Q&A: BB Rates prop trader

i trade 10yr-30yr interest rates....all prop...no market making...medium frequency (average trade duration lasts less than 8 hours...typically more like 2-4 hours...occasionally measured in minutes...but that is very rare).

been doing this a long time, and have honed my craft into a narrow set of activity.

in the past i would be doing many trades per day, on avg...but recently its more like 1-2 trades (open to close) per day...sometimes nothing

i started out as a desk strat / software developer...mostly doing RV work...eventually got a chance to be a market maker trader...and then when i learned enough to make money prop trading i made the jump

ask away...

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Comments (33)

Apr 27, 2021 - 2:13pm

I'm an incoming S&T summer analyst at a BB in one of the Asian hubs (HK/Singapore), and we recently got a bunch of emails for our desk preferences. Of those available, I am most interested in rates sales and rates structuring (I would have preferred rates trading but that wasn't available), so I was wondering whether you could tell me a bit about the required skill-set differences for these two desks (and maybe trading as well)? Also, what do you think of the outlook for these 3 desks under rates, and which desk do you think has the best exits? 

  • VP in S&T - FI
Apr 27, 2021 - 3:17pm

structuring (sales) is more relationship based role..structured trading is more a quant role these days

rates is always a good place to learn the macro skillset...and if you are a rates salesperson with good client relationships, there is always a bank willing to hire you.

rates trading is one of the last vestiges of hidden prop trading in the US banks...sink or swim is a real risk

the world is awash in govt debt....rates sales will always be a good place to be

Jun 2, 2021 - 2:03am

As an incoming S&T analyst at a BB with a rotational programme, I am quite curious about the other " Last vestiges of hidden prop trading". What would you say are other desks that have prop trading aspects?

I am rather keen on distressed debt trading, however, I am first trying to make the most informed decision.


Apr 27, 2021 - 2:39pm
  1. Are you saying prop b/c you are not a US/EU bank under Volcker?
  2. How do you/your boss view your balance sheet usage? Do you have limits?
  3. How much do rely on leverage/cheap bank funding? 
  4. Do you rely on franchise to see flow?
  5. Between prop at a bank vs macro HF, which one is the better/more interesting job?
  6. Do you trade bonds/swaps or just futures?
  7. What are some unique characteristics about the long end that one would not find in front/belly
  8. Is the 20y a bullshit product in your opinion?
  9. Do you prop trade on the interdealer market? How does that dyamic play out w/ HFTs in the mix?
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  • VP in S&T - FI
Apr 27, 2021 - 3:23pm

i'm in the US, but not at a US bank, and i don't trade stocks, so Volker doesn't really affect me

i don't use a lot of balance sheet, so not an issue

i'm not playing the repo game trying to squeeze bps...not an issue for me

i see no flow

HF will get more coverage from the other banks if you like to read (and get entertained)...but its mostly useless anyway

i trade all 3...but prefer futures for tax treatment

the long end is more volatile, and can be more like a poker game...not driven by the Fed (usually)...so a different game

the treasury market has wanted a 20yr liquid point for a long time.....used to just be ZB bond futures...so a welcome addition of liquidity (3yr futures however were ridiculous)

everybody with enough $$ has access to the interdealer market (should probably rename that now)....back in the day eSpeed and BTEC kept the dealers only platform, but $$ was too tempting...Citadel is now 20% of BTEC volume, etc...

  • Intern in S&T - Other
Apr 28, 2021 - 12:29am

What specific rates products/desks would you recommend to avoid being automated? It seems that vanilla IRS are moving towards heavy automation. What is the difference between structured rates and rates derivatives? 

  • VP in S&T - FI
Apr 28, 2021 - 12:47pm

nothing special...TT for trading futures...the native BTEC /eSpeed (nasdaq) for cash Treasuries

i'm not HFT...so i don't need special spreaders or aggregators....tho when i was a dealer i preferred the Broadway aggregator as an off the shelf software...but most banks i worked at custom built their own execution software.

Apr 28, 2021 - 8:59pm

Hey thanks for taking the time on this. Some basic questions:

1. What did you study in undergrad, how did you get your first job, and how did you transition into your current seat?
2. What is comp like for someone of your experience/performance. Any plans to move to an HF?
3. What books/resources would you recommend for someone who wants to learn rates trading?

Most Helpful
  • VP in S&T - FI
Apr 28, 2021 - 9:08pm

i was a liberal arts undergrad with some programming classes.1st job was as a software developer for an investment bank (20 years ago that was easier)

bounce around doing software dev jobs until i got a job on a trading desk as a desk strat/quant...and then after a few years a trader on the desk gave me a shot to be his junior trader, and thus started my career as a "trader"

my comp is a % of PnL (by my choice)...i eat what i kill

i learned thru immersion...i read the standard books (fabozzi, tuckman, young, etc...) but they didn't really teach what i needed...they were a necessary background foundation....but just a starting point...i built spreadsheets and learned to calc everything myself...curve pricing, etc...read everything posted on zerohedge for YEARS....read bank research...and of course watched every tick of bond futures, s&p futures, german bunds, uk gilts, usdjpy, eurusd, etc...and watch the news feeds and see how market prices react to different news items...eventually you get a feel for how the market thinks....and combine that with pattern recognition...and thats how i trade.

  • Managing Director in PropTrad
Apr 28, 2021 - 10:26pm

Could you explain what happened in March 2020 around the funding squeeze, and what occurred with repos. Do you think that could happen again or it made sense to you? What is your average holding time for trades (assuming you hold position overnight or for weeks). Do you hire/mentor junior traders, do you have any tips in how to groom the prop skillset out of young talent?

  • VP in S&T - FI
Apr 28, 2021 - 11:08pm

similar to 2008, during a crisis, banks fear other banks and lending partners going thru a bank run, and so lending gets pulled back.  at the same time there was a large seller of US debt (rumored to be the Saudis)..as a result there was a shortage of liquidity.  To make matter worse, on this day the NYFed members who run the NYFed markets desk were on a train to DC for meetings...and nobody with senior experience was left manning the desk (recall simon potter was fired in 2019)...and so there indeed was a bank run in the repo market and nobody at the Fed with experience to say "hey guys, we need to intervene in the market here".  Heads of US Treasury desks were calling the Fed desparate for them to intervene, but nobody was there to take the call (because that guy with experience was fired by the new head of the NY Fed.)

my avg hold time is around 6-8 hours....majority ~60% of my trades are initiated during the London morning....and closed during the NY morning.

If i initiate during the NY morning, then my hold time is closer to 2-3 hours on avg.

if i take a postion home overnight, then i typically close out either during the London or NY morning

These are not rules per se...just statistical averages

i used to mentor junior traders...have not recently...don't really have many tips other than to say there is no substitute for immersion...give junior trader time to see various market activity....let them take some risk...make them feel responsible for their losses...encourage them to explain their thought process..and after years of fighting the market, they eventually pickup the theme, or they don't and you move on.

Apr 29, 2021 - 1:13am

What chance do you see a FO quant becoming a trader? Which product you would say is best fitted with quant background?

If become a trader, do you recommend stay on the sell side or move to buyside, would being a trader have less attraction to buyside compared to being a quant?

Thank you!

  • VP in S&T - FI
Apr 29, 2021 - 10:40am

i've seen many FO quants become traders in the product for which they are a quant,,,usually after 2-3 years

  • VP in S&T - FI
Apr 29, 2021 - 11:57am

1) open a futures account, and setup screens with 5min candle charts to watch 6 markets (S&P futures, 30yr bond futures, Crude futures, gold futures, USD/JPY and EUR/USD)...this is free with TD thinkorswim as a place to start

2) follow the financial news twitter accounts

3) read everything on zerohege, all day every day..research any terms/markets you don't understand.

expect it to take a couple years of immersion before you get a "feel" for the markets...this is a fulltime job (because you need to be watching the news feeds, and see how markets react to news...and the only way to do this is in realtime)

  • VP in S&T - FI
Apr 29, 2021 - 1:10pm

i wouldn't say i "trade the news" but news often creates price opportunities...most often i will be fading a move which was a reaction to a news headline...and i of course am always wondering "is this time different?" so i read the news just to make sure.

  • VP in S&T - FI
May 14, 2021 - 10:29am

i believe its possible...you don't really learn how to trade directionally at a bank (any idiot can click the buy / sell button....but it takes time, experience and mentoring to learn the pattern recognition that enables you to have greater than 50% predictive capability).  you must commit to years of learning before taking big risks...maybe only trading 1 micro contract...or 1 share of stock....a small % of your actual capital...just so you can feel connected to the markets you are watching....and doing that for 1-2 years before putting on larger size.

However, who you choose to learn from will greatly impact your success / failure.  It will take YEARS before you learn to recognize all the patterns that markets are built upon.  Unfortunately, in trading, you don't have time to research the current pattern....you must instinctively know whatever pattern the market is developing into...so first you must learn the patterns...and then you must internalize them....this takes both choosing the right mentor, and then also spending the time in front of your charts and news feeds watching the market...while you learn to internalize and recognize patterns- in realtime...over many months, sometimes years, while making no money.

I suggest 2 mentors video courses - both can be found for free online

1) Jim Dalton




(he also wrote a book TheLogicalTrader, but the video seminar is better)

Your brain can only absorb a couple hours of information like this per day, so i suggest only watching one video a day...maybe take a day off inbetween....just like college classes.  Allow your brain time to absorb the info...then allow your brain time to relax...after a few weeks.....go back and watch the videos again.  You'll find that you pickup info that you missed the first time...that's totally normal...learning this stuff is not fast....better to learn slow and let your brain internalize over time.

May 16, 2021 - 11:17am

Dear Sir,

If I get a BB FICC sales role and a bond trader role under a third tier bank asset management arm ( with 10bio AUM), which one should I choose?

the bond trader has the potential to become a portfolio manager (the interviewer told me about this).

And if I do well as the bond trader or as PM, can I jump to first tier AM?

Not sure should I start with BB sales then try to move to buyside or start in third tier buyside and try to move to top tier buyside?

  • VP in S&T - FI
May 16, 2021 - 12:37pm

depends....what is your ultimate career goal? 

FICC sales will be a better, more broad educational experience..so without more info, thats what i would recommend

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