Sales & Trading
What is Sales & Trading?
The term 'Sales & Trading' refers to the division of an investment bank responsible for pitching buy and sell recommendations to clients, including asset managers, hedge funds, and insurance companies, etc., and then executing on those trades. Salespeople are the professionals responsible for reaching out to institutional investors and pitching ideas to buy or sell securities or derivatives while traders are the professionals who execute the orders and advise clients on entering and exiting financial positions. Within an investment bank, the Sales & Trading division sits on the public side of the "Chinese Wall." In other words, professionals in the division are not privy to non-public or 'insider' information that professionals in the Investment Banking division have access to (potential acquisitions, capital raises, IPOs, etc.).
Roles in Sales & Trading: Key Responsibilities & Skills Required
The broad category of roles in Sales & Trading are:
Sales is the client-facing side of the Sales & Trading operation. Salespeople "cover" clients by providing them with market information or "color." Salespeople are responsible for distributing a diverse range of products to corporate or institutional clients. They serve as the primary point of contact for the investment bank's investor clients. Salespeople are generally split up by product (what is being sold), such as Equities, Fixed Income, etc., or by client type (whom the products are being sold to), such as Hedge Funds, Corporates, or Long-only investors. Key tasks for salespeople include responding to price quote requests, providing market insight to clients, and resolving trade or settlement issues, etc. To be a good salesperson, one must be passionate about the markets, have stellar communication skills, and be able to dissect large amounts of information quickly and relay it clearly to clients.
Traders execute orders on behalf of investors. As in the case with salespeople, traders almost always focus on specific products. In most cases, simpler products, such as corporate bonds, are traded more frequently but have slimmer trading margins. More complex products, such as derivatives or options, may be traded less frequently but have wider margins. Traders need to have strong quantitative skills to understand complex products, have an intuitive understanding of the markets, and be able to piece together information quickly to identify patterns and trends.
For more complex financial products, salespeople may lack the expertise to effectively guide and advise clients. This is where structuring comes in. Structuring can be interpreted as the intersection of sales and trading. Professionals in structuring are usually product experts and are brought in by salespeople to pitch their area of expertise to clients. At the same time, they work directly with traders to design products and execute trades. As a result, strong communication skills (in particular, the ability to explain complex ideas in simple terms to clients) and quantitative skills are important to succeed in structuring.
Products in Sales & Trading
As mentioned previously, traders are divided into different groups that handle trading of different types of securities, such as Fixed Income Securities, Equities, Commodities, etc. The two broad categories are: 1) Equities and 2) Fixed Income, and Currencies & Commodities (FICC).
Equity Trading deals with companies' stocks (Cash Equities) and their derivatives (Equity Derivatives), which are financial instruments whose values are based on an underlying asset, such as a specific company's stock.
FICC is much broader than Equity Trading and includes "everything apart from stocks," such as Corporate and Government bonds, credit-related derivatives, currencies, commodities, etc.