What can Sell-Side traders do at HFs?

mongoose's picture
Rank: King Kong | banana points 1,234

I don't know much about this, but sell-side traders are not exactly known for their deep analysis skills, so what do they do when they make the move to HFs?

My guess is that HFs need execution traders as well, and that is where the airhead sell-side traders would come in, right?

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Comments (18)

Dec 2, 2012

Depends on the fund...you shouldn't paint with such a broad brush...

Dec 3, 2012

ZJs

Dec 3, 2012
Kenny_Powers_CFA:

ZJs

If you have to ask, you can't afford it.

Dec 4, 2012

Definitely depends on the fund. A lot of HF traders have come from the SS.

Dec 30, 2012
shark-monkey:

Definitely depends on the fund. A lot of HF traders have come from the SS.

@Shark-monkey -- Since the Volker Rule had banned prop trading at Investment Banks (sell side), are you saying that "execution traders" from the sell side have gone on to Hedge Funds as traders ?

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Dec 30, 2012
ypeter123:
shark-monkey:

Definitely depends on the fund. A lot of HF traders have come from the SS.

@Shark-monkey -- Since the Volker Rule had banned prop trading at Investment Banks (sell side), are you saying that "execution traders" from the sell side have gone on to Hedge Funds as traders ?

1. Prop trading still exists at every bank; they've found ways to skirt it

2. Lots of credit and global macro funds are "trading" shops where the traders - ex-sell-side guys - are the stars. They're not just execution traders, they are also generating ideas/alpha

Dec 30, 2012
mrb87:
ypeter123:
shark-monkey:

Definitely depends on the fund. A lot of HF traders have come from the SS.

@Shark-monkey -- Since the Volker Rule had banned prop trading at Investment Banks (sell side), are you saying that "execution traders" from the sell side have gone on to Hedge Funds as traders ?

1. Prop trading still exists at every bank; they've found ways to skirt it

2. Lots of credit and global macro funds are "trading" shops where the traders - ex-sell-side guys - are the stars. They're not just execution traders, they are also generating ideas/alpha

Seems like I mis-phrased my question. Sorry about that.

You mentioned that a lot of HF traders come from the sell side. I meant to ask that, when these people were still on the sell side, were they execution traders or Prop traders ?? And now that they are on the buy side (HF), are they execution traders or prop traders (i read on WSO that HF also has execution traders, but I've never heard about this before).

Thanks !

Dec 30, 2012

Both. But I don't think you even have a good grip on what traders do at an investment bank.

Dec 30, 2012
JamesHetfield:

sell-side traders are not exactly known for their deep analysis skills

And this kid wants to do S&T? Sounds like you don't know much about the business, especially if you think most sell-side traders are execution traders

Dec 30, 2012
gammaovertheta:
JamesHetfield:

sell-side traders are not exactly known for their deep analysis skills

And this kid wants to do S&T? Sounds like you don't know much about the business, especially if you think most sell-side traders are execution traders

I'm a college student asking questions. Don't know how this got front-paged. Excuse my ignorance.

Dec 30, 2012
JamesHetfield:
gammaovertheta:
JamesHetfield:

sell-side traders are not exactly known for their deep analysis skills

And this kid wants to do S&T? Sounds like you don't know much about the business, especially if you think most sell-side traders are execution traders

I'm a college student asking questions. Don't know how this got front-paged. Excuse my ignorance.

So ask questions like you are a college kid; don't call sell-side traders "airheads" when you'd probably S a D to be one at this point.

Dec 30, 2012

Sell side trading isnt execution only, that is what sales trading is. A trading seat on the sell side in many instances can prepare you for a more prop oriented position. On the sell side you manage a book, and by that I mean a lot of the positions you have are given to you by clients. However, at every step a part of your job is to try and make money, and this will come from forming your own views and putting trades on. For example, a client lifts you in some ATM 1Y options of XYZ stock in 50k vega, Now from this point on it becomes a prop position for you, you have to determine whether you like the position, and the spread you took is worth it, which might be the case, you think the vol is high and and its not realizing, so you are happy to be short and receive the decay, wait for the vol to come off a bit and then try to buy some back. Or you think the skew is very cheap, and the name isnt realizing, so you buy some downside, keep it short gamma, or you are afraid of a takeover that the market isnbt pricing in so you buy upside, or you think the vol in the 1Y is really high but the name is realizing, or you are afraid they might profit warn in the next month, so you buy some shorter dated options against it to get some gamma etc etc, can go on but you get my point.

Sellside traders do a very similar job to prop traders, except that its in a different framework, a lot of the times its defensive prop trading, and sometimes you dont really have a choice of what you put on the book, but you have choices on how you want to deal with it. The benefits of this is that you get exposed to a lot of different uncomfortable situations and risks, ie) in single stocks a huge thing is uncertainty over the dividend date, and a movement of a couple days can make a div move into or out of expiry, and if you are not on the ball you can get taken for a ride.

Dec 30, 2012

Moore also poached a few EM FX traders from Goldman recently.
The entire desk is ex-GS now I believe.

Dec 30, 2012
djrajio:

Moore also poached a few EM FX traders from Goldman recently.
The entire desk is ex-GS now I believe.

It looks like Moore is aggressively recruiting. They also recruit MBA students at Harvard and Wharton, if I'm not mistaken.

Dec 30, 2012

Prop traders are not being reassigned to AM from what I've heard - they're getting fired. Goldman PS is being dismantled (most of the 65-70 employees are being fired) and JPM just got rid of some commodity prop traders in europe. not sure where you heard they're being assigned to AM...

People tend to think life is a race with other people. They don't realize that every moment they spend sprinting towards the finish line is a moment they lose permanently, and a moment closer to their death.

Dec 30, 2012
thewallaby:

Prop traders are not being reassigned to AM from what I've heard - they're getting fired. Goldman PS is being dismantled (most of the 65-70 employees are being fired) and JPM just got rid of some commodity prop traders in europe. not sure where you heard they're being assigned to AM...

This is what I read. Even if they do get fired, they'll have no problem finding jobs.

Dec 30, 2012