by Brian DeChesare

Brazil Sales and Trading: What to Expect in FX and Derivatives Sales

Brazil Sales and Trading

What happens when you can’t decide?

You want to do something technical in finance, but you also don’t want to sit behind eight monitors doing math all day.

You want some interaction with other humans, but you don’t necessarily want to spend all day chatting on the phone.

If that’s you, sales positions at a bank, especially on a desk such as FX, might be the right fit for you.

Our reader today won a similar role at an international bank in Brazil – one of the few regions where sales & trading might be growing – and wanted to share his experiences there:

Breaking into Brazil Sales and Trading

Q: Can you explain your story and how you got into the industry?

A: Sure. In my second year at university, I did an internship in sales & structuring at a large, international bank here in Brazil.

After about a year on the job, I left to take a few finance courses, with the goal of getting into M&A eventually.

But then a recruiter contacted me and offered an interview for a “Relationship Manager” role at another international bank, covering FX and derivatives for non-Brazilian companies.

I spent two years in that role and then received an invitation from the Head of Sales to move into his team, so I switched over and have been in Sales ever since.

I wanted to develop more technical knowledge about the products and cover other types of clients, so Sales made a lot of sense.

Q: OK. Can you elaborate on that?

What types of candidates do they want for Sales roles, and how is “Sales” different from “Relationship Management”?

A: Relationship managers spend almost 100% of their time with clients, but they don’t need to be experts in the products they sell.

With traders, it’s the opposite: They need great hard skills and expert product knowledge, but they don’t interact with clients as much.

Sales is in between those two extremes.

You need good communication and negotiation skills to work with customers and stakeholders such as relationship managers, the legal team, and the back office, but you also need enough technical knowledge to:

  1. Understand all the details of the products you’re selling, such as the requirements to trade, the closing and settlement procedures, and the tax implications.
  2. Know what’s going on in the market, including the main internal and external drivers behind big market moves (e.g., why the Brazilian Real just rose or fell significantly in one month).
  3. Avoid getting ripped off by traders. You need to have the quantitative skills to make sure the trader has priced the product correctly.

You’ve covered sales & trading recruiting before, and not that much is different here.

You’ll still be asked to pitch stocks or other assets, you’ll have to discuss your opinions on recent market events, and you may get questions about how to price specific products.

Few students understand FX and derivatives in-depth, so it is definitely worth getting a dedicated reference so you can go beyond the basics (to start, take a look at the articles on Fixed Income Sales & Trading and Equities Sales & Trading on this site).

Brazil Sales and Trading: On the Job

Q: Thanks for explaining that.

What’s the Brazil sales and trading industry like?

A: For FX, the general rule is that “size matters.”

So, the biggest players tend to be the banks that have huge retail operations as well as solid corporate clients.

The big domestic banks such as Itaú, Bradesco, and Banco do Brasil all operate in this market, and international banks such as Santander and Citi are always in the top 10 here.

The main difference is that the bulge-bracket banks often rank well because they cross-sell FX products to support their M&A advisory businesses, thereby capturing huge inflows and outflows.

They often do the same thing with their DCM businesses: These firms sell bonds to offshore clients and then use FX products to deliver the bonds to companies here in the local currency.

Some banks also cover large hedge funds entering the market, as they’re all concerned about their exposure to the BRL.

Domestic banks tend to focus on companies with hedging needs that are not necessarily tied to large transactions.

On the derivatives side, the large international banks tend to perform better than the domestic banks for the same reasons: They cross-sell products to support IB deals, and they have better access to overseas clients and investors.

There is no official ranking for derivatives sales, but banks such as Santander, Citi, JP Morgan, BAML, and BNP Paribas do well.

Q: How does the work differ between bigger clients and smaller/middle-market ones?

A: When we trade with big companies, such as “Tier 1” corporates (any Brazilian company with over $2 billion USD in revenue) and large financial institutions, there’s heavy volume but tight or even negative spreads.

With middle-market and smaller companies, it’s the opposite: Spreads are much wider, but volume is low, which means more of an operational burden for banks.

The most profitable deals are one-off transactions for companies that don’t need FX or derivatives on a day-to-day basis.

Examples of such deals might be a regional bank that needs a capital injection to meet the Basel III requirements, or a domestic company is making a cross-border acquisition and wants to reduce its FX exposure.

There’s high volatility and low liquidity in the FX market here, so that also leads to higher spreads.

Since the Brazilian Real is a non-deliverable currency, all inflows and outflows must be converted to/from BRL from/to the foreign currency.

Q: Are there any differences in the clients at international banks?

A: Most international banks in Brazil focus on three main groups of clients:

  1. Companies in the bank’s home country (e.g., French companies for BNP Paribas) that are doing business in Brazil.
  2. Tier 1 Brazilian companies with > $2 billion USD in revenue.
  3. Multinational companies with which the bank has a relationship in its home country.

We offer FX and hedging solutions for companies in all those categories with products such as spot FX, deliverable and non-deliverable forwards, cross-currency swaps, and interest swaps.

We also use some offshore derivative-embedded structures, but the products themselves are almost the same.

Q: You mentioned earlier that Sales is “in between” Relationship Management and Trading.

What does that mean for your daily activities?

A: Most Sales desks are divided into two groups: Flow and Structured Deals.

But our group isn’t set up like that, so each salesperson here splits his/her time between 1) The execution of small deals, such as spot FX and non-deliverable forwards (NDFs), and 2) Structuring and pitching bigger deals, such as cross-currency swaps to support an M&A transaction.

Tasks in an average day might include:

  • Calling traders to quote and close deals.
  • Calling customers to offer color on the market and recent deals and get information.
  • Visiting customers to determine their hedging needs.
  • Checking contract clauses based on ISDA (International Swaps and Derivatives Association) documentation.
  • Discussing client strategy with the relationship managers.
  • Preparing pitch presentations for deals.

The last one requires the most technical knowledge since you have to understand the mechanics of all the products to pitch them.

You can ask traders for their views, but they don’t have the time to sit down and work on presentations or explain every last detail to you.

Brazil Sales and Trading: A Growth Industry?

Q: You had mentioned before we started that the industry is going strong in Brazil, despite the recession, corruption scandals, and “headwinds” in the U.S. and Europe.

Why is that?

A: Mostly because many companies here are still growing quickly, and they need to manage their FX exposure as they expand into other regions.

Our desk has been growing its profits year over year, despite regulations such as Dodd-Frank that have hurt the industry in the U.S. (and which have also made an impact here!).

At some point, the risk factors may start to outweigh the growth potential, but I don’t know what that point is.

Q: I see. So, are you planning to stay in the industry for the long term?

What do most sales & trading professionals do?

A: I’ve seen people who work here do the following:

As I mentioned, I’ve always been interested in M&A; I ended up here almost as an accident.

I’ve enjoyed working in FX/Derivatives Sales, but the skill set is quite specialized.

If you stay here too long, it becomes very difficult to do anything else, even in an emerging market like Brazil.

So, I’m thinking about completing an MBA program to make a career change into investment banking and then working abroad.

I’ve also thought about starting my own business before, so we’ll see what happens.

Q: Great! Thanks for your time.

A: My pleasure.

M&I - Brian

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

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