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In “The Wolf Of Wall Street”, you could imagine the hectic life of stockbrokers. They are part of the most illustrious and coveted careers at Wall Street: Sales and Trading. If you are pursuing this lucrative job in investment banks, this article will give an overview of Sales and Trading and provide the ultimate guide for entering this field.
Sales and Trading is one of the main 4 divisions in investment banks besides Mergers & Acquisitions (M&A), Equity Research and Asset Management. Salespeople pitch clients for selling or buying stocks, bonds and derivatives while traders will execute the deals to help clients buy or sell securities. Sales and Trading jobs are intensely making the stock market moving everyday.
Salespeople and traders work on the trading floor where they basically help institutional investors or retail investors trade financial instruments. There are some famous trading floors such as New York Stock Exchange (NYSE), NASDAQ, UBS, Goldman Sachs, Morgan Stanley, Chicago, JP Morgan, Bank of America and Citi Bank.
In daily operations, when the “bell rings”, traders will immediately receive the orders from the sales department and also assess the market. After the market closes, they may have overtime to handle some paperwork.
1.1 Why Sales and Trading?
Sales and trading in investment banks serve as intermediary between issuers (companies) and buyers (investors). This division will work in stock market including 2 types:
Primary market (new issue market): Where companies make their initial stock issuances to raise capital. They issue long-term equity capital in the form of Initial Public Offering (IPO) or Private Placement where investors are Venture Capital funds, Mutual Funds, frequent investors or banks. Price of securities in the primary market is relatively low.
Secondary market(stock market): Where stocks are traded among different investors to make profit like New York Stock Exchange (NYSE), London Stock Exchange (LSE), National Association of Securities Dealers Automated Quotation (NASDAQ).
This secondary market is created when primary market investors sell or buy stocks, bonds or derivatives to other investors. Any investors can join this market as long as they can afford. The price of the secondary market fluctuates as it depends on demand. There are 2 types of secondary market: Auction market (NYSE) where buyers and sellers meet and announce the price they can afford and Dealer market (NASDAQ) where transactions happen in electronic networks.
People from Sales and Trading department will be active in 2 product types:
Equity Sales and Trading: They will be in charge of trading stocks or derivatives of companies. There are three types of equity sales and trading desks:
- Cash trading desk trades normal company’s stocks. Sales people work with an operational team of clients (instead of quoting the clients) to ensure their trading system is plugged into banks’ exchange platforms. Traders will execute both agency trading and risk trading. Trading process is very simple thanks to automated systems.
- Derivative trading desk trades different types of derivatives (options call-put, CFD, future contracts, etc). Traders will do 100% agency trading (no risk) and quickly execute deals instead of fundamental pitches of sales.
- Exotics trading desk trades different assets that are more complicated than options and least liquid of all products in equities.
Fixed income, Currencies and Commodities (FICC) sales and trading: They will sell or buy bonds (debt issued by companies or government), foreign exchange (FX), credit-related derivatives, structured credit products, currencies and commodities.
1.2 Traders Help Clients Execute Transactions
There are two types of traders: flow traders (market makers) and proprietary traders.
A market maker (Flow trader) When investors want to buy $10,000 worth of Amazon stock at $200 per share, there are two ways: | A proprietary trader (A prop trader) | |
Agency business (Make up 80% of all Market making business)
| Risk business (Make up 20% of all Market making business) | |
| They can make an order to investment banks, traders will represent clients to execute the deal. This way is risk-free for investment banks. Income comes from commission. | They will ask investment banks to commit capital, so the banks are taking risk. If traders buy back stock of Amazon below $200, the bank makes profit. If above $200, the bank loses money. This way traders will earn money from bid-ask spread | Traders will use the firm’s own money to make profit through direct investment rather than earning commission and fee by executing on behalf of clients. |
When it comes to proprietary trading, it is banned in investment banks according to The Volcker Rule. Traders will spend most of their time being a market maker (only connect buyers and sellers together).
Traders are able to work under pressure, think quickly and constantly execute trades to earn commission/percentage. The career path of traders will depend on the product they are trading (equity trading, bond trading, foreign exchange trading,…) and the kind of trader you are (flow trader) as well as the industry you work in (health care, education, technology, etc).
Proprietary Trading (Prop Trading)
Proprietary trading firms are separated from investment banks because of the Volcker rule. Nowadays, most prop trading firms exist as an independent trading firms and some belong to the Buy-side firms such as Hedge Fund and Private Equity. They use firm’s own money (no outside investors) to buy various financial assets such as stocks, bonds, derivatives, commodities, etc. Proprietary trading firms also apply many trading strategies like Hedge Fund such as index arbitrage, statistical arbitrage, fundamental analysis, volatility arbitrage or global macro trading.
Prop trading firms can maximize 100% their return. The salary for first full year of prop traders is 70,000USD – 200,000USD. Earning potential in prop trading is better than that in Investment Banking. First year salary of Investment Banking ranges from 150,000USD – 200,000USD while some best performers at top prop trading firms can make more than 400,000USD in their first full year. Compensation for prop traders is totally performance-based: you get bonus when you make money, you will get fired when you lose money of the firm.
Some best prop trading firms are Jane Street, Five Rings, T3 Trading Group, Hudson River Trading, Jump Trading, Susquehanna International Group (SIG), TransMarket Group (TMG), Akuna, and IMC.
Depending on products and strategies that prop trading firms apply, traders are required to have different skills and backgrounds. For example, firms that focus on algorithms (HRT) usually require their traders to have technology-related background. The majority of firms’ entry level positions in New York or Chicago requires specialization in Computer Science, Statistics, Math, etc. with no prior finance related experience. Human Traders (at Jane Street) have to show strong quantitative skills through brain teasers or market making games. Some recruiters may ask less behavioral questions and focus more on evaluating your understanding of market and math skills.
Entry-level prop traders often have internships in trading or asset management before getting a full-time job. It is recommended to trade your own account and accumulate programming skills such as C++ or Python (the major languages in most prop trading firms) before apply for Prop trading firms.
These firms tend to be trading-oriented. Thus, this skill is not applied widely in other firms such as Hedge Fund or Private Equity. After several years working in prop trading, you can move to other firms or start your own prop trading firms.
1.3 Sales People Build Relationships with Potential Investors
Salespeople communicate the ideas and opportunities with the Buy-side (Hedge Fund, Mutual Fund & ETFs) to persuade them to trade securities. For example, salespeople may call some investors for buying stocks of Zoom to make profit during a surge in using video communication during the COVID-19.
When a company orders an investment bank to initially issue their stock, the salesperson is also in charge of selling a specific number of shares through Initial Public Offerings (IPO). On the initial stock issuance of Facebook in 2012, there are several investment banks involved in the IPO such as Morgan Stanly (leading), Goldman Sachs, JP Morgan, Barclays Capital, etc. Salespeople from these banks will pitch investors for buying Facebook’s stocks.
In terms of structure, salespeople closely work with Equity Research and trading departments to get more insights before pitching clients, then they will talk to portfolio managers of the Buy-side. If successful, they will pass to traders to execute the deals.
For example, institutional equity sales sells company’s security for big investors such as Hedge Fund, Pension Fund, Mutual Fund and Insurance Companies. Sales people work with senior associates to handle some institutional investor accounts which requires much effort maintaining a relationship. A license of Series 7 or 63 will be requirements for institutional equity sales candidates.
For smaller investors who mostly trade stock via electronic system, candidates have to at least understand how the electronic system works.
1.4 Is Stockbroker a Dying Career?
For sales people pitching stock, the nature of work is replaced by machines. The system can automate pricing/hedging/trading models for products. Thus the involvement of humans in doing sales and trading stock possibly disappears but not 100% true. To some extent, automatic systems may be quick in analysing data and implementing transactions. However:
- In sales: the system can not build strong relationships with institutional investors. Salespeople now mostly maintain connections with these large clients through meetings, dinner, events. They are the targets that will generate more return in the long run.
- In trading: Along with the integration of automation, 80% of trading tasks are done by machines such as the I Know First algorithm. This machine can do two things: create a portfolio of stocks that have high expected return and show signals of predicted movement trends. 20% of human traders will utilize the data from algorithms to provide the strategies that the machine can not do: How to trade products? What creates the market trends? Is it liquid? How long should we hold this stock? Machines can not analyze the illiquid market. Thus, trading in investment banks is looking for computer science background candidates who have quantitative skills. They can work under pressure to handle numerous deals in a short time.
At Wall Street, there are still a large number of stockbrokers who help clients buy and sell stock everyday. In this global financial market, stockbrokers are the one who can understand the mobility of the market, the Central Bank policies as well as manage risks for investors. These experiences also help them earn a highly competitive salary.
2. Sales and Trading Offer a Highly Competitive Salary
Sales & Trading often pays salary as competitively as Investment Banking. However, the salary for sales and trading often fluctuates more than that of investment banking. When it comes to Investment banking, people often work as a team on a large-scale project such as helping Facebook buy Instagram and Whatsapp, so it is difficult to know exactly who contributes the most and the least. In the meanwhile, salespeople and traders often get paid based 100% on their performance. How many stocks or bonds they can finally trade will decide the amount of commission they earn.
For sales and trading analyst salary in US large banks, they can earn 100,000 USD – 150,000 USD per year.
Here is the average salary for sales and trading per year in the U.S large banks:
| Position | Base Salary (USD) | Total Compensation (USD) |
|---|---|---|
| Analyst | 90,000 | 100,000 – 150,000 |
| Associate | 130,000 | 150,000 – 240,000 |
| Vice President | 150,000 | 170,000 – 350,000 |
| Director/Senior Vice President | 160,000 | 350,000 |
| Managing Director | 170,000 – 500,000 | Upto 1M and beyond |
Source: Research firm: Glassdoor
3. Working Hours Seem To Be Intense But Still More Comfortable Than Investment Banking
A highly competitive salary means that you are not averse to work for long hours. Around 60-80 hours per week is very normal for any traders and salespeople. They have to come early before the market opens and work a bit more after the market closes. Meeting clients to build relationships with potential investors is very common as many investors are quite busy with their own work in a day, so the possibility of overtime is high but weekend work is rare. In comparison with Investment Banking, sales and trading seems to be less nerve-racking in terms of working hours as the investment banking people work around 90 – 100 hours per week.
4. Sales and Trading Job Description and Career Path
Generally, there are not many changes in the work of Sales and Trading when you move to a higher position. You could start from the role of Intern, Analyst, Associate, Vice President, Managing Director. In every position, you always have to do trade. Only when changing into a managerial side, you will stop doing trade with a less promising salary. If you take your first step in sales and trading, keep in mind that you will have strong development in the first four years, then things are going to flatten.
For entry-level in sales and trading, especially in large banks such as JP Morgan, Morgan Staley, Goldman Sachs, Citi, requirements are demanding:
Sales | Trading |
– Excellent analytical and relationship management skills. – 1+ relevant experience in banking/financial service industry – Ability to work under pressure and multi-tasking – Pass the appropriate licensing examinations including the Series 7, 63 | – 2+ years of trading experience – Strong understanding in firm-related assets and industry – Bachelor degree in quantitative-related field (engineering, math, computer science, etc) – Ability to work under pressure, multi-tasking skills, quick thinking – Pass the appropriate licensing examinations including the Series 7, 63 |
Below is detailed job description of sale and trading hierarchy roles:
Role | Sales | Trading |
Intern | – Support in researching market trends and opportunities for clients – Build financial model and report – Preparing client presentation – Assist sales or trading teams with daily work on the trading floor. | |
Analyst | – Always be on call with clients for pitching, updating market situations – Do research to provide insights in trading securities. | – Prepare commentaries, payrolls, notable trades – Assist at trade desk – Manage trade blotter ( a record of trade activities) |
Associate | – Build relationship with medium-sized clients – Support daily functions of the sales team – Ensure the accuracy of trade booking | – Maintain relationships with clients by helping them execute the trades. – Do market making for a financial instruments (stock, bonds, etc) – Inform clients and internal company about market updates – Support with Profit & Loss of trading book |
Vice President | – Build relationship with medium to large investors – May cover a portfolio – Contribute in sales strategy | – Handle trading books (the list of portfolio intended for trading) – Be responsible for risk management and trading activities |
Director, Senior Vice President | – Build relationship with large clients – Relationship manager role for larger client – Create sales strategy | – Manage a trading book (generally a larger and more profitable than a VP) – Handle large transactions – Create strategy for trading and overall risk management. |
Managing Director | – Manager of sales team – Relationship managers for largest clients | – Manager of trading desk – Oversee risk limits – Manager of largest trades |
5. However, the Exit Opportunities For Sales and Trading Are Relatively Niche
When you work in sales, the more senior you are, the larger clients you are assigned. This is your opportunity to get more bonus. Salespeople can move to Investment Banking to take charge of large deals. Besides, some successful financial salespeople often become stockbrokers or Hedge fund managers who are involved in sales, research and trading. Thus, assisting yourself with tailored experiences to stand out among numerous candidates applying to the buy-side is extremely vital.
Unlike sales career, trading is a bit niche and less transferable. Before entering this career, you are advised to determine what type of trade you want to work in. Some excellent traders move to Hedge fund to become billionaire titans in Hedge fund or Wealth Management but it is quite difficult and competitive. You need to prepare lots of relevant experience to work in the buy-side. Otherwise, some traders can do their own trade after earning some amount of money and a network they already built during the time in investment banks.
Niche exit opportunities does not mean you have no opportunity. NETWORKING a lot with people who work in your target firm will be a strong weapon for opening up your career path.
6. How To Get Into Sales and Trading?
6.1 An Internship – Does It Convert You Into a Full-time Position?
It is quite essential for an undergraduate to gain experience through an internship. But keep in mind that an internship does not always move to a full-time position. The requirements for sales and trading are more demanding while the number of positions are limited (mostly at large banks). Furthermore, interns are not involved in many significant tasks but simple responsibilities instead.
For students who study in target-schools such as Havard, Stanford, MIT, Michigan, etc, there is a high chance of landing a job in sales and trading. Banks often send some recruiters to these top universities for recruitment. A tailored resume and successful interview will help you land a job in sales and trading.
For students who come from non-target schools; professionals who used to work in Investment Banking Boutique Banks & Middle Market Banks or MBA students, they still have the possibilities of working in sales and trading but a bit challenging. You have to network a lot, prepare an outstanding resume and master the interview.
To find an internship job, you can go through some investment bank’s career websites like JP Morgan, Morgan Stanley, Barclays, Goldman Sachs…
6.2 What You Need To Do To Apply For Sales and Trading Jobs?
Networking is the key
If you are an undergraduate, try to keep connected with alumni at your institution who used to work in sales and trading ideally in the place where you are aiming like Wall Street, London or Singapore. Besides, LinkedIn and other social media is a good way to find people who have experience related to your goal.
Next, the CFA community in your area may include some people who may know investment bankers and introduce them to you. Maybe you will be recommended for the job of sales and trading or a summer internship to accumulate sales and trading-related experience.
You can attend recruitment events from target schools even when you are not invited.
The benefits you can utilize from networking are job opportunities (they may pass your CV to HR departments), advices for recruitment and interview, why this firm, etc.
Reflect on your own story
Recruiters will look at what you did to evaluate your contribution and your ability. It’s vital to spend time reflecting on what you did (your leadership story, your failures or your success), what you learn at university to synthesize your strengths as well as your weaknesses in order to answer any questions in the interview. Whether you have no experience or many, the first thing is to show your ability for the industry. You have to acknowledge the role of sales and trading, how to keep relationships with clients, how you do trading, etc.
Prepare a sales and trading-relevant resume and ace the interview
No matter how many experiences you did have, your CV must include your most relevant skill set related to sales or trading such as quantitative ability, analytical skills and the passion for the financial market. When you are not from target schools, recruiters expect your excellence in academic performance (above 3.7 GPA).
There are basically two types of questions assessed in the whole interview:
Non-technical questions: Mostly happen in the first round
- Behavioral/fit questions: The most common question is “Walk through your resume” (1-2 minute answer) or other fit questions such as your motivations working in sales and trading in this firm, experience working in a team, your strengths and weaknesses, culture fit, background, commitment, etc.
- Market understanding: questions to test your understanding of market trends, trading ideas, stock pitches, world events, etc. This assessment is quite important for choosing the right future sales and trading employees.
Technical questions: Mostly on Super Day
- Mental math: questions to test your analytical thinking under pressure. Technically, interviewers could ask you about addition, subtraction, multiplication, squaring number, square root, etc. You have to solve problems in a logical way without using paper, pen or calculator.
- Brain Teaser questions: This part is super challenging as recruiters will throw some puzzle questions to assess your problem solving, critical thinking, analytical skills, creativity, ability to perform under pressure. For example, How many trees on earth? How do you climb to Everest? etc
The process of interviewing in sales and trading is not in a specific structure. Generally, candidates generally experience 4 stages: resume screening, first phone call interview, second phone call/ Superday and job offer.
- In the first round interview, you will tackle some non-technical questions. Always stay confident and do not hesitate to raise questions at the end of the interview. This will show your strong intention to work for their firm. After the interview, sending an email to the HR department will create more impressions. This action may not account for the large percentage of winning the first interview but a good way to remind them how enthusiastic you are.
- In the second phone call or Super Day, candidates will have different interviews from various divisions (equity or FICC sales and trading). There are still some fit questions such as “Tell me about yourself” but the majority of the questions are related to market understanding and math ability.
- After 1-2 weeks, you will receive the final result from HR departments. Whether you are chosen or not, remember to send a thank you email. If you fail, you can send an email to your interviewers to ask for another chance to interview. Besides, keep networking and find more opportunities.
Investment Banking guide provides you practical tips about resume, interview and networking.
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7. Are You Suitable For Sales and Trading In Investment Banks?
You should land sales and trading jobs in investment banks, if:
- You are interested in trading for a long time as you will buy and sell stock day by day.
- You are agile and understand the dynamics of the markets with a good risk management skill.
- You are capable of computer science, math skills and technology as you will use math a lot.
- You want to focus on a specific industry or product like equity trading stocks in healthcare.
- You can work under pressure and multitask.
You will belong to sales teams if you are excellent in establishing relationships with potential investors. Traders are required to have quantitative skills, think quickly and the ability to do research. On top of it, in order to choose actionable data, traders have to deeply understand the types of securities, the industry, the sector. Therefore, specialized traders have more competitive advantages than people who are out of focus.
At Wall Street, sales and trading people are expected to understand the market dynamics, grasp the policies of the Central Bank to handle risks for clients. The preferred backgrounds are business, finance and economics which cover several important parts: macroeconomics, microeconomics, risk management, finance, etc.
8. It’s Time To Consider Sales and Trading
Though there are not so many options after doing sales and trading compared to Investment Banking, this career is still promising as it offers a highly competitive salary, better working hours and diverse positions to experience. If you find that you are suitable, why not sales and trading?
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