HELP: The Future of the S&T Job Market and Selecting the Right Desk

scottsmithsonian's picture
Rank: Baboon | 143

Hello WSO. I just accepted an internship offer at a top bulge bracket bank for S&T this week. My only issue right now is that the internship is NOT rotational so I have to make sure I'm on the best desk for me this summer. I know this is mainly an IB forum so I've been having a hard time finding forums on here that give insight on the sales and trading industry. I'm open to hearing ANY advice or thoughts anyone might have. If you disagree with anything I say please voice you thoughts! :) thanks.

There are three things I would like to figure out right now:

1) Determine which desk (equity, credit, rates, derivatives, fx etc.) would be best to start a career in S&T in general and what areas are expected to shrink or expand due to regulations - market forces - technology.

-Right now my thoughts are that equities have been doing well recently. There's been a lot of M&A activity and since the crisis the stock market has boomed. The only caveat of something like a cash equities role is that the work has been phased out by technology.

Personally I view it as a purely relationship driven role where as a young analyst I will develop limited fundamental knowledge/experience. I'd rather have my career rely on my fundamental / technical knowledge than my ability to become best bros with my clients.

-Fixed income has seen a recent headcount cuts because of weaker bond trading. What do people do once they get fired? Banks are seeing bond-trading revenue decline by up to 40%!

Right now I'm interesting in credit sales but I'm worried about the space shrinking. Should I avoid sitting on a credit desk because the market is shrinking or should I not be worried given that I'm young during this downturn?

2) Which position sales vs trading presents long-term earnings potential and other career opportunities. I want to know that if I'm faced with job cuts because of the market (no wrong doing on my part) that other firms/banks would be interested in hiring me because of my experience as a salesperson/trader in my particular product.

-I'm discouraged from doing anything in trading at BB because from at least what I've read on WSO it's mostly a market making role and should be avoided if you're looking for career longevity.

3) What questions would you ask yourself to determine what desk is best for you? What are important considerations for each desk and sales vs. trading role?

-I do my best to network but I sometimes I just don't know what to ask! If you got an opportunity to speak to people in sales or trading on various desks what would you ask to determine if it was right for you? I wish there was a PDF with all the different desks at a bank and the kind of work you'll be doing and the kind of person who excels in that role. I feel for IB analyst there are exhaustive resources for this that exist online but for S&T information is extremely limited.

Please let me know your thoughts. I'd like to have a solid discussion on these topics. I know that a career on Wall Street doesn't provide perfect job security but I do want to make sure that what I choose to do won't be useless in five years. And thanks in advance - I wouldn't have this opportunity or be able to handle my interviews in the first place without WSO!

Comments (141)

Funniest
Dec 15, 2015

equities in dallas

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Dec 15, 2015

oh sorry, didn't notice you're going to JPM, idk how good their dallas equities operation is

Dec 15, 2015
OP:

"-I'm discouraged from doing anything in trading at BB because from at least what I've read on WSO it's mostly a market making role and should be avoided if you're looking for career longevity."

r u srs

Dec 15, 2015

lol

Dec 15, 2015

Yes. I've read post on here saying that. They were a little bit older after the crisis. Please provide constructive criticism. This doesn't add value to the post

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Dec 15, 2015

It's in NYC

Dec 16, 2015

My thoughts are that you should chill the fuck out and work on securing an offer before planning opportunities that aren't even relevant right now. You are counting so many chickens before they hatch that I can't even

Dec 16, 2015

not sure why anything I've said in this post has rubbed you wrong. I'm going to respectfully disagree with you. Figuring out what you're getting yourself into is important for anyone's career. Finding the right desk is actually my next step - not getting a FT offer, that starts in June. I'm here because I know I know nothing as a college junior and need help. so maybe I'm not the one who needs to "chill the fuck out"

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Dec 16, 2015

I'm assuming you're at JPM based on "top BB" and no rotational program.

The upside to trading/sales is dependent on how well you do - if you kill it, your career longevity/security isn't an issue. Pick whatever you think you're more suited for. At the same time, I know guys who move from sales to trading and vice versa, commonly at all levels (even MD) so don't pigeonhole yourself into thinking that you need to do sales or trading to make the most money/have the most secure job.

The "best" desk is probably credit, at least in relation to the credit desks at all other banks. That being said, do something that you're interested in/something you think you can excel in. A top-tier trader at their equities desk is going to be way more important than a bottom-tier trader at their credit desk, and will be compensated accordingly.

I've been told from one of the traders I know that the guy who made the highest bonus last year was a trader, not a salesperson. But again, no offense but out of thousands of guys you probably won't be the highest paid one. Pick something you think you'll enjoy, because if you do amazingly at your job the money will follow. That's one of the best parts of S&T - you're paid partially based on how much money you bring into the company. If for some reason desk is being cut and you're a top trader, there's zero chance that you lose your job. Companies want to retain top talent, and will let you move to another desk.

Most importantly, reach out to alumni for help. Tell them your thoughts about the process and all the desks/future outlooks. They can explain the intricacies of the desks to you, which ones you could be a fit for, what questions to ask when trying to network with other desks, etc. Don't feel like you're a burden when you reach out for this sort of help. After all, they most likely want you to succeed as it reflects well on both the school and the firm.

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Dec 16, 2015

If for some reason desk is being cut and you're a top trader, there's zero chance that you lose your job.

http://cdn.overclock.net/3/36/560x432px-LL-3697d21...

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Dec 16, 2015

those are some good insights @padlocks thanks for the response. I definitely am spending time trying to figure out what my interests are and doing my best to align them with my skills and experience. I'm not really concerned about pay now. I know if I'm good AND my desk is doing well I will be compensated accordingly. That's why I want to make sure I'm capable or a good fit as well as being at a good desk

honestly I'm asking on the forum because a lot of times I don't feel comfortable asking people up-front, alumni or not, about their own career prospects or the likelihood of their role being phased out. I don't think it's a very positive use of their time. I do agree with you when it comes to alumni looking out for your best interest. Thing is - unless you have alumni on many different desks, the feedback and advice can be a little skewed. I find that everyone I spoke to so far enjoys their own product and will only really discuss to pros and leave out the cons. Nevertheless I'll still reach out to alumni as they are a good resource.

Mar 24, 2017

so just wondering if you have eventually figured out which desk/product you like... and if you don't mind sharing as I too will have to choose in the end. thanks appreciate it.

Dec 16, 2015

efinancialcareers actually addresses questions 1 & 2 as well as several other articles if anyone is interested

http://news.efinancialcareers.com/us-en/224614/how...

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Mar 24, 2017

THE END IS NIGH.

I win here, I win there...

Mar 24, 2017

I don't see anything affecting jobs in Investment Banking but S&T is a different story. You already see the influence of computers strengthening. So I definitely see traders being replaced. The amount of sales guys on the floors could be reduced as well. Aren't some investors bypassing sales and putting in orders through comp software provided to them by the bank? But then what's stopping a hedge fund trading with Bank A instead of Bank B, so sales guys may be needed keep those relationships strong. If anything happens, I think it's at the very least a decade down the road.

Mar 24, 2017

Honestly, I'm a little tired of all that talk. Step onto any FI desk and if you still believe that you're crazy. FYI a lot of banks have been increasing salespeople.

Dec 16, 2015

You're asking a retarded question that has been debated in various forms throughout this forum over years and the answers never change.
-All trading has risk.
-Making (big) money is hard.
-All desks have star performers and crappy ones.
-You will likely never be the guy pulling down $10MM/year no matter where you get placed. Worrying about failing to capture extreme upside is a chump move.

Dec 16, 2015

you've missed the point of my post. I'm not looking for the holy grail of trading. I never said anything about compensation actually - try re-reading my 3 original post questions. regardless - I am here for help and any kind of criticism on my thought process is welcome. and thanks for the monkey shit btw :)

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Mar 24, 2017

I thought they were spinning off due to BIII?

Mar 24, 2017

they also print money

Mar 24, 2017

I actually think it's the opposite. They use a lot more capital, but the benefits and margins are much higher as well. Plus they are the ones that add more value to the client with their complex/bespoke products, and it's impossible to move them to any kind of electronic trading or exchange system so they are very hard to replace.

Best Response
Feb 28, 2016

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Dec 18, 2015

ahaha thank you so much for this. I'll do my best this summer. what are some characteristics of a shitty intern? I'm assuming you got a FT offer. What are some things you did to positively differentiate yourself?

However, here are my thoughts on each product:

Credit
- from my work experience so far, company specific credit research is interesting to me. even more interesting than equities. It's solid at my bank. I'd pick this purely because I'm interested in the product - not because I see any upside or growth in this space. I would pick this desk no questions asked if it wasn't for current market conditions. From what I see, bond trading isn't sooo bad that I should be completely avoiding the desk - someone correct me if I'm wrong or add your 2 cent

Rates
- all things considered it seems like rates are a good place to be right now given rate hikes and some other research I've done on our place in the current credit/economic cycles:
http://d1z8aenxk3z1kj.cloudfront.net/wp-content/up... (pg 20)
http://www.nasdaq.com/article/what-is-the-credit-c... but honestly I don't really understand what you do in rates and know pretty much nothing about it. I don't want to rule it out right away because I don't understand what it is especially because I view it as a good desk to be on at jpm - at least objectively. What macro themes and data points do you follow in this space? For anyone in rates or some who knows anything about it, why would you want to be on this desk? What do you like about it? (I personally can't see how "interest rates" are interesting) What skills or qualities are important?

FX
- So far frankly currencies don't interest me

Securitized Products
- The multidimensional longer term projects are attractive to me but I think that the work can be a little too far removed from the markets for my liking

Equity Derivatives
- In a similar boat as rates. I don't know much about option theory. Will never become a PhD quant but I'll do some digging and learn more about it in general. Would have to be in a vanilla equity devr seat

In conclusion...
-Interested: Credit, Securitized products (MBS)
-Not enough information: Rates, Equity Derivatives
-Not interested: FX, cash equities

Ranking: Credit > Rates > Equity Derivatives > Securitized Products

Feb 28, 2016

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Mar 24, 2017

the answer hasn't changed from the last 47 times this question was posed....
there will always be a need for human oversight. some areas more than others.
for example, i trade customized fx derivatives. There's a lot of intuition, assertion and interpretation... and the product is pretty illiquid. Not to mention there's only like 2 of us. i'd say i feel pretty safe.

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Mar 24, 2017

^ agree with above, but on the other hand the more liquid stuff like cash equities is indeed moving away from human interaction. If you're a hedge fund, why have a human trader charge higher commission to get your block trade done, when the sell side also offers sophisticated and cheap execution algorithms?

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Mar 24, 2017

and Bonds also.

Technology increases efficiency and transparency. Within 20 years things will change dramatically. Honestly, none of us know the answer, but it is safe to say margins will slim and traders will be replaced by algo's

Dec 17, 2015

I'm in cash equities sales at a regional (Los Angeles, not Dallas, so I at least have that going for me) and can tell you now that it's not intellectually stimulating but rather puts focus on your social skills.

Dec 18, 2015

Yea, I think I'm avoiding cash equities. not the best fit

Mar 24, 2017

Since when DB is a tier 2 bank? Thanks

Anyway, shoot @derivstrading a message, worked 2 years as an options trader as well and now on the buyside as a convertible bond trader.

Dec 18, 2015

Avoid spot FX trading. Nearly all of the volume is now transacted on electronic platforms, and any 'proprietary' risk-taking is concentrated in the hands of very few senior traders at even the top FX banks. Add regulatory burdens (sellside FX dealers aren't even allowed to chat with traders at other banks anymore) and you quickly realize that the product's trajectory is becoming awfully similar to cash equities.

All of these developments are great for buy-side FX traders.

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Dec 18, 2015

thanks, fx and currencies just never caught my interests anyway

Mar 24, 2017

Etrade, TDAmeritrade on their best days are only a fraction of daily volume. I don't see the buy side going all electronic ever and I don't think the infrastructure will in place even 15 years from now to handle institutional trading and brokerage regardless of what NYSE does. We've had electronic market places for decades now, and it really hasn't impacted the sell side.

I think trading will continue to evolve, I don't think it'll ever become antiquated.

Mar 24, 2017

Great article from Bloomberg that was on Citadel's home page:

http://www.citadelgroup.com/news/downloads/20638-B-Citadel.pdf

Some what apposite to this discussion: it talks about how the "narrowest spread" concept is a misnomer because of fees for accessing this liquidity.

However, if the fee is capped this could compound pains for market makers, guaranteeing cheap/reasonable access to the narrowest spreads.

Again, there would need to be substantial engineering done to the electronic infrastructure to make it available to institutional investors.

Also, narrow spreads is a good thing for market making companies, they don't advertise wide spreads they advertise narrow spreads, as it benefits the client and makes them seem like they are less interested in making money off the spread and more interested in providing their clients liquidity.

Dec 18, 2015

If you end up in a european bank - avoid FICC

Mar 24, 2017

neither of those statements are true

Mar 24, 2017

Well, I can tell you for a fact that electronic trading has significantly diminished some areas. You see the NYSE floor these days, and there are half as many people at most down there as compared to some years back. Then again, the whole point of trading (especially prop) is to come up with something new and make it make some money for you. Every strategy gets played out, but there's always that point at which the computer hasn't quite figured out what the 10-year trader's gut instinct tells him.

Mar 24, 2017

The NYSE floor isn't a barometer for the entire trader industry -- as trading gets more computerized, that just makes it more efficient for sell-side traders, who can now focus on larger blocks (which in turn allows for more opportunities for risk taking / prop). Just because a computer can match volumes doesn't mean a trader is going to become useless. If anything, it makes the sell-side trader more powerful.

And there isn't a decrease in recruits, there's an increase. Look at fixed income, the growth of prime brokerage, and the fact that equities still comprises a significant portion of revenue for some/most wall st firms.

If anything, more powerful computers endangers bankers, not traders

Mar 24, 2017

nicely said, i completely agree with you

Dec 19, 2015

"thanks, fx and currencies just never caught my interests anyway"
"but honestly I don't really understand what you do in rates and know pretty much nothing about it."
"I personally can't see how "interest rates" are interesting"

rates and (g10) fx are very highly interrelated. if you're genuinely not interested in currencies, then you likely won't be interested in rates either.

Mar 24, 2017

As a guy just starting out on a commodities desk, I'll admit I'm not really sure about the future of BB commodities groups either. If volatility in the commodity markets goes back to 1990s levels I may need to find a new line of work. However, I'm a lot happier to join a group that is hot, rather than a group that's doing horribly and just praying that business picks up sometime in the future -- months, years, who knows.

If you are looking for a "relatively safe place" to start and build a career, you probably shouldn't be considering working for any of the BBs, in any group. It seems that nothing is really certain in this business so I think the best you can do is get into a group you're genuinely interested in with talented people, learn fast and keep your eyes open.

Mar 24, 2017

I agree that I'd rather be in a group that is hot rather than not, but at the same time it's also not exactly an area that's time-tested either. Just to clarify, when I say relatively safe, I mean in comparison to other groups in S&T. I'm all too aware that no banking related job is "safe."

Mar 24, 2017

I started about a month ago FT in a natural gas group. It seems that the desks at my firm are pretty full, and that there will not be much need for recruiting this year. I feel that commodities will be an interesting area to work in over both the long and short term. My bet is that short term there will be a slowdown, but long term prospects are still healthy. If you want to build a more "safe" career start on the physical side, then switch to the financial.

Dec 22, 2015

Just some thoughts on generic examples of adding value/showing potential:

If you're on a sales desk, start your own weekly newsletter (3 pages is fine) about what went on that week, what to look for next week, what your views/trades are, what the bank's views are, what the mkt is pricing in etc... Include a few tables/graphs to illustrate your point, and make it look really good. As you meet people, mention it and ask if they could have a look, it's great for visibility among sr management (and for the end of the internship when you have 8-10 pdf's of newsletters to show what you did this summer). Of course, keep it internal, don't spam it to people you haven't met.

If you're on a trading desk, run your own paper prop book. Have a solid risk monitoring system and risk limits, automate it to mark your trades to market, and track your PnL. Friday afternoon's, send out a page update on what went well, what didn't, how your views have changed, etc. Start this right away, if you show ability to manage risk and interest in trading there's a chance depending on the desk you'll get to put your trades on.

For any desk, learn VBA and automate a few of their tasks (ie PnL calculation). So much stuff can be automated it's not even funny (it's scary). If you absolutely can't find anything, build a tool that pulls and synthesizes relevant data for the desk (ie if you're on a credit desk, use SRCH to create an monitor to break down volume and credit quality of new issuances, if you're on an FX desk create a tool to backtest one of the trades the desk does frequently, for FI Cash look at month end/quarter end pricing anomalies/opportunities, the list goes on)

Start this stuff before the summer (ie learn bbg and what var is before the summer if you're on a trading desk), start your prop book at least a month before it starts so you come onto the desk with a basic understanding of the products/market.

Learn VBA before hand too. As a stretch example of something to work towards, I made a program that calculated the value of an option using different pricing methodologies, and compared Implied vol vs historical vol. Make sure you can make things super user friendly, it should be 100% intuitive for the user.

Make sure that this stuff comes 2nd to whatever people ask of you. Try to find a senior analyst/associate who will be your go-to for feedback (ie will have a quick read of your first few newsletters before you send it out). If you show initiative coming to the desk with things like this and aren't an ass, people will give your first few newsletters/data automater a look. Better yet if you send in your newsletters before your internship to an analyst you know (ie an alumni) you'll really hit the ground running.

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Dec 22, 2015
undefined:

Just some thoughts on generic examples of adding value/showing potential:

If you're on a sales desk, start your own weekly newsletter (3 pages is fine) about what went on that week, what to look for next week, what your views/trades are, what the bank's views are, what the mkt is pricing in etc... Include a few tables/graphs to illustrate your point, and make it look really good.

I can't imagine people would actually want to waste their time reading a 3 page report from an intern? Surely these people have better things to do?

Dec 22, 2015

Your desk will be assessing you for potential, and a newsletter is a low-risk high visibility project. Send it out on Friday afternoons when no one's busy and it'll be a good talking point with whoever you're sitting with. Newsletters also show good progression in your knowledge, few other projects let you demonstrate as much growth.

Potential really boils down to a combination of passion, initiative, and a base level competency. Starting a newsletter on a sales desk does a the best job on these out of anything else you can be doing, especially as most interns can't face clients. Of course they'd rather read high-quality newsletters that are well-researched with interesting points of view but how do you expect any junior on a desk to eventually be producing that unless they've written dozens of mediocre newsletters and have tried to improve each time?

The hiring process for SA's can be political. Newsletters are something universal that any any MD can take a look at and see that you didn't spend the summer just sitting around or grabbing coffee, but that you have potential in 6 months to be put in front of a client with an informed opinion.

Dec 22, 2015
  • I agree with this for the most part. I cannot stress enough how useful VBA is if you're in trading. Some guys on the desk won't know anything about it, but many more guys on the desk will know what it is but just not have the time to use it. You have nothing useful to do as an intern, so one of the easiest ways to add value is to look at the way the desk does things in Excel and come up with simple functions to make their lives easier. Even saving someone 5 minutes every day can make a huge difference.
  • As far as putting your own paper trades on, I don't think it's a bad idea but I know a lot of desks have their interns do that already. Also, make sure you focus on the risk management/PnL calculation side of it as you do on the taking a view side (actually, you should probably focus more on risk management). No one gives a shit how much PnL you can generate if you have no idea what your exposures are or how to manage your risk.
  • Regarding the comment about generating a newsletter in Sales... while I do think it's a good way to put yourself out there and demonstrate your ability to synthesize information I think there is a better approach. Most people will already have their go-to general market news sources so whatever you're sending them needs to be tailored enough that it specifically relates to them. I think the best way to do this is to start putting together notes for whatever meetings your team has. Most desks will have a weekly meeting, and sales teams will usually have multiple weekly meetings. If no one is putting together notes on those meetings that's a HUGE way to add value.
Dec 29, 2015

thanks that's insightful advice, I'll keep all those things in mind. I'll make it a priority to learn VBA before I start.

Mar 24, 2017

US banks banned from prop trading.. will it affect their prop operations in asia and europe?

Mar 24, 2017

as far as i'm aware, they're watering down the volker rule

http://www.bloomberg.com/news/2010-06-30/volcker-s...
keep in mind that selling, agency trading and market making are still very much needed, so there won't be any divestiture

Mar 24, 2017

Banks are more innovative than governments can possiblly keep up with. Relax and follow your passions.

Mar 24, 2017

So, GS isn't spinning off FICC anytime soon? I'm relatively unexperienced with how the dynamics of Sales and Trading actually work. In a BB, what percentage of trading would you say is market making, hedging, agency trading and customer orders compared to speculative positions

Mar 24, 2017

Last I read was that even though the firms were required to spin-off those departments, they could still be held as wholly owned subsidiaries. They merely had to be separated from the actual bank itself, with the bank becoming a holding company for the now spun-off trading unit, i.e. trading subsidiary.

-N.

"It's about the game." - Gordon Gekko
"No matter how much money you make, you'll never be rich." - Jacob "Jake" Moore
"'Oh Africa Brave Africa'. It was... a laugh riot." - Patrick Bateman

Mar 24, 2017

I can't speak to GS but these changes will take time and will be mostly legal in nature. Any change does not automatically mean that Goldman will not house a derivatives partnership under its umbrella, for instance (sorry for double negative, but you get it). I'm sure it varies from shop to shop but much of flow trading is indeed market making and hedging. You hedge almost all of your positions and generally the speculative positions are simply leaving something unhedged or partially hedged. People have this glorified view of prop trading but flow trading at a good shop can be immensely interesting and rewarding economically speaking. Banks are returning to a customer-focused model and looking to reduce risk where possible. The pendelum will always swing back and forth as far as risk appetite and authorization are concerned.

Mar 24, 2017

I've read a lot of articles and tutorials about flow trading but I'm still not quite sure the details of it. From what I understand, customers place in their orders, ask for your bid/ask spread and you try to give them the best price. Also, you customize derivative products for customers and give them a quote for the price. At the same time, after you sell them the product or complete their position, you(this is where the brain work comes in?) have to hedge the position you just took. You don't really care if the product goes up or down(is this true?), but you just make money off of the bid asks spread(you're like a casino and they are the gamblers?). Is that the jist of it? would someone like to clarify or correct some (if any) of my blatant misconceptions?

Mar 24, 2017
ambition2102:

you try to give them the best price.

Not if you're a trader. If you're in sales you try to give people a decent price, but traders are looking for the fattest spread possible.
I think you got the jist of it though.

Mar 24, 2017

When people say that S& T is risky in that if during the first few years, you are losing or not making enough money, they can you, does that mainly apply to prop trading? What about flow trading? what determines the bonuses you get in that and your performance? Is it the volume of orders and the money you make off the spread?

Dec 23, 2015

How about 1st year analyst? I go a FT position in Sales with no S&T internship in my pocket, so what should I prepare for the job? Given the similarity between 1st year analyst and SA, I assume some VBA for P&L, vol ?

Dec 29, 2015

from speaking with people I've heard that there's typically like at least a 1 month long training period, someone else who is FT now may be able to shed some light on this topic

Mar 24, 2017

structured finance trading will be a shadow of what it once was for at least the forseeable future.

but the rest of the market making trading desks will still be viable and profitable business models. at the end of the day, somebody needs to provide liquidity to the market. for example, commodities and forex are currently having banner years.

the govie bond, forex, equity, and all those other markets aren't going anywhere.

Mar 24, 2017

agreed, as investors flee structured products and stay away from the more exotic structures the core flow businesses will benefit. while pay is sure to take a hit across the board the business model of these desks will continue to be profitable for banks.

Mar 24, 2017

Two trends that I am noticing right now are that the quality traders are still going to HF's, while this is certainly not new. What is new is the flight of sales to smaller shops where they are more linked to their direct production. It just doesnt make a lot of sense when you have the fate of a firm linked to a couple traders that made bad bets and the entire company suffer.

The second trend I have noticed, as analyst26 mentions is the flight away from structured products.

"Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.

Mar 24, 2017

what school do you go to?

Mar 24, 2017

and yeep, the top prop shops are having their best years on record.

...don't forget, the banks were having their best years ever, oh i dunno, last year.

past performance /= future performance.

Mar 24, 2017

Trading at big banks won't see big bonuses.

Mar 24, 2017

Part of the draw towards BBs in the last few years was the ability to trade structured products with relatively large margins. Simpler products are covered by prop shops and banks alike so it makes sense to go where your job security and compensation are almost solely dependent on your personal performance.

Mar 24, 2017

oh come on xqtrack you sound like one of my old finance professors. I agree that prop shops wont make as much next year. Volatility probably kicks in to a more "normal" level sometime in mid-late 2009.

"Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.

Mar 24, 2017

some deak still are going well

Mar 24, 2017

point wasn't about this year vs next year. i meant it more in the long term.

Mar 24, 2017

I'm amazed no one has mentioned foreign exchange. Huge increase in volatility and volume of trading in FX. FX trading bonuses will be down the least this year.

Mar 24, 2017

@turducken08---Wow, someone read Bloomberg this morning.....

Mar 24, 2017

Is it possibly a good time to enter BB trading / exotic products? As an analyst at a BB, you won't be really important for 2 - 4 years, right? Will appetites return?

Mar 24, 2017

BB S&T will always have an advantage over prop shops because the sell side has better information, thus is a better place to learn how each market really works. Furthermore, HF's and B-schools have a lot of respect for people who can get jobs at BB's and produce there, relative to many small prop shops where you just learn how to trade without necessarily understanding the true fundamentals of the market.

Mar 24, 2017

Fundamentals? What are they? They stopped working in October. Someone send me a memo when fundamentals are working again.

Options/futures I would give the edge to prop shops.
Equity I would give the advantage to a BB.
All other products obviously advantage to the BB.

"Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.

Mar 24, 2017
trade4size:

Fundamentals? What are they? They stopped working in October. Someone send me a memo when fundamentals are working again.

Options/futures I would give the edge to prop shops.
Equity I would give the advantage to a BB.
All other products obviously advantage to the BB.

why the advantage in options and futures to prop shops? also, why do you give the short term trading advantage to prop shops?

Mar 24, 2017

keep in mind that the top tier prop shops i'm talking about - the ones that the smartest kids in my class have chosen to go to - are nothing like the prop desks of banks from what i understand. they are almost exclusively market makers / arbitrageurs and rarely place outright bets.

trade4size, your breakdown seems correct in terms of what products BBs vs prop shops tend to trade the most, but i strongly suspect that the kind of trading they do is not comparable even in the same product.

Mar 24, 2017

Let's look at Foreign Exchange for example. At a BB FX desk, you are exposed to the volume of all the big asset managers and hedge funds each and every day and the sales desk is communicating with them and discussing trade ideas - people like George Soros. Furthermore, you have access to world class research and are also communicating with central banks and governments all over the world.

At an FX desk at a prop shop, you have access to some research that your firm is willing to pay for, the economic indicators that come out each day, and your own technical analysis skills.

Bottom line, there is so much information assymetry between a BB and a prop shop. I would much rather learn how the big guys play the market as opposed to starting as one of the little guys and working my way up.

Mar 24, 2017

c'mon, do you really think soros looks to his sales coverage to shoot the sht and come up with ideas?

There is something to be said for working at a bigger shop...but if you go to a small place where you will get well trained and can make some good cash, that's valid too.

Mar 24, 2017

Point Jimbo!

Trade_nrg realize that Chinese wall comes into play when your on a prop desk. I think it really depends on your niche I would give the edge to longer term fundamental trading styles to the BB but short term trading the advantage to the prop shops.

"Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.

Mar 24, 2017

trade4size brings up a good point--pure prop desks at sell-side banks get very little, if any, advantage from being at the bank. They are completely separated from the rest of the bank, and are really a buyside unit within a sellside institution. So they are not getting any access to info brought in from salespeople or structurers, and do not interact with the market makers. Hell, at a lot of banks they are even a legal entity separate from the actual investment bank.

Now regular traders who also have broad freedom to take their own positions do benefit from being part of a large sellside desk, but those guys aren't a pure prop desk so it's not a proper comparison....

Mar 24, 2017

The answer to the first part is more up to debate but the 2nd part not as much. These are just my opinions of course.

Technology plays a big role with market making and the prop shops have the advantage. Another more basic reason is that the people that apply to the prop shops know what they are getting into whereas at a bank you tend to be placed where they think you will fit.

Research departments tend to focus on longer term because it takes time to do and write the research. Prop shops niche is short term trading market making and doing arbs. They are literally watching the markets they trade tick by tick day in day out. Banks are working in much larger quantities and because of this are less nimble than a prop shop.

"Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.

Mar 24, 2017

Prop shops benefit enormously from the volume and volatility created by big banks but if big banks choose not to trade certain products or certain options, prop shops are going to be screwed in those areas. I don't believe it's technology that prop shops benefit from but more of expertise than anything else. If you're a good trader, you're not going to stick around making 4-5% of your p&l at a major bank. You are going to go to a prop shop and make 10-20% of your p&l. Even in commodities trading, a good number of commodities traders end up going to specialized commodities and physical trading firms after having developed an amazing skill set. They use these skills in the prop shops to make big bucks. As for their reach into fundamentals, I really don't think there are any fundamentals in options/derivatives trading (it's simply making the best estimate of implied vol. and pricing accordingly). On the other hand, fundamentals are pretty important in commodities trading, equities and to some extent fixed income, but research is aimed at investors not traders and to be honest when I was working on the desk, none of the traders gave a shit about what the research said. Sure, they'd take a look at it but at the end of the day, they'd go with the market dictates.

Mar 24, 2017

10-20% of pnl..... thats a crappy payout!

"Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.

Mar 24, 2017

How much is it at a prop shop? I'm not familiar with the figures for prop shops.

Mar 24, 2017

Most of the option market makers around 40-60%, the superstas obviously higher. Prop equity shops around 50-60%.

From what I have seen the prop guys at a bank might run a 100mm book 50mm 50mm short and they keep around 10% of profits.

Experienced prop shop guys might run a 10mm book with 50% of profits, obviously there are trade offs.

"Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.

Mar 24, 2017

for any OTC product BB is the place to be anything exchange traded prop shop might have an edge.

Mar 24, 2017

How big of a book can superstar prop traders end up running? Is there a point where they just get too big and have to set off on their own?

Mar 24, 2017

The largest energy book I have heard of is 250MM annual P/L but the largest credit book I have heard of was around a Billion (GS when they shorted the entire credit market in 2007).

Mar 24, 2017

activities in the credit market or the structured credit market pretty much die out recently, right?

Mar 24, 2017

structured credit has been Dead for a while now. That is at the root of this entire mess.

"Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.

Feb 29, 2016

This is probably a silly question, but is a bank's securitized products group the same as some bank's structured finance group?

Mar 1, 2016
Mar 24, 2017

"1st year salary very similar to an analyst, however bonus might be slightly lower depending on performance"

Not sure if this was intentional, but you phrase this as if the term "analyst" is reserved for IBD. 1st and 2nd Years are analysts irrespective of IBD or S&T.

Your hours range is somewhat right, but if you are a Structurer they can be more. No work on the weekend is correct.

Bonus Potential is on-point.

Higher chance of termination -- Not sure how to answer. I suppose so. You will hear that S&T is more meritocratic than IBD.

A few other things to keep in mind with S&T v. IBD:
Take into account:

Do you like the idea of managing risk?
Are you more project or short-term driven?
How quantitative are you?

Mar 24, 2017

Devils Advocate is right on the money. I had a quantitative major in college and all my friends expected me to go into Trading or the like, while I didn't apply to a single trading position, SA or FT. I simply don't have the right appetite for risk-taking.

Mar 24, 2017

Thanks for your replies guys - much appreciated.

So when you start in S&T with an MBA, what is your official "title"? Can someone list the job ranks in that area please.

Also, what is a typical signing bonus for an MBA grad?

Thanks again!

Mar 24, 2017

If you start S&T with an MBA you will be a "1st year associate"

Conventional Titles (from lowest to highest):
Analyst
Associate
Vice President
Executive Director/Senior Vice President/Principal (title here can vary depending on firm)
Managing Director

MBA signing bonus for the past year I believe was 40k

Mar 24, 2017

I could add a little from my experience hiring and working with analyst/assocaties in S&T (I run a prop desk at a BB).

Salary -- I go to HR and get the bands for analysts and associates in IBD in my firm and work from there. If I want a 3rd yr analyst I offer exactly the base they would get in IBD. Bonus I have a "guarantee" in my head that usually winds up being 75% of the median for that person's IBS peers but depending on how my desk performs that could be upped pretty reasonably.

Hours -- I work 60 hours in office per week and 15 hours from home on avg. All my team-members work more. But I don't care if it's in-office or home. No face time requirement.

Chance of firing -- I don't think it's any different.

Bonus -- yeah it could be higher than IBD but I think you need to think of this differently. You will make more money where you are a better fit. First few years in business are tough on hours and low on pay but if you're in the right place and are cognizant of poliics and work for the right people, you will be doing very well after several years.

I don't hire out of college or business school. I prefer lateral hires so probably can't help as much as others on that.

Mar 24, 2017

I was under the impression that S&T is an aggregate of Sales brokers and Traders, two completely different roles. Or am I mistaken?

Mar 24, 2017

Do you guys also know if it is difficult to get a SA position in S&T in London if you are an American citizen? I know it is harder for ibanking, but how about s&t?

Mar 24, 2017

Thanks again for the replies.

BankBaron - You commented that the first few years are low on pay....would this be low in comparison to IBD associates? For example, first year associates are rumoured to be getting around 200k in bonuses this year - for S&T associates, would the figure be substantially lower?

Also, although you don't do your hiring out of b-schools, would you say that many banks do recruit MBA students?

Thanks again!

Mar 24, 2017
leapinghorse:

Thanks again for the replies.

BankBaron - You commented that the first few years are low on pay....would this be low in comparison to IBD associates? For example, first year associates are rumoured to be getting around 200k in bonuses this year - for S&T associates, would the figure be substantially lower?

Also, although you don't do your hiring out of b-schools, would you say that many banks do recruit MBA students?

Thanks again!

No not low in comparison to IBD, low in comparison to what could be earned later.

Many banks including mine hire extensively out of B-School. I don't but am considering next summer (2009) taking on a summer associate for the first time.

Mar 24, 2017

Also, depending on the banks, S&T and IBD bonuses may be on a different cycle. In the US, IBD is usually considered a 2 year contract, and many analysts leave afterwards. Thus, it makes sense for the two bonuses cycles to be on the anniversary of the hire date (in the summer). S&T is generally more long term. If you have a great P&L, you'll keep moving up in the firm. Because of the long term nature of S&T, you usually get paid at calendar year end. 1st year bonuses are usually a stub (everyone gets the same), because you've only been on the floor a short time, and you're still learning.

Although the same titles are used, it is not as hierarchical in S&T compared with IBD. In S&T, an associate, VP, SVP/ED vary based on years experience and P&L. In IBD, it is more hierarchical where work gets passed on from one rank to another.

Take a long look at S&T and IBD. They are very different, and many firms don't like it if you want to do both or are undecided. That shows that you haven't done your research and just want to work in IB in general.

Mar 24, 2017

Eric - I appreciate your advice and info. Do you by chance have a good resource(s) that gives more detailed info about S&T or gives a good overview of what IBD vs. S&T entails?

Thanks again

Mar 24, 2017

So S&T is not a combination of two separate fields: Sales brokers and Traders?

Mar 24, 2017

political panda,

Let me clarify some things.

Sales and Trading at a BB:

Generally includes
Salesmen/Sales-Traders (interact with clients) It is incorrect to call them "sales brokers"

Flow Traders(trade flow, make money on bid/ask spread; occasionally take a prop position)

Prop Traders (trade using firm capital)

Structurers (complex modeling; heavy on the quant)

Research Analysts (exactly what it sounds like research on companies or market conditions)

Additionally understand the 2 major divisions of S&T are Equities and Fixed Income..So youmight be an (FI or EQ salesmen, FI or EQ trader..etc etc

Mar 24, 2017

DA - that's very helpful to see how many different roles S&T comprises, usually it is spoken of as if it is on homogeneous thing. Can you comment a bit more on how comp varies among those roles?

"When I get sad, I stop being sad and be awesome instead."

Mar 24, 2017

I see. Thank you for the insightful response. May I ask why it is improper to call them sales brokers though? Would financial planners/advisers suffice? Or is Wealth Management an entirely separate service.

And I'm a bit surprised that Research Analysis and Structuring are a part of S&T.

Mar 24, 2017

Panda, you've got the wrong idea completely. Wealth management and private client services deals with high networth individuals and provides specialized services for them. S&T deals with institutional clients ie hedge funds. S&T are NOT financial planners.

Research, structuring, sales, and trading all fall under equity or debt capital markets.

Mar 24, 2017

Wealth management is completely separate. The sales people aren't called sales brokers, partially because the sell to brokers.

The way S&T is divided at my bank. First by product (equities, fixed income, commodities/currency) and then by further subproduct (rates,credit) and then even further (i.e. agencies, high grade bonds, high yield bonds, synthetics (CDS), syndicate (primary issuance bonds), commercial paper)

Next, it is split up by function, sales, sales-traders, flow traders. (You also have admins,ops, compliance sitting on the desk too). Although by heirarchy, sales, trading and structuring are generally separate, but they do sit according to product.

In addition, you also have middle market sales. The product specific salespeople sell to the large asset managers or other broker/dealers. (Fidelity, State Street, Columbia/BoA). Now, for your smaller accounts that don't have as much cash to spend, and fewer people manageing the cash, so they are covered by middle market sales reps or general sales. They cover more products than the typical salesperson, but work with smaller volumes.

The vault guide to investment banking gives a good overview of what IBD is. The guide to finance interviews is also very helpful. For S&T, take a look at an overview of the products to get a feel of how the markets interrelate. I'm getting my dad a book for christmas titled "All about bonds and bond mutual funds" by esme faerber. It's accessible and gives a quick overview of what you need to know on the credit side. (goes over some basic bond math, defines key terms and goes over the different fixed income products, but looks at an investor's point of view versus a traders).

Structuring is considered S&T because it needs to be close to the markets. Although there is still the client interaciton like IBD, one of the main selling points is the ability to understand the market. If you're trying to structure a CDO, you need to know how the underlying debt is performing in the market, how the overall credit market is moving, as well as how the CDO market is performing. In IBD, the most lucrative product (M&A) doesn't really have a market, hence the coverage groups are generally a bit more distant from the trading floor.

The best way to get a clear picture of the differences between S&T and IBD is to network and try to arrange a visit. Talk to alumni and attend company events. Some banks have specific days dedicated to women or minorities for diversity recruiting. Some also have trading competitions to screen potential candidates.

Mar 24, 2017

That really was extremely helpful. And embarrassing..

Thanks :)

Mar 24, 2017

leapinghorse, it may make more sense to concentrate on what you like and think you'd be good at than look at what you'd make as a 1st year associate. maybe a 1st year associate in IBD makes 50k more maybe he doesnt, in the long run you can make a ton of cash in both jobs but you have a better chance of making it there in the one you enjoy.

these 2 jobs are so different it would be tough to be happy in both, i know as i worked in banking and now work in S&T. what I can say from experience is that you are rewarded for performance in S&T while banking is much more structured (3 yrs analyst, 3 associate, x for VP etc). I know of a few MD's that are under 30, VP's in the 25-27 range while in banking ive never seen that (thats not to say it doesnt exist though)

Mar 24, 2017

Actually I would think prime brokerage is one of the areas facing significant difficulty right now.

Mar 24, 2017

Good luck in monetizing your ultra thin listed spreads. If electronic trading becomes the last remaing profitable desk, you can as well become a plumber.

Mar 24, 2017

I thought the consensus was generally that more complex or structured products were better because the spreads are still nice. Someone with industry knowledge should chime in.

Mar 24, 2017

The more complex and esoteric the product, the safer you are in terms of viability.

Mar 24, 2017

let's go trevor gimme your smokes

Mar 24, 2017

Unitl you realize everyone has shifted out of complexity and is looking for low fee simple products...

Mar 24, 2017

Aw, those are my last two!

Mar 24, 2017

Wouldn't regulation and capital requirements have a more detrimental effects on complex products within the FICC space?

Mar 24, 2017

Yep. Funny how a lot of things become unprofitable when you need to hold more capital.

Mar 24, 2017
Mar 24, 2017
Comment

"Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.

Mar 24, 2017
Mar 24, 2017
Comment

"Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.