Why do S&T internships exist?
I'm currently part of the S&T program at a solid BB. The internship is 95% networking, 5% actual (though BS) work. I assume that's the same in person as well.
I really don't understand why the internship exists. It seems like it'd be much more cost efficient to just hire new grads and interview them more thoroughly rather than spending $20k per intern * 60 = $1.2M on a summer class, not including the cost of recruiting us and whatever add-ons come along with that. I know the amount is probably peanuts to the bank, but even the time loss for people on the desks to maintain interns seems sizable. We add literally 0 value unless you're on a technical desk, unlike IB or tech where your small contribution can end up on a deck or go into production.
For example, I think the consulting model makes a ton more sense as summer intern classes are small, but they do it to lock up the best of the best talent for the much larger FT class.
The only explanation I have is that they really want good fits for their desk, it's just tradition, or they want to lock in all the talent sooner rather than later. However I feel like a more drawn out interview process would give you a pretty good sense of fit; if it's tradition, then they should probably rethink it; if it's talent, it doesn't make sense since I really don't think S&T attracts the best candidates.
Any thoughts on this?
Hi, I went thru a S/T internship last summer, now I'm a fulltime analyst. I think mostly the internship program exists for the benefit of the interns. A lot of things you learn in the classroom don't stack up in real life, and you'll learn way more shadowing people than from any textbook. No textbook is gonna explain why IG is traded off yield but HY is traded off price, and certainly no undergrad level class is gonna explain mtg dollar rolls or what the heck TBA is (took me a while to understand). Think about it as finance crash course 101.
Also, the interns get to learn about the work environment, which is so so useful. IB is more standard quiet work, which tbh, anyone with enough coffee can grind through. S/T is a lot more stressful, and you'll really get to experience that if you shadow a desk. A lot of people don't like it. One of my friends said the trading floor looked like the most depressing place to work. But you'd never know that if you didn't do the internship. Best of luck with your internship, PM me if you have any other questions!
i've been a rates trader for over 15 years at multiple BB banks....i've seen dozens of interns...and trained many new hires.
Its very hard to gauge if somebody will make a good trader...there really is no interview that can ascertain that...partially because there are many different ways to be a good trader (and also many ways to be a bad trader). So, the internship gives the desk a chance to get to know you.
Good traders aren't dumb...they have to take in huge amounts of information, and synthesize that info into actionable decisions. We are judged very harshly..by our P&L and the market. So, just spending time with interns over the summer "socializing" gives the trading desk a chance to really get to know your personality. Trading is generally not a high level physics rocket science level math exercise....its more understanding the emotional state of the rest of the participants in the market (observed thru trading activity...which yes are transmitted as numbers in the trading data). So, spending many nights at the bar getting drinks, getting to know the "real you" is important...because once you actually start trading at a bank, you can easily swing million of dollars of P&L..sometimes in minutes. This s not market making for a couple thousand dollars hundreds of times....large BB trading is hundreds of millions of dollars of notional (sometimes billions) on every trade....where you provide an order of magnitude more liquidity than you have access to yourself to get out of a position given to you by a client. And you are often given this type of responsibility very fast (compared to traditional investment banking).
I was trading 300mm off the run 30yr bonds with customers my first year as a trader. I could easily have lost 1-2 million dollars on just about every trade that size. For this reason alone, it is very important for the trading desk to really get to know the potential new hires.
I could not agree with this post more. Being able to determine a good trader at a young age is nearly impossible and trying to figure out if they have the drive to continue crushing is similarly challenging.
If you've seen the prop trading/quant trading industry's timelines you'll notice they don't even care about anything past stats and maths backgrounds because of how they generally view trading.
To get bright people interested in your shop from an earlyish age that wish to return for grad/perm roles
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