Traders screwed?!?

RGee's picture
Rank: Orangutan | 330

I'm often concerned about my peers in the Sales & Trading career track. While many of them seem to think they will be the next big HF PM and such (and I am certain that a few of them will be) I have a hunch that the vast majority of them will be either unemployed within a couple of years or cut at a mid-level management role, either from poor performance, a bad mistake, and/or automation, and then have nowhere to go.

Does anyone have any insights on what happens to those who go into trading out of undergrad say 10-20 years out? Seems like a dead end for most since they would have built little to no transferable skills to enable them to change careers after they get fired

Comments (136)

Apr 11, 2018

I'm interested in this as well. Do bankers even get in touch with traders within their firm? Perhaps better to ask on trading forum?

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Apr 11, 2018

I'd like to hear insight here too.

Apr 11, 2018

A lot of people lateral out to other areas of the bank at junior levels. Some people go to completely random sales jobs that may not be finance related. Others go to business school. Your transferable skills are very product dependent, so it's hard to give a good answer without knowing which desk they're on.

I think the people who get on good desks and perform very well are in a great spot. Sales and trading is a great career if you're in the right product or you get to move up quickly due to unexpected exits by people more senior than you

Apr 14, 2018

What products do you find valuable?

Apr 11, 2018

I believe the best products are for very quanty, math-inclined students. Trade equity derivatives, any volatility product, interest rate derivatives, non-agency rmbs, and you could end up a buy-side trader at a good macro hedge fund / trading shop. On certain quanty desks programming experience can be important. I don't want to say too much because there are so many exceptions and other things I don't know

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Apr 11, 2018

If you're in FI S&T you're good. Little to no automation on most desks. Bond traders kind of stick around forever though, so very difficult to move around as seat space is tough to come by.

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Apr 11, 2018

That's because (it's widely known) that FI is about as exciting as a senior citizen on life support.
In other words, it's VERY BORING and difficult to attract/retain ambitious talent.

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Apr 13, 2018

Im assuming you just mean vanilla rates trading? What makes it more boring than other products for example?

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Apr 11, 2018

Exit opps are what you make of them, although will be somewhat desk dependent. All high volume products will continue to be automated (think rates and etc.) leading to further spread compression and making it more difficult to generate huge PnL (as we've seen with equities). However, on some lesser liquid products you'll still need banks with balance sheets to take risk and provide liquidity. I'd suggest reading this post if you want a better understanding of each desk and its pros and cons:

Picking The Right Trading Jungle

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Apr 13, 2018

Compared to Investment Bankers, traders are inferior in comparison in just about every way.

Hours: Entry level traders work about 70 hours a week, and the work environment consists of constant stress and very few breaks, meanwhile IB analysts work around 80 hours a week, and there is plenty of downtime and breaks.

Compensation: Traders make typically $85k base, standard across many FO roles. However, their bonus is very performance based, and I have YET to hear any BB traders saying they made any figures even above $30k for their bonus. Meanwhile, IB analysts make $85 base, and very often receive bonuses that are 50-100% of their base.

Job Stability: Traders can get cut for sub-par performance, bad team/group performance, bad firm performance, a bad market, or even a mistake they made on a trade, or simply from automation. Subpar IBankers in a decent market will retain their jobs and will simply be thrown into the "bottom bucket" bonus pool, and in down-markets, M&A and RX activity will still exist, but perhaps their bonuses will be a bit lower than expected.

Furthermore, Investment Bankers will take a very very long time to get automated due to the interactive and relationships-based nature of the business.

Upward Mobility: By the time you're 2 years in as a trader, most the people you knew from day 1 will have been axed and/or replaced. It is extremely hard to move up unless you're a superstar in the group. In Investment Banking, most the superstars move to PE and HF. Thus, if you're an above average analyst who did not leave, the associate promote option is often sitting there waiting for you.

Exit Opps: Traders have very very few exits that are worth it. IB have unlimited possibilities for where they can potentially move to.

Conclusion: Yes, traders are screwed.

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Apr 13, 2018

as a trader myself...this rings true in a very hurtful way. The exception is the superstar.

The superstar trader can make millions to billions...and will quickly eclipse most ibankers. Every person who goes into trading thinks THEY will be the next superstar. If you don't think you'll be the next superstar....then you don't belong in trading.

risk vs reward...ibanker is the statistically better job...but if you are playing for the extreme edge, then trading offers the gambler an opportunity that ibanker does not.

just google it...you're welcome

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Apr 13, 2018

People are throwing ms at this post but having worked in S&T for a year before moving over to IB, all of that is pretty much true. I worked in equities, which has seen a lot of restructuring (& continues to see it moving forward) and those guys who got cut ended up in pretty rando sales gigs. Seeing that was a big factor behind my move to IB.

Like want2trade says above, a lot of sales & trading is banking on yourself and in the majority of cases, the gamble doesn't pay off especially in an era of rapid technological change that's shrinking rev pools and headcount.

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Apr 14, 2018

yea - unfortunately the guy has a point.
Might be exaggerating as to the amount of traders getting cut, but it's pretty brutal. Also bonuses for juniors are still not that bad and 50-100%, although maybe he is right and that has changed as well. Before after 10 years on a trading desk you could retire, never again can you do that... Anyways - bottom line is the guy has a point and even if it might be exaggerated it's not far from the truth.

BS: on the hours though - traders have better hours no matter what

Apr 14, 2018

I know sales guys/brokers making 1 million a year at 30. The talk their are no exits is just that. His work is fairly easy.

Array
Apr 13, 2018

Bonuses at the banks suck. Prop shops are where the money is at.

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Apr 13, 2018

What other peoples opinions on prop shops?

Apr 14, 2018

how old are you? Most prop shop were shut after the banking regulations kicked in post 2008

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Apr 13, 2018

You're saying you haven't heard of any traders that made more than 115k (85 base +30 bonus) this year??

Apr 13, 2018

its rare for a 1st year trader to make more than that...because most 1st year traders aren't actually trading...they sit next to a senior guy, do all the bitch work...and are paid to learn thru osmosis for the 1st year. Most 1st year traders lose money in their trading books (if they actually have their own book)...some make a little...but its VERY RARE for a 1st year trader to make significant money trading. Trading takes years to learn...and in the meantime, the job is to not lose money. Around year 3, BB traders are expected to start making real money.

just google it...you're welcome

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Apr 24, 2019

Just got an offer at a pretty good Chicago prop shop to make markets on equity options over the counter. 100k base plus a median first year bonus of like 40k. And churn, from what I've been told, is fairly low- at least relative to other jobs in finance where you make 100k base year one. Seems like a good gig.

Apr 13, 2018

The crypto market seems to be a huge area where a lot of form Equities and FX traders have moved into. I also notice that ER and AM are moving to crypto as well because of the lack of saturation and the volatility.

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Apr 14, 2018

LOL

Apr 14, 2018

have you ever heard "rolling" in trading desk?
namely,replace expensive senior traders with juniors.

Apr 14, 2018

Im a trader and this thread nails it.

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Apr 13, 2018

What type of bank and product were you at (roughly)?

Apr 14, 2018

Top Tier BB IB, Equity Derivs, Prop and Client flow.

Apr 14, 2018

This question has been asked in some form every other month since WSO started, and will be asked regularly until the heat death of the universe.

Apr 14, 2018

What's the average comp for a semi senior trader? (let's say 4-7 years in) Is it as lucrative as the analyst ==> MD track?

Apr 14, 2018

Agree that it is all about what desk you are on and where you want to go. For instance - I had a conversation with a macro HF last week - where trading (structured products in particular) was the only realistic way to land a gig there if you werent a quant with a phd, pricing in the background. Wasn't too partial on any trading any other product, particularly (to be expected) FX which makes sense. This is obviously very specific. No one from IB and almost no one from a research background - which seems to be supported by other posts about macro HFs on this site.

"I'm not fat. I'm cultivating mass."

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Apr 15, 2018

For someone 5 years in on a fixed income desk, I'd say 250-275 area. Ofc, if you're at a lower tier bank or are a low performer you'd get less than at a top 10 bank and are performing well, so it could easily range. A senior associate doing well at a BB could be making 300. You'd probably be working a bit less than 60h per week. If you have a good rep, are really good, or get along with people well, you'd probably have other options, but they may not necessarily be worth the risk.

Apr 14, 2018

Any insight on exit-ops for FICC SALES? Would a exit to corporate finance (i.e working under the CFO of some F500) be something to consider?

Apr 17, 2018
SandT2IB:

Any insight on exit-ops for FICC SALES? Would a exit to corporate finance (i.e working under the CFO of some F500) be something to consider?

Anyone got any thoughts on this?

What about Private Wealth Management advisory desks (HNW &UHNWs) as an exit option for people in S&T?

Apr 11, 2018

Probably one of the best exit ops would be exactly what your talking about. It's called treasury capital markets. You mostly manage short term paper for liquidity purposes, but deal in capital planning as well. Great hours as well, but tough to find open spots in F500's.

Apr 14, 2018

S&T used to be better hours, same base, better bonus upside, more fun/fratty/freewheeling, more quantitative/abstract/intellectual with regards to IB (like over 10 years ago).

Now, the hours have gotten worse, the base is lower than IBD, the bonus upside is gone because you can't take risk (and with MIFID II, in Europe, barely talk to clients), tons of compliance/watching your ass (fratty atmosphere is gone), more coding less finance, and yes, you're slowly being replaced by software, while your boss sees his retirement getting pushed further out with each disappointing bonus, and no longer even pretends to care about your career.

If you're on a good desk, and your skills match the desk perfectly, it can end up making more sense than Banking. Banking is also mired in regulations and is just as boring as ever (PPT formatting, typo-catching, save-as Pitch_v41, etc), but it hasn't deteriorated as much as S&T has.

The tables have definitely turned.

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Apr 17, 2018

Agree with all of this.

Most senior guys at my desk know this is the final act and are preparing for retirement. Factor funds, indexing and cheap online trading platforms ruined active management. Trading volumes and margins are lower than ever making it impossible to get a big bonus in flow trading, and the few prop traders that exist are often times limited to algos or extremely strict trading rules.

I think the guys that are at risk are traders with 5-10 years of experience. No pre-2007 bonus to fall back on and a skillset that is too narrow for a lot of corporate roles.

Oh, and fuck MIFID II - can't even take a client out for lunch anymore without starting a compliance paper mill.

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Apr 17, 2018

what product do you focus on? MBA to change path?

and yes fuck MIFID

Apr 13, 2018

Where would you suggest going within S&T for greatest longevity? Move to another department in the bank?

Nov 12, 2018

So for a freshie entering the business, is it better to be on the sales side or trading side? who will have a job for the foreseeable future? is it possible to make 500k after tax in this business and how?

Apr 13, 2018

once you are in the BB trading biz for 3-4+ years, your base gets pegged around 120-200k (depending on the bank)...and it pretty much never goes up from there.

At a BB, as a trader, your bonus is between 4-6% of your P&L...which can vary from zero to infinity...as a trader, its up to YOU to make your P&L. Nobody else is responsible for your P&L.

A trader who makes 60 million dollars trading can get a 3mm bonus (this trader should go to a hedge fund to collect the 20% to get 12mm). This 60mm trader will almost always have multiple hedge funds to choose from. Its very rare for a BB trader to stay at the BB making that kid of money, because the hedge funds pay so much better. Its also very rare for BB trader to make that $$ in the first place...because trading is so incredibly hard (hence, why hedge funds pay so well).

just google it...you're welcome

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Apr 17, 2018

Well, a lot of those 60mm traders do go to a hedge fund only to find out that they don't really know how to make money :)

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Apr 18, 2018
want2trade:

once you are in the BB trading biz for 3-4+ years, your base gets pegged at 150-200k (depending on the bank)...and it pretty much never goes up from there.

At a BB, as a trader, your bonus is between 4-6% of your P&L...which can vary from zero to infinity...as a trader, its up to YOU to make your P&L. Nobody else is responsible for your P&L.

A trader who makes 60 million dollars trading can get a 3mm bonus (this trader should go to a hedge fund to collect the 20% to get 12mm). This 60mm trader will almost always have multiple hedge funds to choose from. Its very rare for a BB trader to stay at the BB making that kid of money, because the hedge funds pay so much better. Its also very rare for BB trader to make that $$ in the first place...because trading is so incredibly hard (hence, why hedge funds pay so well).

Really curious where you got this 4-6% number from, and being a trader at a hedge fund does not entitle you to 20% of profits. You shouldn't comment on this stuff without xp

Apr 13, 2018

its what i got paid when i was trading on a BB desk...and it jives with my peers.

just google it...you're welcome

Apr 14, 2018

20% for trader at hedge fund is only slighter higher than the market rate. It's probably 17% on average. All multi-strats pay in that range.

Different if you are execution trader. But that is fairly standard at macro/multi strat. At the bigger prop groups 30-40 is standard ,

Honestly I'm not even sure what the difference is between multi-strat and a drw. Probably a slight difference between position building versus daytrading but they both do both.

Array
    • 1
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Apr 17, 2018

What are people's thoughts on cash equities sales specifically?

Apr 14, 2018
Apr 22, 2018

looks like IBD > S&T for awhile

Apr 22, 2018
bigparth53:

looks like IBD > S&T for awhile

nah

Apr 22, 2018

would take trading with only base over IBD with base and bonus anyday

Apr 22, 2018

no way in my life would i ever work a bankers hours. ever. there is absolutely no way the marginally higher bonus is worth it, and you probably still make less per hour.

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Apr 22, 2018
WellsFargoBaker:

Looks like trading is getting fucked

http://www.reuters.com/article/2011/07/08/us-compe...

Traders definitely are getting fucked more than investment bankers...I mean they have more time for it. :)

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Apr 22, 2018
GoIllini:
WellsFargoBaker:

Looks like trading is getting fucked

http://www.reuters.com/article/2011/07/08/us-compe...

Traders definitely are getting fucked more than investment bankers...I mean they have more time for it. :)

Yes, because they're getting laid off and replaced by computers.

Apr 22, 2018

this isnt about ib vs trading. but a serious question about the viability of trading as source of revenue for banks in the future.

Apr 22, 2018

I dont think it is a viable source of revenue for banks. Maybe bonds and FX trading but otherwise I do not see a future for it with banks.

Apr 22, 2018

What's with the drama? Yes, prop is out, capital is getting expensive and the easy money subsidised by the taxpayer is no longer quite as easy.

IMHO, this is a good thing.

Apr 22, 2018

@Martinghoul: easy to say when you're not the one who is suffering.

Apr 22, 2018

For banks it tougher BC of the regulatory environment - But smaller IBs with trading desks that aren't subject to the Volcker rule because they don't take deposits with thrive.

Apr 23, 2018

Ugh more kids making random comments...

Apr 22, 2018

@creditanalyst85: More ppl assuming everyone is a "kid." making a comment from a dorm room. :-)

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Apr 17, 2018

When markets are doing hot, your EV is much higher because no one gets fired and the $ upside is massive. With regulations, technology etc, you are not gonna make as much money. The trade (i.e. doing S&T) doesn't look as attractive. We are never going back to the heyday.

HOWEVER, i gotta address some of the myths posted above regarding life as an analyst on the desk.

Hours: Except for some very specific desks, no one on the floor works 70hrs+, not on a regular basis anyway. For juniors, a 60hr work week (12hr/day) seems more like the norm.

Comp: You get paid if your bank/group/desk make $ and you perform. That's why with all the restructuring sh!t going on, some banks just don't pay their juniors anything. That's because they have a smaller bonus pool and they still gotta pay their material risk takers first.
Comp also varies more between the top and bottom bucket than in IBD and it's not a standardised X% per bucket like in IBD. Basically you can get paid >100% and you can also get 0.

Not all seats in S&T are the same. It depends on the product, your bank's relative position within that market, your boss etc and the thing is most graduates just kinda luck into their seat/desk.

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Apr 18, 2018

Given the rebound in commodity prices how do you think physical commodity trading is going to fare in the near to long term?

I don't think physical is going to get automated given the relationship driven aspect of it.

Apr 13, 2018

100% agree with this

Apr 23, 2018

There are like three threads covering this exact topic,,,most of them made it to the front page.

Apr 23, 2018

Maybe this thread pertains more to the actual traders rather than the bank.

I'm actually curious to learn what you guys think.

Apr 23, 2018

they should all join together and start a mega-super-duper fund

Apr 23, 2018

Yes Maxc that is more what I was looking for. I know how to use the search function Gekko but nothing addressed this directly.

Apr 23, 2018

It seems like the prop ones would get screwed and other traders would feel the effects. More trading might be done outside of banks.

Apr 23, 2018

If this new regulation actually passes, no doubt prop desks will be hurt. By how much, I'm not sure.

Luckily, investors aren't stupid, and they know where the talent is. So when Joe Trader and his entire desk get let go, he'll take them all to create Joe Trader Capital LLC. He'll just drop a line to the most likely numerous people he knows and say, "Oh, you remember Goldman's FI prop desk? Haha, yeeeah that was me. You can make your check out to my firm, talk to you at the end of Q4."

Like you said, it would may end up being great for the traders. I'm guessing the reason they didn't leave in the first place was working for a firm with a bit more capital behind them (a bank vs. a hedge fund that could tank at any point) and then comp they were given was too enticing to leave.

Just my thoughts though.

Apr 23, 2018

so would this regulation no longer let market makers take some prop positions?

Apr 23, 2018
Exclusive8:

so would this regulation no longer let market makers take some prop positions?

Market makers inherently take prop positions by being market makers, the difference being is that its prop in the sense that you are taking the other side of the trade and if you do not hedge then its a prop bet. You cannot actually be a market maker without some 'prop' element to it.

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Apr 17, 2018

What about Private Wealth Management advisory desks (HNW &UHNWs) for large Wealth management houses as an exit option for people in Fixed Income S&T?

Apr 18, 2018

It's crazy to me how many people on this thread state things as facts when they really have no clue what they are talking about and clearly have never sat on a desk. The people that yell automation about trading jobs have simply never sat on a sell-side desk and don't know how it functions.

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Apr 19, 2018

SHUT UP AND LET ME GO!

Apr 19, 2018
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