The basics
What Is Sales and Trading? How a Bank's Markets Division Works
Sales and trading (S&T) is the part of an investment bank that buys and sells bonds, currencies, shares and derivatives with clients. This is how the floor is organised and what each role does.
The short version
When an asset manager wants to buy a bond, a hedge fund wants to sell a currency, or a company wants to lock in an exchange rate, they call a bank. The bank's markets division quotes a price and takes the other side of the trade. That division is sales and trading, often shortened to S&T, and sometimes called Markets or Global Markets.
The bank acts as a market maker. It is ready to buy from clients who want to sell and sell to clients who want to buy, earns a small margin on each trade, and manages whatever risk it is left holding.
A trade from start to finish
Say a pension fund wants to sell £20m of ten-year UK government bonds (gilts). The fund's portfolio manager rings their salesperson at the bank. The salesperson checks with the gilt trader, who quotes a price a touch below where the market is trading, because the bank is taking on the risk of holding the bonds. The fund accepts, and the trader now owns £20m of gilts.
The trader can sell those bonds on to another client, or hedge the position with futures until a buyer turns up. Either way, the bank's revenue is the gap between what it paid and what it got back, less the cost of carrying the risk in the meantime. Repeat that thousands of times a day across dozens of products and you have the business.
The three roles
Sales, trading and structuring get lumped together, but the jobs are quite different.
Sales owns the client relationship. Salespeople spend the day on the phone and on chat, telling clients what is moving and why, relaying prices from the desk, taking orders, and suggesting trades that fit what each client is trying to do. Communication and knowing your clients matter more than any single technical skill.
Trading is about pricing and risk. Traders decide what price to show, what positions to hold and when to hedge. They watch the screens and the risk numbers constantly, and the result shows up in the desk's profit and loss every day.
Structuring is the design work. When a client needs something a standard product does not cover, such as protection against a specific move in a currency or a bond whose payout is tied to an equity index, structurers build it, price it with the traders and help sales explain it. It tends to be the most quantitative of the three. Barclays' internship programme, for example, is called Sales, Trading and Structuring.
Research analysts publish views on markets and companies and work closely with the desks, but research is a separate team.
The desks
Banks organise the floor by asset class. Names differ from bank to bank, and no bank is strong everywhere, but these are the common ones.
- Rates: government bonds, interest rate swaps and related derivatives. This is the backbone of most fixed income businesses.
- Credit: corporate bonds and credit derivatives such as credit default swaps.
- FX: spot currency, forwards and currency options.
- Equities: cash shares, equity derivatives, and financing services for hedge funds (prime brokerage).
- Commodities: oil, metals and other exposures, a smaller business at many banks.
- Securitised products: bonds backed by pools of mortgages or other loans.
- Money markets and repo: short-term funding and lending against collateral.
The desk you land on shapes your daily life more than the S&T label does. An FX salesperson and a credit trader are both in S&T, but their clients, their hours and their skills differ.
How banks make money from markets
- The bid-offer spread on client trades, which is a small margin on a very large volume.
- Financing. Banks lend cash and securities to clients such as hedge funds, and charge for it.
- Fees and margins on bespoke products built by structurers.
- Positions the bank holds while it makes markets. These can make or lose money, which is why risk management sits at the centre of the job.
Most of the revenue on a modern desk comes from serving clients rather than from the bank betting its own capital. Regulation since 2008 has pushed banks in that direction.
What a day looks like
Desks in London are usually staffed well before the equity markets open, often by around 7am. The morning starts with what happened overnight in Asia and the US, then a desk meeting where the head of the desk and the traders share views and flag the events of the day. After that it is client calls, price requests and moving risk around while data releases and central bank news land. Late afternoon is for reviewing positions and profit and loss, and preparing for the next day.
Analysts often spend much of their first year on the less glamorous side: booking trades, checking risk and P&L numbers, writing the morning notes and learning the products. Interns get a compressed version of the same thing.
Is it for you?
S&T suits people who like fast feedback, follow markets out of curiosity, and can be wrong in public and move on. If you would rather work on one project for months and see it through, investment banking may fit better. The comparison of the two goes through the differences.
Questions people ask
Do I need a finance degree?
No. Banks hire from every subject, though you will need to show numeracy and a real interest in markets. I wrote a separate guide on getting in without a finance degree.
Is sales and trading the same as investment banking?
No. Investment bankers advise companies on deals and on raising capital. Sales and trading serves investors and trades in the markets every day.
Is sales or trading the better choice?
Neither is better. At some banks you apply to one combined programme and are placed on a desk and in a role later, so be ready to explain the difference and say which you lean towards, and why.
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