4/21/17

Hi guys,

I was wondering what makes you a "star-trader" at a BB? I heard of traders making MD with 27 because they make so much money. Isn't trading just about executing? I am sorry if this question is stupid but I am a first-year and I don't really understand it. How can you make a lot of money and be successful in sell-side trading since there is no property trading in banks?

http://news.efinancialcareers.com/us-en/190207/kun...
Thank you.

Comments (18)

4/14/17

anyone who is a trader himself?

Don't say this in a banking interview:

Which superhero would you be and why? I want to be like Robin Hood, stealing from the rich and giving to the poor - me.

Financial Modeling
4/14/17

Bump

4/14/17

Commissions, bid/ask spread, flow trading, prop trading, etc.

Then out spake brave Horatius, The Captain of the Gate: "To every man upon this earth, death cometh soon or late. And how can man die better than facing fearful odds, For the ashes of his fathers, and the temples of his Gods."

4/14/17

but isn't commission the same for every trader? how can you be "better" than your colleagues? I would really appreciate it if you could go into more details. Thanks.

Don't say this in a banking interview:

Which superhero would you be and why? I want to be like Robin Hood, stealing from the rich and giving to the poor - me.

4/17/17

People get different amounts of commission. There's a lot more to it than you think, and tons of this stuff can be read up on on the internet. You should do some searching.

Then out spake brave Horatius, The Captain of the Gate: "To every man upon this earth, death cometh soon or late. And how can man die better than facing fearful odds, For the ashes of his fathers, and the temples of his Gods."

4/15/17

Generally speaking the days of people in their 20's making MD at BBs are over, and were not even that common to begin with. Of course GS has a few stars that grab headlines, they always have and always will but the S&T business has changed. Important to note that article is dated 2007, was probably making the firm a ton of money on a structuring desk like the rest of the street in 2004 - 2007.

4/15/17

How are traders making money? Is it just the execution fee?

Don't say this in a banking interview:

Which superhero would you be and why? I want to be like Robin Hood, stealing from the rich and giving to the poor - me.

4/15/17

yea from the spreads and even though sells-side trading is just principal trading, traders can still take some risk ("hedging")

4/15/17

so they can hold positions themselves and "bet" to a certain extent?

Don't say this in a banking interview:

Which superhero would you be and why? I want to be like Robin Hood, stealing from the rich and giving to the poor - me.

4/15/17

I'll give a simplified response to your question that won't be 100% accurate but might help you understand if you are new to this. If you are making markets, you have to hedge your book. Assuming there is a direction to the market, you can take a view in your hedging. Basically be over-hedged (hold more inventory) on one side or the other, so that is the risk you can take and get some p/l from that. What I would suggest you do if possible, try to shadow someone on a sell-side trading desk. A common complaint for new analysts is they don't actually understand how desks make money, so if you can nail that down you'll sound a lot better on interviews. Hope this helps

4/16/17

You can always take positions to a some extent, whether its a left over of a client's trade or actually initiating a prop position.

As a trader, your edge comes from a. reading the flow b. nailing the fundamentals. Then you can change your markets width & size based on what you think. Lets say after FOMC you think the yield curve would steepen. Some client asks for a yield curve market, and then you can skew your market based on your market to not sell the steepener easily, while other market makers who give a less aggressive market will get lifted away by the client.

4/18/17

You get more flow based upon the prices you post and the relationships you have. I doubt there are star traders in equities or commodities, but in derivatives, credit products, and fixed income there's still potential to make it due to the opaque nature of those markets.

4/18/17

What do you think about rates or high yield?

Don't say this in a banking interview:

Which superhero would you be and why? I want to be like Robin Hood, stealing from the rich and giving to the poor - me.

4/20/17

Rates & HY go under fixed income. Rates have been, AFAIK, pretty good lately as have leveraged loans, from a hiring standpoint. This may end soon due to the normalizing of interest rates, lol, so take that with a grain of salt.

Best Response
4/21/17

Okay, so the sell-side is comprised of a) Sales Traders and b) Liability Traders (prop). These roles often get blended, depending on the desk, but the VAST majority of trading is simply filling client orders. However, any trader anticipating client demand in a certain position can enter it before actually receiving any orders, taking risk & providing liquidity, generating profits in a prop-like fashion.

The characteristics of a strong modern day trader is identical to what makes an individual a strong sales person in any other industry: increasing the bank's commissions with the client accounts they are assigned to cover.

This can be done through developing strong relationships with clients (see: fancy dinners), or by providing an advantageous rate to enter/exit positions compared to the rest of the street.

In my personal experience, the best traders are the guys who are the best at sales, rather than providing any value through their opinion on short-term market movements. I am obviously biased, but most solid value funds have (or theoretically should have) a long enough holding period that their decisions to enter new positions are not influenced in the slightest by traders' views. Quant funds don't engage with traders. And macro funds are on their way out the door.

4/21/17

Golden. +1 SB

Overwhelming grasp of the obvious.

4/21/17

OP's question really seems to hinge around: are you a market maker, or a price taker? and no, price takers won't make MD, they'll be phased out for automation.

4/21/17

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Overwhelming grasp of the obvious.

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