Sales & Trading

The wheeler dealers working the secondary markets

Every day, millions of financial products are bought and sold in the secondary markets where traders and salespeople in investment banks work together to trade for clients after a security’s initial issue.

In the secondary markets, salespeople advise clients on investment opportunities, while traders buy and sell securities on their behalf.

The secondary markets are divided into equities (stocks and shares) and fixed income, currencies and commodities (corporate credit, government debt, currencies, commodities and interest rate products). Within the fixed income division is foreign exchange (FX) – the largest market in the world, with an average daily turnover of $4 trillion.

High-volume markets like FX and equities have become increasingly traded electronically. The benefit is greater trade volume, which improves market liquidity as well as increasing the speed and reducing the cost of transactions. The downside is that less manpower is required so trader headcount has fallen dramatically in recent years, while employee numbers in the technology divisions have risen.

There is also a range of ‘exotic’ derivative products within all these sectors, whose value depends on the underlying security.

Roles and career paths

Salespeople advise their clients when to buy and sell securities. They usually focus on particular products (e.g. government bonds) and clients, whether that’s high-net-worth individuals, pension funds or corporate finance managers. Salespeople take orders from clients, from the moment markets open until they close, and communicate them to the trading desks.

Traders track the markets and buy and sell products at the touch of a button. Your career will be defined both by what you trade (e.g. equities, foreign exchange, or commodities) and by the kind of trader you are. There are several types.

‘Flow’ traders buy and sell financial products for a bank’s clients, while proprietary (or ‘prop’) traders trade the bank’s own money. Historically, prop traders were at the top of the trader hierarchy, but many banks have reduced their prop trading activities following regulatory crackdowns like the Dodd-Frank Act in the US.

‘Execution’ traders place trades for analysts and fund managers – the key is to be both quick and accurate with the software, and able to deal with any problems should they occur.

There are also sales-traders, who act as intermediaries between sales and execution traders, and develop new business for the bank. They quote prices, take client orders, advise on the timing of the trade and execution method. They are seen as key revenue generators, and good client relationships are key to the job.

Within the electronic trading teams, you’ll also find quantitative analysts, who design, develop and implement execution algorithms using a mathematical approach to identify investment opportunities and strategies.

Within the sales and trading division, graduates are also recruited into structuring and marketing roles. It’s the structurer’s job to create financial products and provide a pricing service to clients. It’s the marketer’s role to search for new opportunities to sell these products, and prepare marketing materials and pitches.

Skills sought

If you’re trading complex derivatives you’ll need the mathematical ability to understand the products. If you’re trading non-complex, ‘vanilla’ products, you’ll need to understand what drives the market. FX and equity traders in particular are news junkies, able both to connect the dots across a broad range of data and understand the implications of world events on markets.

“The ability to multi-task, to work under pressure in a fast-moving environment, to assimilate information quickly in order to react fast to market changes, sharp attention to detail, and strong risk management skills are a must for a successful career in trading,” says Danielle Sindzingre, global head of fixed income, credit and currencies, SG CIB.

Understandably, if you have a desire to work in sales, it’s safe to say you shouldn’t be a shrinking violet. You must also have a thick skin – only a small percentage of approaches to clients result in a successful sale, so you must be able to persist in the face of rejection.

“You must be true to yourself, find the communication style that you are comfortable with and use it to gain clients’ trust and build your network,” says Joe Squires, co-head, rates sales Europe at BNP Paribas.

“To be successful in sales, individuals need to possess superb verbal and written communication skills with a proven ability to develop and build relationships both internally
and externally,” adds Sindzingre.

This is an extract from our Careers in Financial Markets graduate careers guide. Download the full book here.