What is Sales & Trading?
The Sales & Trading (S&T) division at a bank is responsible for market-making and executing equity, fixed income, derivatives, commodity and other such trades on behalf of clients.
Let’s break that statement down:
Sales and Trading: There are two very different roles that work very closely. The sales team is responsible for conveying information to clients and convincing them to do business with the bank. The trading team is the one actually executing the trades that are originated by the client-facing sales team.
Market-making: Market-makers are wholesale buyers and sellers of securities that provide liquidity to the market by trying to satisfy demand. Think of them as a very large used-car salesman who is willing to buy any number of used cars at $8,000 and sell them at $10,000. Anyone who wants to buy or sell a lot of used cars, goes to them.
Equity, fixed income, derivatives, commodity etc: Banks trade in a number of different asset classes and many of these are grouped into separate teams.
- The institutional equities team deals in cash equities, equity derivatives and even electronic trading tools like algorithms and smart order routing applications.
- The FICC team deals in fixed income securities, currencies and commodities. This includes a number of products like interest rate, currency products, oil and gas, metals, power, investment grade and high yield bonds, credit derivatives and so on.
On behalf of clients: The sales and trading team executes trades on behalf of corporate or institutional clients like large companies, other financial institutions, governments, mutual funds, pension funds, hedge funds and so on.
Job Description – Sales
Sales & trading are two very different roles even though they work in very close proximity to each other. The salespeople are responsible for sourcing the deals and the traders sit right next to them and execute those deals while trying to maximize profits.
- The sales team is responsible for distributing a diverse range of products to corporate or sophisticated institutional clients.
- A salesperson must be able to come up with innovative ideas to convince their client to initiate trades in a complex and fast-moving environment.
- Exceptional service is expected by these large clients as they have a lot of other big banks vying for their business.
- Providing timely market information and prices is also key to success. Any delays or lapses can lead to stale prices which can impact sales and profitability.
- The salesperson might also be responsible for pitching products like algorithmic or quantitative trading solutions and other execution capabilities. These products actually have higher margins these days.
- Participation and leadership in business origination activities is also expected. The sales team may accompany relationship/ coverage managers in order to win some additional business from new or existing clients.
- The sales team will also assist in strategic prospecting initiatives like preparing marketing materials or participating in industry events and so on.
- Onboarding activities also include documentation and compliance with KYC/ AML norms and other checks.
- Cross selling products is a big part of success in sales. If your client is buying one product, you have to assess if they will benefit with another product that you or one of the other teams are selling and then try to win that business as well.
- The salesperson must also assess the risk-reward of a transaction on a real-time basis. For example, major news events can drastically impact a certain security and the salesperson must use their judgement when accepting a trade of that nature.
- While doing all of this, you must also ensure strict compliance with all relevant regulations, internal policies and controls. Sales works in close partnership with compliance, audit, market risk, credit risk, legal teams and other control functions.
- You will also perform reporting and analysis of key business metrics like revenues, sales analytics, market share, wallet share, expenses, client analytics etc.
- Identification of operational or other inefficiencies and leading cross functional teams to solve such issues.
- Senior level roles involve management activities like monitoring the performance of your teams and other administrative tasks.
Job Description – Trading
As a fresh trader, you will likely spend most of your time on administrative tasks rather than actual trading. For example, you may be the one responsible for ensuring that all trades are properly entered into the banks trading system, monitoring the profit and losses of each trader on your desk, doing financial modelling on behalf of other traders and so on.
- You will slowly graduate to more meaty roles where you are finally given the responsibility of making trades.
- Traders monitor, interpret and analyze macroeconomic and market trends, economic indicators and global financial markets to make sure that you are well aware of any material developments and can more effectively price transactions and trades.
- Accurate and timely booking of transactions on a consistent basis is a key requirement.
- Traders are responsible for pricing complex derivative deals and providing deep analysis of such products. Some banks have dedicated structuring teams which also assist in this task.
- Traders must find effective hedging strategies to protect bank capital from trades that they have entered into.
- Traders need to understand all available execution tools, their associated trading costs and risk and the underlying objective of the trade in order to effectively perform their role.
- The use of capital and trade limits must be optimized to the maximum extent possible. As a trader, you will have limits in terms of how much capital you can deploy at any given time and you need to figure out the most profitable way to deploy that capital while minimizing risk.
- Most roles require the use of Python, Excel and VBA to create scenarios and price complex trades.
- You must be well versed with risk management principles and deal with concepts like VaR, CAV, and other metrics.
- Traders liaise with the sales team, quantitative analysts, risk management and other departments in order to meet their deliverables.
These bullet points cover some of the more common job requirements although there is a lot more to it. Additional job requirements depend on how the trading team is structured, what all asset classes are covered, what type of clients are serviced and so on.
Qualifications and Skills
Quick decision-making – S&T is an extremely fast paced work environment where high-value decisions have to be made very quickly. Given the volume of the transactions, even a small delay can mean the difference between a highly successful trade and having a really bad day.
Extreme multi-tasking – You will have your hands in multiple cookie jars and will have to balance the demands of the clients while effectively communicating with internal teams.
Product expertise – In order to make quick and correct decisions, you really need to understand your product class and all its related concepts.
Risk management – Risk management is becoming increasingly important as even a single mistake can wipe out gains made over several years. There are very strict standards in terms of what you can do and you must learn to manage risks in order to maximize your revenue.
Relationship management – Your success as a sales manager is going to depend on your ability to connect with clients, understand their requirements and pitch them products that they are likely to deal in. You must offer them better service and peace of mind so that when they have a requirement, you’re the first bank that think of.
It can be a tough job as you have to deal with internal considerations and constraints. It’s especially hard considering that the client will want to minimize their cost which will have to come out of your margins. A good salesperson can make a big difference and that is why banks still continue to pay the big bucks to relationship managers despite automation and digitization.
How to get into S&T
S&T is no less demanding than any other investment banking role when it comes to recruitment. Most banks hire from a list of target schools and only the top-ranking students really get a chance for an interview.
There is an even greater focus on quantitative subjects than in investment banking. Given the fast-paced nature of the job, you will face questions that will require you to really think on your feet and come up with answers quickly. You have to be at the top of your game when it comes to quick math and rapid-fire questions.
For a sales role, you can follow much of the same advice as that for an M&A role. Focus on your grades and your academic pedigree and performance. Showcase your relationship skills, leadership, product knowledge and generally be likeable.
For trading, you mostly need to focus on quick decision-making abilities matched with a very high level of quantitative skills. If you’re that guy/ gal who can solve dozens of math problems before anyone else in your class, then you might have what it takes to be shortlisted for a trading role.
CFA is somewhat relevant, especially the part about derivatives, fixed income products and equities. But a course more focused on those specific areas would be better suited for S&T roles.
For derivatives, I recommend the Professional Certificate in Derivatives from the New York Institute of Finance. It’s fully online, takes about 40 hours to complete and is hands down the best course you will find online. NYIF also offers a an exceptionally well crafted course for Fixed Income Professionals which is also in a league of it’s own. It’s quite a commitment but worth it.
Salary and Bonus
Analyst salaries in sales and trading are very close to what investment bankers make. Expect a fixed component of USD 85,000 to USD 100,000 with an additional variable component of around 50%-100%. You get a nice boost at the associate level and can expect your total compensation to be around USD 200,000 to USD 400,000.
However, beyond this the comparison with investment banking starts to break down as S&T compensation becomes increasingly dependent on how much revenue you generate. If you’re a star performer, you can even earn seven figures while not being anywhere close to managing director. The only real hurdle is going to be your trading limit and the size of your clients.
A Normal Day in S&T
The day starts really early with both salespeople and traders trying to catch up on all relevant market information. This is especially true for salespeople who will likely find themselves in the position of discussing these events and breaking them down for their clients. Traders will also like to shift their strategy based on such events.
Most desks have an early morning meeting where events, strategies, business opportunities and any pending work is discussed. This is followed by the market opening which tends to be the busiest time of the day. You will likely have to crank up your multitasking skills all the way up to survive these few hours.
Salespeople can expect a lot of client calls and hectic communication with traders as well. Large clients have dedicated hotlines and will call you to place large volume transactions. You have to offer them the best possible price in a market that changes every few seconds. It can be quite stressful but also quite exhilarating.
There are lulls on most days as large clients will not be placing trades every few minutes, but you still are expected to be at your desk for most of the trading day. So you will likely be having your lunch at your desk. Once the trading hours are over, you just need to perform housecleaning and reporting activities and you are done.
If you want to be in S&T, you better be an early riser or make friends with the alarm clock. Most people in S&T usually start arriving to work by 6 AM. The good news is that you don’t have to stay long after the market closes. There are some housekeeping activities to perform like updating reports and validating trades etc., but you are usually out by 6 PM.
This translates into a healthy 60-hour work week with your weekends being completely free. Compare this with the poor investment or even corporate banking folk who not only put in much longer hours during the weekdays but may also be called upon to do some work over the weekend.
Career Path and Progression in Sales
The career path in sales is rather similar to most other corporate and investment banking roles. As you move up the ladder, you start managing teams of other salespeople and playing a leadership role. Just like in investment banking, you will spend more time managing relationships at the senior roles and less time involved in daily transactions and related activities.
The biggest strength of a salesperson in any department is the ability to manage client relationships and convincing them to do business with you. Product knowledge is important but that is something that can be picked up faster, at least in my opinion. Because of this, salespeople can manage to transition into different product groups and still excel.
This is already happening to some extent. Certain asset classes like cash equities are just not as big anymore as they used to be. Many banks are now actually focusing on selling automated trading solutions like algorithmic trading or other advanced trading applications to their clients. This still requires a sales team to pitch the product to the client, explain its features, and convince the client to move an ever-increasing component of their business to that platform.
Career Path and Progression in Trading
The natural career progression within trading is a bit unconventional. Unlike other banking roles, moving up does not mean that you have to stop trading and just manage other traders. You still executive trades and try to profit to the maximum extent possible. What really changes is the amount of capital that you have to play with and possibly the size of clients that you handle.
Because of this, it is rare to find traders at CXO level positions. But that is not necessarily a bad thing, it is just something different. Traders continue to do what they are best at and not having to manage teams of people is something that many traders actually prefer.
Trading is a whole different beast in and of itself. A lot of skills are in common with investment banking, but it becomes difficult to move into a completely different role after a few years. The reason for this is that your skill set won’t match with what is required for front-end sales or relationship management roles.
That does not mean that exit options are not there. Traders have plenty of trading options to choose from like hedge funds, other more lucrative trading desks or prop trading firms. Successful traders can earn tens of millions or even hundreds of millions of dollars. They can even create their own funds, if they have the market reputation to get the capital.