Wall Street Prep

Sales and Trading: Roles and Asset Classes

Everything you wanted to know on what the different jobs are in sales and trading, the different career paths and the different asset classes and who are the largest banks in each asset class

This article is part of a series on Sales & Trading

I volunteered for a number of recruiting events during my time at JPMorgan. I brought hundreds of business cards and prepared for a lot of small talk. We were typically grouped off by role, Sales & Trading by one banner, Investment Banking by another banner. There would be a swarm of really eager candidates that wanted a job but were also extremely nervous. If you meet a hundred students a night, repeat the process 4-5 times a year, and do this for a number of years, that's a lot of students and patterns begin to emerge.

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Figuring out which role suits you is quite challenging. Some banks are even moving to games and quizzes to help match candidates to roles. Each role requires a different skillset and you need to do an honest assessment of your strengths to figure out which role you are best suited for.I would ask "So, what type of job are you interested in."

Somehow, instead of speaking their mind, their eyes would glance down to my name tag, or my business card. They tried to figure out what I did and tried to be interested in my job. That is probably the only wrong answer. Saying any role would show you did some research, and lead me to talk about great things my bank did in that area.

Saying you didn't know, I would provide an overview and some general advice. I had no clue of the roles when I was in college and could relate. I ended up bringing one of two types of business cards to recruiting events:

  1. Business cards with no group information or ...
  2. Business cards with an acronym no college student would know.

It was slightly more obvious and potentially more entertaining when students look at my business card to figure out the what do you want to do question.

What are the Key Roles in Sales and Trading?

Although we call it Sales & Trading, there are more Front Office Sales & Trading jobs that aren't technically sales or trading.

Front Office S&T Role Include: (starting with the obvious ones)

  • Sales
  • Trading
  • Structuring
  • Research
  • Quant/Strat

If you get hired into an internship or analyst program, it’s typically a generalist sales and trading program. Once you are on the desk, your role is a combination of a product plus a function. For example:

Product   Function   Role
Credit + Sales = Credit Sales
Mortgage + Trading = Mortgage Trading
Commodities + Structuring = Commodities Structuring
FX + Research = FX Research
Rates + Quant/Strat = Rates Quant

The one exception is cash equities. Cash equities doesn’t have traditional traders as trading is done on an exchange and on an agency basis. They have two sales roles: sales research focused on portfolio managers at active asset managers, and sales traders covering the execution team at the asset manager. Sales research shares trade ideas and manages access to equity research and corporate management at investor conferences.

Equity derivatives fits in the same structure as the rest of sales and trading, with equity derivative sales, equity derivative trading, and equity derivative structuring, etc.

What is Sales?

Sales is the client facing side of the sales and trading operation. Salespeople “cover” clients, meaning they provide market information, or “color.” Salespeople set up clients to trade with their firm through onboarding and making sure they have the appropriate documentation necessary, such as an ISDA to trade derivatives. Inquiries from investors looking to trade are received by the salespeople who will relay and quote prices from traders (“Please bid on $10mm Apple 2025 Bonds”).

Salespeople manage access and resources to the rest of the firm, such as meetings with research and meetings with traders. Salespeople generate value for a firm by pitching ideas and trades, not only to generate trading volume but also to move positions that traders want to exit out of. Successful salespeople need to have very strong interpersonal skills to build relationships. In addition, they need to be good with numbers, detail-oriented, and able to articulate trade ideas in a clear and convincing way.

Salespeople are split up by asset classes (or types of products you sell, equities, corporate bonds, FX, etc). In addition to the asset class, some salespeople are split up by client type, meaning they only cover Hedge Funds, only cover Corporates or only cover "Real Money" Investors (which are long only investors such as Asset Managers, Pension Funds and Insurers). For example, you could be in Real Money Rates Sales, or Corporate FX Sales, or Hedge Fund Credit Sales (with Credit being the asset class for Corporate Bonds and Derivatives).

The Salesperson is main contact for all the investors that trade with the Markets or Securities department.

The salesperson job description: 

  • Responding to price quote requests
  • Understanding the client's unique needs and provide market insight
  • Onboarding clients and sets them up in the various trading and settlement systems
  • Ensuring clients have the right documentation to trade (ISDA)
  • Connecting clients to the resources of the firm (research, trading commentary)
  • Resolve trade or settlement issues
  • Taking clients out to dinner to build a relationship and pitch trade ideas

What is Trading?

In our Demystifying Wall Street Trading article, we go different types of trading with real examples. It's worth noting that not all traders are the same. There are more simple products (e.g. corporate bonds) and there are more complex products (e.g. contingent options). In general, the simple products trade more frequently but have slimmer trading margins. The more complex products may trade less frequently but have larger margins.  Traders have a niche part of the market that you are focused on. If my job was to trade short expiry interest rate options. I'd focus on the my existing positions an risk, how the volatility market (or volatility surface) for interest rate options  moves, and how underlying interest rates moves. I'd have my eyes on the rates screen closely. I'd keep track of where equities are, but i certainly won't be taking any positions on equities based on my person view, or looking at individual stocks. Each trader sticks to their own product.

What is Structuring?

Structuring sits in between sales and trading and only exists for more complex products. Structurers can be product experts and pitch their area of expertise to clients while utilizing salespeople to maintain the day to day relationships. Structurers need to both understand all the minutia of these complex products, but also be able to explain the complexities in simple terms. Structurers will also need to work with salespeople to solve client requests (What are some cheap tail hedges for a market correction?) and also work with traders to design products to take the other side of a particular risk position (How can I recycle S&P 500 and 10 Year Swap Rate Correlation Risk?). Quantitative skills and communication skills are important for structurers.

What is Research?

Research produces periodic—typically weekly—reports on their market for the investors to read. Research also supports trading, where traders may ask research to analyze potential trade ideas. Traders are constantly watching their markets and providing price quotes that they may not be in a good position to analyze market data or run regressions. Index design, publication, and management generally sit within research (i.e. J.P. Morgan’s Global Bond Index). Solid quantitative skills and written communication skills are important for successful research positions.

What does a Quant or a Strat do?

Quants and strategies generally work for the trading business but are not traders themselves because they do not manage their own trading book. Quants and strats can run analyses on market data for traders and backtest trade ideas. They can also build pricers and tools for traders to price derivatives and analyze their risk positions. This is an important task because trading pricers are constantly evolving. There isn’t one perfect pricer and parameters are constantly being changed for either speed or accuracy. Quants maintain electronic trading or algorithmic trading platforms. This part of the business is growing, particularly in lower margin and high-volume business such as cash equities and FX. There is an increasing number of jobs for programmers and developers to plan, develop, and maintain with these electronic trading systems. Coding and programming skills are key requirements for these positions.

Front office versus middle office versus back office

In general, a front office employee is a person working directly for the desk or business, and are either client-facing or own a trading book with P&L.

The middle office teams support the front office team. The official term for the middle office is operations and the team is generally split between sales and trading. Some middle office members sit right on the trading floor alongside traders, while others are nearby either on different floors or in a close building.

Trading middle offices ensure that trades are booked properly, including making sure that all trades done via the phone or chat are properly recorded into the firm’s systems. They are also responsible for calculating the trader’s risk, or net long and short positions, as well as calculating the trader’s P&L.

Sales middle offices ensure client-facing trades are booked properly and are tasked with resolving issues with the client’s middle office for matching trade instructions and settlements.

Other roles on the trading floor include:

  • Finance (Controllers)
  • Valuation
  • Compliance
  • Business Management
  • Financial Planning & Analysis
  • Technology (Both IT and Programmers)

Back office teams focus on settlements of cash and securities and ensure derivative payments and collateral move between parties. They are also part of the operations team but are located further away from the trading floor. Some banks base their back-office employees in Delaware, Utah, or internationally in countries such as India.

What are the key Asset Classes?

Every major Wall Street investment bank is divided by asset class. Most banks will split up Equities from FICC (Fixed Income Currencies and Commodities).

Equities

Equities is what you think of for trading shares of stock. Equities are split up between:

  • Cash equities: Trading ordinary shares of stock
  • Equity derivatives: Trading derivatives of equities (stock options) and equity indices

FICC

The FI in FICC refers to fixed income. Fixed Income is a fancy word for bonds, and are typically split up in the following way:

  • Rates: Government bonds and Interest Rate Derivatives
  • Credit: Corporate Bonds (High Grade, High Yield, Loans), Credit Derivatives
  • Securitized Products: Mortgage Backed Securities, Asset Backed Securities
  • Municipals: Tax-exempt bonds (State, Municipality, Non-Profit)

Adding FX (Currencies) and Commodities to Fixed Income rounds out FICC.

If you arrive at the lobby of a large investment bank, you’ll notice that each major asset class will have its own trading floor. For example, you might see the following:

If you take the elevator up to a particular floor, you’ll first see the floor divided by a sub-asset class. There are generally signs above individual trading desks identifying the sub-asset class that sits there.

Mapping out the asset classes on the trading floor:

Equities Fixed Income Currencies and Commodities (FICC)
Cash Equities Fixed Income
Equity Derivatives

  • Delta One (Includes Index and ETFs)
  • Flow Options
  • Exotics and Hybrids

 

Rates

  • Treasuries
  • Agencies
  • Repo
  • Interest Rate Swaps
  • Interest Rate Options
  • Interest Rate Exotics and Hybrids
Currencies or Foreign Exchange (FX)

  • G10 FX
  • Emerging Markets FX
  • FX Options
Futures and Listed Options (F&O)

 

Prime Brokerage

 

Capital Introduction

Credit

  • Money Markets
  • High Grade
  • High Yield
  • Emerging Markets
  • Syndicate
  • Loans
  • Distressed
  • Structured Credit
  • Credit Hybrids
Commodities

  • Precious Metals
  • Energy
  • Power
  • Agriculture/Soft Commodities
Securitized Products

  • Agency Mortgages
  • Non-Agency Mortgages
  • Asset Backed Securities (ABS)
  • Commercial Mortgage Backed Securities (CMBS)
  • Municipals / Tax-Exempt

 

Which banks are good for...?

In Sales & Trading, few banks are good at everything, most banks have particular niches where they focus on. For example, French bank Societe Generale is ranked #3 by Coalition for Equity Derivatives but ranked #12 overall.

coalition league table

In my experience

It's worth keeping in mind that league tables are constantly fluctuating. Finding a firm that is a good fit and having a strong support network is important. Some of it was also luck. When I was applying for a job in 2006, the consensus advice was "Don't apply to work at JPMorgan, apply to work at Lehman or Bear Stearns instead, JPM was just a bond house and didn't have a Prime Brokerage."  Things have certainly changed since.

Additional resources and rankings based on asset class.

Derivatives

Risk Awards - Risk provides awards to Investment Banks across asset classes, Rates, Credit, Equities and Currencies

Prime Brokerage

Preqin Hedge Fund Prime Brokerage - Guide by Hedge Fund Strategy

Hedge Fund Alert - Ranking of Hedge Fund Prime Brokerages by Count

Equity Derivatives

Greenwich Associates - Ranking of Equity Derivatives Houses, separated by Equity Swaps and Options

Greenwich Associates - Ranking of Retail Structured Products, primarily an Equity Derivative Product

Rates

Primary Dealers - Primary Dealers are a list of Investment Banks who bid on Treasury Auctions. This is a list of 20+ Banks and more useful for understanding which non-US Investment Banks have a larger US rates operation.  For example, out of the major French Banks, Soc Gen and BNP are primary dealers, but Credit Agricole is not. Although Credit Agricole also called CACIB has a large Investment Bank their US Rates business is likely smaller than SocGen and BNP.

FX

FX Week - Rankings that include currency pairs, which is helpful for answering "Which Canadian Bank is best for FX"

Greenwich Associates - Rankings split by client type (Corporate versus Banks)

Credit

Global Capital - For the Credit Markets the new issue league tables are a good proxy for relevance of Investment Banks. Bonds mature and then new bonds are issued, and as a result credit investors need good relationships with banks that see significant new issue bond business.

Research

Institutional Investor - II or Institutional Investor is an investor sourced survey of Investment Bank research by asset class. A well regarded resource for the top research firms for each asset class.

Learn More

We’ve designed the Wall Street Prep Sales & Trading Boot Camp from the same materials we teach new hire salespeople and traders at major Wall Street banks. This is a three-day course designed to teach the economic skills, option theory, and bond math that you are expected to know before moving into a front-office role. Learn more about our course here.

 

Eric Cheung
Wall Street Prep Head of Markets Training
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