Is it better to choose a desk with great people but mediocre product (G10 rates sales, commodity sales/trading)
or is it better choose a desk where you click just so-so with the people but great product (interest rate/equity derivatives, exotics, non-linear trading)?
Wondering this myself
This all comes down to your firm's stance on internal mobility.
It also depends what you care about more - if it's job security and marketable skills, then I'd take the "great product average people". But if you care less about money, bonuses, exit opps, job security, etc. and care more about your WLB and relationships, I'd take the "average product great people". There's no right answer here, it's more about where you wanna strike that balance. For me it's the former, since I don't plan on staying in sell-side S&T forever and my firm doesn't have the best internal mobility.
Which products have prop desks?
Well by the volcker rule, pure prop desks are only allowed in government backed debt (treasuries, agency bonds, agency mbs, muni bonds, etc.) and trading instruments that are not securities (spot fx, spot commodities, loans). That said, there is a fair amount of prop risktaking in other desks as part of market making, as its close to impossible to be flat at the end of each day, but it has to be justified as either hedging or meeting expected future customer demand. TBH buying a bond because you think a lot of customers are going to want to buy it from you later is not very different from buying something because you think the price is going to go up, main difference is that is has to be related to your market making activity and compliance places limits on position sizes based on what is reasonably expected near term demand (RENTD). In the products I mentioned though, they are totally exempt from the volcker rule, but in any product that isn't like cash equities there is some room to take prop risk. Market making exemption basically allows you to buy a security because you think the price will go up (and thus customers will want to buy it from you at a higher price than you paid), just needs to reasonably support your market making activities. Hedging exemption basically gives you discretion to hedge your tilt in a way that supports your view (buy bonds you think are cheap and sell bonds you think are expensive to hedge risk, underhedge the risks you like and hedge out the risks you don't like)
Do these desks require high mathematical or quantitative background? Is a finance major possible?
very succinct write up on risk management within SnT +1
If trading involves risk at BB, how come they always post a profit in the trading division. For example the average investor has a 50% chance of posting losses but when looking at BB trading it’s always a net profit. Am I missing something ? Would the offset be the commissions for trading ?
They make money on the spread between bid and ask prices. It's a market making business like a retailer buying from a wholesaler and marking up to end customers.
Not every trade is profitable, but when you have a big edge like market makers do and you have both the scale and diversification that banks do, the trading division as a whole is usually profitable unless something really big goes wrong (like the 2008 mortgage meltdown or Archegos). When you trade every product under the sun and have a good edge (bid ask spread, seeing order flow), individual traders or divisions might lose money in the short run, but usually in the long term the bank as a whole is profitable. Even if individual trades are only profitable 51% of the time, but you make hundreds or thousands of bets, its close to impossible to be down for the year, assuming your bets are uncorrelated and you manage your risk well. An individual trader might have a good or bad year, (they have enough edge to make money most of the time), but the firm is diversified enough to show a profit on the majority of days, and most years.
You get a lot of advantages. For example, your hedging cost may be cheaper because you have lower cost of funding and you can net against firm/client positions.
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