market making or prop trading. Prop trading in banks is quickly being eliminated. As a market maker senior positions may act as relationship managers with certain buy side firms. They can also handle certain products at certain monetary values. Senior positions may include managing a certain trading/risk desk. Many firms can have very specific desks depending on the products that they are trading. The one thing you can not replace in trading is experience. You don't see many people stick it out on trading desks too long( less than 10yrs) because people tend to burn out. Also, it is very possible to make millions before 40 and then retire to trade on your own or open a hedge fund, brokerage, prop house, etc.
Answering your last question: I guess there is a reason why they made it to senior level - possibly, they are bringing in serious amount of bucks to the bank, or if they wouldn't have, probably they had already been laid off. There is no point in letting the senior (aka more or less profitable) guys leave and recruit new (likely not profitable) people to the desk.
Most seniors have something the juniors don't - long standing relationships & RM skills. Try finding fresh pups out of college who have that (and can add to the bottom line). On a side note, they take important clients golfing, to dinner, and other means of entertainment to keep things interesting.
I have seen this too. MD's shoulder to shoulder with analysts, nine monitors each. I always wondered about this myself because I am in IT. I have set up MDs in lofty corner offices and MDs on the trading floor's shared desks - The only thing I have come up with is that they must pay the Trading MDs extra to be staying in the trenches like that, but of course I could never ask such a thing. Why the bank keeps them there and pays them so well was obvious to me: the juniors jumped when the MDs told them to, they operated like actual directors on the floor, making about 20 multi-million dollar decisions a minute, going to bat for the whole group. That's a lot on one persons shoulders. Just Plain Scary. Also, what GCTrader said.
When I was in BO, I would see traders get a title bump out of no where. I assumed it was because they were doing well profit wise, and if you are already being compensated well monetarily, the only other real reward is a title bump. Also, reading some day in the life type of articles, seems senior guys are there to help bail out junior guys. So a trade goes bad and the senior guy can help turn it around, and also take the heat from trading heads.
There is a big distinction that has to be made, MD traders and MD's that are management. MD traders do what it says on the tin, they trade. As a junior on a BB trading desk I sat next to a trader with 20 years of experience. You do the same job except the senior trader has larger risk limits/more autonomy and generally oversees everything on the desk and has the last say on things as well. If you have a ship you need someone who is the captain. You say why dont they fire these guys and replace them with cheaper juniors? Well because in trading mistakes can easily cause losses that are high multiples of the basic salary of senior traders, so you need experience at the helm. To be honest the diff between a juniors base and a seniors base isnt that huge anyway.
Management MD's are higher up, they will oversee divisions and spend most of the time overseeing risk and going to meetings and trying to create synergies or some shit. Other than that I dont really know what they do.
at my last firm, i saw the head of a trading desk made the same base salary as the middle rank traders (200k)....but he made 25mm in trading P&L..where the rest of the desk was essentially flat P&L. Now if you were management, who would you fire??
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