Cash traders & sales-traders - what's the point?

I can comment on the overlap. Typically a bank will give a dedicated sales guy for clients with assets over a given size, or do yearly commissions on a given level. Remember in equity the bulk of the transactions are agency based. Proprietary trading in equityland is a much smaller component than it is in other products.

Sales-traders are a hybrid that do both sales & trading. Typically they have all the knowledge of a regular sales guy but they tend to deal with smaller clients. Also cash equities are growing across the block because they again are mostly agency opposed to principal. As volume goes up so will profits.

Cash equities are sort of the slow and steady earners on the trading spectrum. Their salary volatility is going to be lower than a product that may run in a more cyclical nature such as commodities. Cash equities are similar to spot FX trading in the compensation picture.

equities also give a good exit opportunity, daytrading. Plenty of cash guys leave and just become independent traders.

"Oh - the ladies ever tell you that you look like a fucking optical illusion?"

DB is not known for equity trading so keep that in mind. That does seem like a bit of overkill in terms of coverage. Lets analyze the roles

Institutional Salesman- Master of relationships who know has what, who wants what, and what levels they want it.

Sales-Trader - Hybrid of sales and trading, liason between block trader and the client. Tends to work the smaller orders, trades tend to be agency.

Block Traders - Obviously they work the order

Sector sales - they know whats actually going on in the sector in day to day business. Much more trading related opposed to actualy analysis.

Country sales - Sounds like your on a bit of an international desk. Dont have any idea as to the norm for international desk break downs.

Research analyst - knows whats going on in the company but knows jack shit about how the issue is trading in the market day to day. Much more macro and very stock specific than the coverage that a salesman provides.

As usual it varies firm to firm but that in general should cover equities. I dont understand why people think equities are so beat. Thats for another post, i will debate it with you as you seem to take the contrary of everything.

"Oh - the ladies ever tell you that you look like a fucking optical illusion?"

I just realized you said the traders charge 10-20 bp for commission. It didnt click at first because im using to think in flat rate per share but 10-20 bp is ripoff levels. No wonder your firm struggles in equities. They better have information from the gods and the best traders to work the order on the street by far to make that rate reasonable.

10 basis points on a $100 stock is .10 20 basis points on a $100 stock is .20

10k shares per block X .10 = $1000 commission per block

From my experience a charge per share is more common than basis points. Typically I have seen things range from .005 to .03 per share seems to be the norm. While using basis points is probably more efficient a flat fee per share tends to be more common.

Yeah dude thats like ripoff level. No wonder my firm is growing so aggressively. They have great execution and great prices if you have

"Oh - the ladies ever tell you that you look like a fucking optical illusion?"

Thats pricey, I trade index futures for my personal account my one way commission is $2.50 per lot which has a notional value of around $65,000 per contract, and thats still pretty steep but only because I dont do that much volume.

I would love to see how that 10-20bps is bundled together. Clearing fee, exchange fee, ecn fee, and commission for how that is broken down.

That seems just like a very expensive agreement and the traders/salesman had better be giving rediculous value added to make that rate worth paying.

Cash equity trading began to lose its appeal with the birth of electronic trading, DMA, and with the change over of decimalization. As a result of the tighter spreads and electronic capabilities this has greatly increased the volume in equity markets.

While you suggest that cash trading may be a dying breed I must argue that its not dying but rather its evolving. The value of voice brokerage decreases as a market matures and becomes more liquid, however in a more liquid market this creates more value for good timely information, ability to work an order getting the best prices, electronic trading capabilities, algo/program trading, anonymity, pre/post and realtime up to the minute reporting on Positions.

A lot of the luxuries afforded in a mature market are not a possibility in a developing market. So its not to say that the market is dying but rather that different skills are in demand. I agree traditional voice brokerage without any other value added is a dying business model. The firms that do not adapt will suffer to other firms that embrace the new techology and changing needs to the market participants.

I post this not just for you badam but for everyone else that seems to give equities a bad name.

Equities often are bashed on this forum out of ignorance.

-Spreads are too small which result in crunched margins. However this is offset by the increase in volume

-algo trading- People often claim that this is going to be the end of equity traders as they will be replaced with a black box. Remember that people use the sell side for information not just for execution. I believe a good human trader can beat a computer.

Electronic Trading/dma - people argue that the buy side will just work the order themselves. This actually gives the buyside the ability to focus on idea generation opposed to the physical working of a trade. The whole concept of working a order getting the best price has basically been outsourced to the sell side while the ability to generate unique alpha generation ideas get a heavier weight. Finally remember that sometimes the buyside gets jammed and the PM wants to make a lot of adjustments, if the buyside trader needs to get the orders done and he cant hes going to shop these orders to the sell side to work themselves.

Hope this helps.

"Oh - the ladies ever tell you that you look like a fucking optical illusion?"

Nice one trade4size.

I said cash equity trading is a dying business as I heard here revenues and bottom-line has been in decline around 15% each year recently - the tightening of margins (with more people using low-bps DMA etc) is not fully counterbalanced by growth in vols.

Also, your definition of sales-trading may be wrong. Definitely here its NOT the case that sales-traders are a hybrid of sales and trading who tend to work orders for smaller clients. Here sales-traders have absolutely nothing to do with working orders, they don't even have access to do that, all they do is (a) what salespeople do ie forwarding out Bloombergs and chatting to clients on stock newsflow and (b) the execution ie typing "BUY 200,000 AAPL.US LIMIT 185.00 ENTER" into the computer. The trader will then work the order.

Also, don't get so upset when people bash your job. I say this somewhat hypocritically from being upset when people bash my bank, but fact of life is every single area of banking is riddled with (predominantly negative) stereotypes - in cash equities this isn't helped by the multitude of loud, brash, gluttonous types at the bars! M&Aers work 120 hours a week for $60k (ie less than McDonalds hourly wages), corporate brokers lick S&P ass all day, quants are antisocial geeks with no people skills, Ops types are constantly frustrated about not being able to get into FO, the list goes on!

cash equity has is tough in the US because transaction sizes are lower and attaining best price can be done reasonably well with an algo (or, at least that the cost of using an algo in beating VWAP is offset by the 1-3bps charge) in fact, many clients pay a premium for algo trading.

I think high touch trading still has a use, but certainly it will be less in 10 years time.