WHAT IS SALES AND TRADING?
One of the primary functions of an investment bank is buying and selling products both on behalf of the bank's clients and also for the bank itself.
Sales & Trading involves transactions in the secondary market.
There are a number of roles involved in sales and trading such as:
- proprietary trading
- market making
- structuring
- flow trading
- sales
In the process of market making, traders will buy and sell financial products with the goal of making an incremental amount of money on each trade. They provide liquidity by matching buyers and sellers - literally making a market. Sales is the term for the investment banks sales force, whose primary job is to call on institutional and high-net-worth investors to suggest trading ideas and take orders. Sales desks then communicate their clients' orders to the appropriate trading desks, who can price and execute trades, or structure new products that fit a specific need.
Structuring has been a relatively recent division as derivatives have come into play, with highly technical and numerate employees working on creating complex structured products which typically offer much greater margins and returns than underlying cash securities. The necessity for numerical ability has created jobs for physics and math PhDs who act as quants.
Banks undertake risk through proprietary trading, done by a special set of traders who do not interface with clients and through Principal Risk, risk undertaken by a trader after he buys or sells a product to a client and does not hedge his total exposure. Banks seek to maximize profitability for a given amount of risk on their balance sheet.
Activities carried out in a Sales & Trading include:
- Broking and Dealing
- Providing liquidity to customers willing to trade (Market Making)
- Originating and structuring more or less bespoke products for the retail market or the wholesale sector
- Proprietary trading: generating revenues taking outright positions with the institution’s capital or credit resources
- Maintaining good and lasting relationship with current and prospective clients.
Read On: Career Paths into Sales & Trading >>>
