Institutional Sales and Trading

Discussion in 'Professional Trading' started by baller1069, Jan 20, 2008.

  1. I am trying to figure out exactly what these guys do. I don't know anyone who works in Sales and Trading departments and there isn't much info on the web about what they do.

    Can someone explain to me what they do throughout the day and if they make money other than commissions?

    Do they only make trades when they are taking orders from clients?
  2. Surdo


    Market making used to be a source of revenue, as well as IPO underwriting/trading. Nowaday's @ .01-02/share, they might break even executing and clearing!

    I almost forgot, the street used to pay for research and order flow as well as capital for larger orders.
  3. So do they pretty much make their money trading propriety trading systems?

    Or by having solid discretionary traders that take money out of the market everyday or do they cheat their clients?
  4. thanks for the responses but you never really answered the question...

    how do they make money and what exactly do they do?

    From what you describe I would envision it like a prop how is it different?
  5. Bugatti


    This board scares me sometimes... there is a lot of bad information being passed around... Sales & Trading is what large buy side institutions use for market information, execution and general chatter about the intruments they are involved in....

    I am a trader for a large hedge fund and I use sales traders for many different reasons... typically we pay them for a number of services including the following...

    a). Source liquidity & commit capital for large blocks of shares which if trying to purchase in the Level II would have significant market impact... When they commit capital this is your insurance that they will not purchase in front of you and less reluctant to vocalize your order to the is a serious issue... and often times non existant... When a sales trader commits they also work your order better in my opinion... take time to create less market impact and do a better job of waking up major holders to take the other side...
    b). Sales Traders offer opportunities to hedge funds/trading desks by offering discounted placings...ex:Holder A wants to sell 25mm shares and is offering a 4% discount to the market.... the placing will be presented to hedge fund desks and be a lucrative trade....Also IPO allocations are given to funds who pay the most commision dollars...
    c). Sales traders coordinate 1 on 1 calls/meetings with companies and analysts...great service...well worth the .03-.05 a share....
    d). I view sales traders (good ones) as an extension of my desk... they set alerts for me, break news to me and overall keep me posted and save me time....

    Their salary: $150k-$3mm
    Bonus: 10%-40% depending on their firm and structure...
    Their education: usually econ/math/business degree some have MBAs & CFAs
    Their age: 25-45
    Hours: If US Equity S&T (7:00am-4:15pm) then entertain clients at night
    My opinion: I used to think they were not necessary... my opinion has changed over the years... they are my eyes and ears.... my connection to information...

    Hope this helps... I am trying to present the honest truth...

    Lastly... they make money by charging cents per share... usually .03-.05 (Goldman, Lehman, CSFB, Morgan)
  6. Bugatti


    The street still does pay for this service...nothing has really changed... agency only broker-dealers standard is .01-.02/share....
  7. would you say the majority of people in these positions couldn't make money if given $x and told to simply trade.

    what makes some better than others?

    is it all about who you know and managing relationships?
  8. Bugatti is spot on.

    I am on the Institution side for DPPS and Private Placements. I also deal in land. I dealt with some of the institutional side traders for various reasons.
    Most guys I know have the 7, 63, 55, and 22.

    Many have a solid background in education and start off between 150k plus bonus.
  9. Yes, managing relationships and Building Relationships are 90% of the game. Trust, honesty and knowledge are the three key elements needed.

    Of course, DPPs are a bit different in that your dealing with individuals who have to have 2 million net worth.
    You are heavy regulated on Private Placement activity.
  10. Trading dynamics have changed.

    Black Box and Quant Guys do the trading.

    Institutional Trading, the Desk Jocky is the low man on the roster.

    Those raising capital, dealing with the relationship building and closing the deals are making the true money.

    I guess what your looking for is the traditional desk trading job. Trading and hedging market activity much like daytraders do?
    #10     Jan 20, 2008