by Zeke Lee Comments (128)

On the Trading Floor

trading_floorThis article was guest-written by Zeke Lee, a Stanford graduate, former management consultant with Booz & Company, and current derivatives trader on Wall Street (Oh yeah, he’s one of my friends from school as well). He founded the GMAT Pill based on his experience scoring in the 98th percentile on the GMAT in just 2 weeks with a unique study method.

Have you ever seen a trading floor?

No, we’re not talking Liar’s Poker here…

We’ve all seen the so-called “pit traders” on CNBC yelling and screaming at each other. But what’s it like on a typical trading floor at a large bank that you might work at?

Usually, you’ll see one large open room – no cubicles. On the outskirts of the trading floor you’ll see conference rooms and occasionally the offices of the Managing Directors.

On the floor itself, you’ll see rows of really long desks that are sectioned off per person. Traders within the same group will naturally sit within close proximity of each other. So you might see the foreign exchange group in one area, the credit group in another, and the equity guys somewhere else.

But you’ll notice something unique about each trader’s desk: the monitors. No, not that they are eco-friendly and conserve energy – just that there are so many monitors on each desk and that some of them are blinking constantly.

Got Monitors?

If you’ve never worked in trading before, you might think there’s no reason you would actually need between 3 and 8 monitors – the other 7 must be for playing World of Warcraft, right?

Wrong.

Partly, it’s for showing off: some traders view the number of monitors they have as a status symbol on the trading floor. Hey, even if you can’t see my BMW, my 8 monitors mean that I own a really expensive car, right? Or at least that our P&L is higher than that of the other group over there with only 2 monitors.

The actual rationale – status symbols aside – is that speed is extremely important in trading, and you don’t want to waste time toggling between windows. Alt + Tab is for bankers.

You need to be able to look up and know that Apple surged 4% in the last 10 minutes.

Then you need to monitor the market news and major headlines coming in through Bloomberg – is some analyst raising their forecast for the number of iPhones sold? Was there an announcement that just came out regarding Apple’s contracts with AT&T and Verizon? Did consumer spending numbers just come out?

As an active prop trader, you’re multi-tasking all the time and constantly thinking about these kinds of questions, assessing risk, and making quick decisions.

Bloomberg

Bloomberg is an expensive news/finance information service that all banks and trading firms have access to.

Beyond just watching the news, you also need to track stocks you’re interested in and see their prices updated in real-time – so you use another monitor for that. These screens are constantly blinking as the prices of securities are changing every second.

Bloomberg has a price feature that lets you organize and track stocks by sector (Technology, Financials, Energy, etc.) and lets you see where everything is trading.

You can also get a real-time heat map of the market, so you can see which sub-sectors of the S&P are up, and by how much.

Trading Platform

Next, you use another monitor to actually make your trades – this might be Merrill’s MLX platform, Goldman’s REDIPlus platform, FlexTrade, Fidessa, or anything else.

If you’re trading equity derivatives, you need to enter your orders for stocks, puts, and calls quickly and monitor any pending orders that are waiting to be filled.

Why do you need an entire monitor just for making trades?

Because you might be trading over 100 individual stocks, and each of those stocks might have over 20 positions in option contracts, with various maturities and strike prices.

Depending on what you’re trading, you might actually need 2 monitors to track everything.

Option Valuations / Other Calculations

If you’re not trading derivatives, you won’t need to value options – but you may well have to make other calculations, whether you’re valuing bonds, analyzing the yield curve, or back-testing a trading strategy.

While the “math” itself is not quite rocket science, it goes beyond what most bankers deal with: simple arithmetic. While investment bankers may come from liberal arts, finance, or engineering backgrounds, derivatives traders primarily come from mathematical / engineering backgrounds.

Your firm might have a proprietary way of valuing options, developed by a senior IT programmer (see, the back office may have some merits after all) – and depending on what you’re trading, it might be very complex.

Getting these programs working properly can be difficult because they need to be synced up with other programs you use. Getting the # of shares and contracts held, exposure to risk, and other variables linked together dynamically rarely works perfectly – and this complexity means you’ll be calling the back-office tech guy or floor IT guy to fix technical issues quite frequently.

Messages

Of course, you’ll also need a monitor for Outlook – the standard email program at banks – to handle email and see incoming messages from broker and the rest of your team.

The Rest of Your Desk

So what else is on your desk?

Just like at a bank, you get a phone terminal along with a headset and regular phone – but be careful about the conversations you have, because anything between brokers and clients is recorded.

Talking about bottles may not get you fired – but you probably want to postpone talking with your model(s) until later. Even if it’s not recorded, everyone else on the desk will hear what you’re saying.

The phones are also connected to CNBC audio, so you can listen to what’s going on in the news throughout the day.

So What Else Do You Do On the Phone Besides Chatting with Models?

For one, the phone actually rings quite often – especially between the trading hours of 9:30 AM and 4:00 PM.

Most of the time, brokers call to tell you what their clients are looking to buy and sell and see if you have any interest. Some of this is shifting to online chat instead, but it’s still common for brokers to call to get your attention on larger orders.

Sometimes junior traders will screen the phone calls first before bothering the traders – you already have to multi-task a lot, and getting called every 20 seconds makes your job even tougher.

Forget About the Bathroom – or Trips to Starbucks

This also brings up another key point and a major difference between banking and trading: most traders hate leaving their desks for fear of missing out on something important.

  • Lunch breaks are limited to 15 minutes (and often the junior guys or interns will go get the food for them).
  • Bathroom breaks are rare unless you really need to go.
  • Forget about 10 trips to Starbucks during the day: bankers can do that only because they have so much down time.
  • No friendly chats with the cute marketing intern – at least not until the market is closed.

This also means that it’s common for traders to gain weight: they pretty much just sit there all day, eyes glued to the monitors, only taking the occasional break to eat.

If you walk up and try to talk to a trader, half the time he won’t even look at you: this might seem rude to you, but to him not paying attention for even a few seconds might result in a loss of thousands or tens of thousands of dollars.

And part of it is just habit: they’re so used to having their eyes glued on the screen that it’s almost weird to look away from it.

Hey, if you had that much money on the line constantly, you probably wouldn’t give the time of day to bright-eyed interns or newbie traders either…

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About the Author

Zeke Lee is a Stanford graduate and former management consultant with Booz & Company and derivatives trader on Wall Street. He founded GMAT Pill, a top-rated online GMAT Prep course designed for busy working professionals who want to study less and score more.

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Comments

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  1. Hi,

    I would soon be starting working as a derivatives pricing model validation quant in a BB IB. Could you please share the exit opportunities from this role and what career paths could lead me to a trading role at an investment bank. I have an engineering background. Should I go for a good B School after 2-3 years and then look out for those opportunities or is there a possibility of shifting from my current role to the trading role within the same firm. The firm advertises that it supports internal mobility but again I am not sure if that is true because I am yet to start working there.

    Thanks
    AT

    1. To add to that, I am in India and there are not many front office trading roles here.

    2. Avatar
      M&I - Nicole

      I think both options work. Regarding internal mobility, it really depends on your performance. If you are a rock solid performer internal mobility should be pretty easy. In terms of exit opportunities I think readers may have better suggestions.

  2. This article bears nothing but the truth. I wake up every morning Mon-Fri looking forward to the everyday surprises on the trading floor. Everyone on the floor thinks and act fast and being on the floor itself can be overwhelming for the faint-hearted. I love the dynamics of it!

    1. Avatar
      M&I - Nicole

      Lyn this is awesome!

  3. Hi,

    I just joined as a junior trader on a trading desk at a boutique and at the moment I am quite lost as to how I can contribute or add value to the desk. My boss hasn’t really talked to me in terms of expectations, and responsibilities. There is no structured training period here and I feel very unguided. Besides shadowing traders and ask a few questions here and there, what is the best way to get up to speed and to feel more integrated into the team? It is pretty frustrating seeing how much you don’t know and unsure about where to get started.

    Thanks so much.

    1. Avatar
      M&I - Nicole

      I’d ask your boss, or a senior members in the team you get along with, to grab coffee. You can then express your thoughts and interest in learn more through the conversation.

  4. Avatar
    Banbanmoomani

    Hi,

    I wanted to know about exit opportunities from prime brokerage. I have an offer from GS sec lending which is under prime brokerage, and I also have another offer from high yield credit trading at non-BB firm. Which path should I take if I envision myself to have an investor role later in my career? I am drawn to GS name value and internal transfers within division.

    1. Avatar
      M&I - Nicole

      Yes I’d probably go for GS given its reputation and network. Readers may have more to add.

  5. Avatar
    Bulbasaur

    Hi,

    I just started working with a senior trader at a small bank. However, he doesn’t talk to me that much and hasn’t really given me any work. I am confused as to what my responsibilities and roles are and how to make him open up to me. Sometimes, I just sit there all day and don’t really do anything. Is this common for someone who just started? Should I be spending more time shadowing him more?

    Thanks

    1. Avatar
      M&I - Nicole

      He probably doesn’t have too much time/experience training/dealing with interns. I’d approach him when he is in a “happy” mood and is “available” (i.e. not when he is stressed out about a trade) and ask if you can help him with any trades he’s working on, or perhaps help his team etc. Also ask him intelligent questions re. the markets. Yes shadowing him is important. If he still leaves you “hanging” then you may want to learn as much you can observing him, while striking up conversations with other team members so you can learn from them too

  6. do market risk sit on the trading floor?

    1. Avatar
      M&I - Nicole

      I am not 100% sure – I believe so though it may depend on the bank and region.

  7. I am a recent graduate with a degree in finance and from a small private school in the northeast which is not very well known. I was fortunate to complete numerous internships while in school however none were in finance/banking/investments as I did not realize I wanted to be in this field until my senior year when I took only finance/math courses. I wasn’t able to wait around until I got an interview (if I even would have been able to) with well known firms I was applying to, and I ended up having to take an unrelated finance job in the city. Before starting with this company I was fortunate enough to spend a day at a fixed income desk at a large bank and see the daily routine of traders, sale associates, and individuals in their research department. Almost every single person I spoke with was from an Ivy league school and had completed an internship with a well known firm while in college. With that being said, is it possible for individuals from tiny, unknown schools with no internship experience (in these fields), who currently work in a different field to land spots at well known firms or eventually make my way into one of these positions? From everyone I have been able to meet with and talk to in NYC at big firms it seems they came from some top tier school and started working in their field right out of college.

  8. Avatar
    King Kong

    Hi,

    I just started at a sales trading division of a boutique in the city. However, I am still struggling with how to remain very productive during the day as people walk around and make jokes and laugh all the time. And if I don’t go and talk to them and have some face time, I feel like I am missing out and can’t do my job perfectly.

    What are your tips for staying super productive on the trading floor? Moreover, since I just started the hours haven’t been great and sleep deprivation is taking a toll on me so I am kind of half sleeping the whole day. There are weeks in which I have to go out to drinks with the desk and other people till midnight too.

    Would love to hear all suggestions since I know I am not doing a good job at all considering I just started. Last week I got feedback frm HR about how I was picked at the top of my class now I am not doing a great job at all and everyone is curious as to why.

    1. Avatar
      M&I - Nicole

      I think getting enough sleep is crucial if you want to be productive, especially on the trading floor, where it is chaotic and with lots of information “bombarding” you. I’d try to socialize a bit less – only go to functions that are “necessary” and can help you advance, and cut down on the drinking if you can (drink a bit less). If possible, I’d take a very short break away from your desk over lunch just to take a rest from the floor. I’d make very good use of your weekend to rest up and read up on the markets & reports so you are prepared for the next week. You don’t need too much face time on the trading floor to be honest. Cut that down a bit and just focus on your performance now. Once you get your performance back up, then you can socialize a bit more.

  9. Some Boston-based forex brokerage firm called BuysideFX is making an app for Google Glass for their brokers/traders.

    http://www.advancedtrading.com/photos/trading-floors/ubs/?image=06_DSC_0595/

    Seemed relevant and interesting. Perhaps other firms will follow as the tech is refined.

  10. Avatar
    Trading Floor

    Why is the trading floor always on the 4th floor? Is this for convenience, least building risk in case of emergency, or least cost when wiring the building…

    1. Avatar
      M&I - Nicole

      I wasn’t aware that trading floor is always on the 4th floor, at least it wasn’t set up that way when I was in S&T.

  11. Avatar
    Anonymous

    Since I am not too familiar with trading, just had a couple of general questions:

    1. Are equity derivatives traders assigned usually to cover one industry only?
    2. Do most banks have rotational programs for first-year traders?
    3. How long does it generally take to pass the Series exams required to start trading?
    4. Since a downfall of trading may be that its a repetitive process because you trade a specific asset class or product, is there any way to make the learning experience less dull? I do realize there is excitement since every day is new in terms of the markets, but it seems like it would get boring after a while trading the same things and specializing.

    1. Avatar
      M&I - Nicole

      1. No, not like research/IB analysts
      2. Some do.
      3. Re Series exams – pls refer to http://www.finra.org/Industry/Compliance/Registration/QualificationsExams/RegisteredReps/P011051
      4. I think you’ll have to speak to traders re this question – they’ll give you better insights since they are currently at their job

  12. Who handles pre-trading? Middle Office or Traders/Dealers?

      1. Also whats the relation between Portfolio Management and Trading? If there is any?

  13. Hi Brian,
    I will be starting my S T internship at a BB this june. However, there are so many desks to choose from. Do you have nay specific advices on how to choose the right fit?
    Moreover, could you produce an article about like different products? Like differences between cash versus derivatives versus ETFs…??
    And what does someone in structuring do on a daily basis?
    Someone in prime brokerage?

    At the BB i am interning at, there are also management desks: risk management, strategy…- they are just middle/back office right?

    I am sorry that’s alot of questions. But i would love to be in my best shape.

    THis site is invaluable. I recommended it to all of my friends.

    1. Avatar
      M&I - Nicole

      Right fit – http://www.goldmansachs.com/a/pc/flash/quiz/quiz.html
      Structuring: https://www.mergersandinquisitions.com/structured-finance-careers/
      Prime Brokerage: We’ll have an interview on the topic later on. At this point, pls refer to http://primebrokerageguide.com/2008/08/explain-prime-brokerage-what-is-prime.html
      Risk m’gmt, strategy – yes.

      Thanks for your support!

      1. Hi Brian,
        The GS quiz doesn’t help very much since I am already going to be in Sales and Trading this summer. I am interested in knowing how to select the desks that are suitable for me. Are there any books you recommend to read about equity products?

        1. Avatar
          M&I - Nicole

          You mean sales versus trading versus structuring versus sales trading? Or product desk i.e equity versus derivatives

          If you want books on equity derivatives, I heard http://www.amazon.com/Structured-Equity-Derivatives-Definitive-Options/dp/0471486523 is interesting

          Readers may be ale to better assist you w other book recommendations

          1. Hi Nicole,
            Right now I am looking just at Trading and Structuring. SO i need hep in selecting desks.
            How would you recommend I would know which desks are suitable for me? THey have cash, derivatives (lost of desks within this one: exotic, systematic..) and ETFs.
            Would you recommend talking to the employees in specific desks?

          2. Avatar
            M&I - Nicole

            Yes, that is the best way to go!

  14. What about retail brokerage, is it sort of in line with what you are describing, I’m looking for something like you are describing: a very intense experience!

    1. Avatar
      M&I - Nicole

      Readers may be able to offer you better insights though I think institutional S&T are a bit different – the clientele you are dealing with will be of a different caliber. I believe that is the fun part of it

  15. Do any of the bulge bracket firms have trading floors in DC?

    1. Avatar
      M&I - Nicole

      I’m not quite sure. I don’t think so.

  16. I did not go through all Q&As posted..so if an answer is in place, I’ll go back over it. This is a dream-job: the whole article!
    Out of high school, what are the steps taken to end up doing exactly what this article mentions?
    I have traded (very successfully) on my own through TDAmeritrade and Scottrade and love it to become my career.

    1. Avatar
      M&I - Nicole

      Network w people in the industry in your hometown, apply to as many jobs as you can…see how it goes

      1. Well put; out of experience, would you know/recommend any exams required -i.e Series ##- maybe?

        And many thanks, Nicole.

        1. There are exams but you take them all once you start working so no point in worrying about them now… focus on networking and getting internships

  17. What is the difference between a Dealer and a Trader? Or are they synonymous?

    1. Avatar
      M&I - Nicole

      It depends. There are traders, sales traders, proprietary traders and dealers. Also depends on the products (equity, bonds, derivatives) and the structure of the bank

      1. Can you please explain the difference and definition between each of them?

  18. Technical analysis vs. fundamental analysis, which one is used more often and by how much?

    1. Depends entirely on the type of trading and the desk itself… and varies for equities vs. FICC and so on.

  19. 1.) I read above that deriavatives trading requires a rigourous quant training for “street cred.” If that’s the case, then, do people from Strong Targets (Duke, Ivies, Stanford)who major in economics, stand a disadvantage in entering trading, even equities trading?

    2.) Is it easy or normal to transfer from trading to a hedge fund?

    3.) Can I trade by myself using my Etrade account and not do a “regular job” and leverage that as job experience to get into hedge funds or equity research or even trading? Or will it be too difficult?

    1. 1) No, at the entry-level they still recruit out of undergrad.

      2) Yes.

      3) You could but it will be heavily discounted. So try to get some type of real job or internship.

  20. Is FX trading also highly numbers driven? Would it be more, less, or the same level of difficulty to break into for a non-quant than derivatives? Anything else that is special about FX trading?

    Thank you.

    1. I believe it is, yes. Maybe not as much as derivatives but numbers still matter. Not sure if it’s more or less competitive but we’ll be covering FX Trading in the future.

      1. Ok, thank you.

  21. Do the people in ECM/DCM generally work on S&T-like trading floors? Thanks!

  22. Thanks for the great post! I’m from an engineering background and have an offer for the JP Morgan Technology Analyst program. I was wondering how I could go about switching to trading? Would I have to wait until the end of the two year program?

    Thanks!

      1. Thank you!

  23. Truly impressed with the honesty and quality of this site,

    Just wondering what the best buy side route to hedge funds is? In terms of transferable/marketable skills and industry prestige.

    Thanks in advance.

    1. Generally you either do IB –> HF or asset management –> HF, sometimes you see people from other industries like law and accounting as well but those are the 2 most common. Most would say IB is more marketable/prestigious than asset management.

  24. If you come from a finance background and go through an IB analyst program for say 2 years, is it possible to become a trader on a hedge fund then or do you still need a quantitative background?

    1. Yes you could still become a trader at a hedge fund but more than likely it would be something like long/short equity or merger arbitrage rather than FX or options trading.

  25. Do private bankers (high-net worth client services) work on a trading floor?

    1. Nope, normal offices.

      1. Like that of a law firm?

  26. Is it possible to move from trading to consulting?

    1. Yes but it’s difficult since there’s almost no overlap in the skill sets… best to do it as an intern.

  27. First off, awesome website!!

    Do you guys have anything on quants? Is it easier to get into quants than trading coming from an engineering background? Also is it necessary to have a masters degree?

  28. If S&T and i-banking generally offer the same salary/bonus, what are the benefits of choosing i-banking over S&T? (other than exit opportunities)

    1. wouldnt everyone just want to do S&T and work less hours but still make ibanking compensation?

      1. Advancement is less certain, there is more risky, there are fewer exit opportunities. https://www.mergersandinquisitions.com/sales-trading-vs-investment-banking-part-2-lifestyle/

    2. It’s just exit opportunities, possibly getting broader exposure, better if you like working with clients or if you’re not interested in the markets as much.

  29. im currently pursuing a degree in english literature. however recently, i’ve gotten really interested in trading. is all lost for me? :(

    1. Just do more quantitative classes

  30. Is there a position at trading desks that is not a PhD level quant but not the floor trader?
    Basically I am trying to find something that would offer challenges but I don’t have a PhD.

    My understanding is that there are structurers and “front desk quants” – what is usually their background and what does one need to know? Do they actually exist and does everyone hires them or are they a speciality at certain establishments?

    I keep reading about them but they are not widely mentioned on this blog. Any information would be appreciated.

    1. Yeah, structuring would probably be the closest to what you’re looking for. I really know very little about S&T but I’ll see if we can cover this in the future. Most people in structuring are math/science grads from top universities but definitely not PhD-level – they’re good at math but don’t necessarily want to be traditional traders.

      1. I would also be very interested in more information about structuring.

        1. Same here

          1. Thanks for your feedback, we hope to cover Structuring in more depth in the future.

  31. Many banks claim that their securities divisions are very team oriented? How so? I mean, from your description, it seems to me that the trader is pretty much on his/her own. I understand that a lot of research is conducted beforehand, but at the end of the day, the trader has the last say…Yes?

    1. I think this is just corporate spin, traders are more independent than bankers most of the time

  32. Whoa, I’m gad the trader has time to breathe…!

    Just a few weeks ago, I attended a banking event held at a reputable bank, wherein we were given a tour of the building. The trading floor was very man-dominated – I always had this impression that women were better multi-taskers! :p That’s beside the point…is this the norm?

    1. Yes, trading and finance in general are male-dominated. Most floors are 90% men – that’s just how the industry has always been, though it is starting to change a bit.

  33. What is the difference in salary, hours and exit opportunities for Asset Management, Investment Banking, Private equity and Sales/Trading?

    1. In general asset management has lower salary/hours/exit opportunities… the others are all “more” but the specifics are very dependent on what you do, what level you’re at, what you’re looking for afterward, etc. See this article for some thoughts:

      https://www.mergersandinquisitions.com/finance-investment-banking-jobs-tradeoffs/

  34. Hi,
    I am a junior derivatives trader at a BB. If after a year or two of trading at my current desk I want to switch to a desk at a different BB (or HF I suppose), how do I accomplish that? Are there headhunters I could contact?
    Thanks for your help!

    1. The best bet is to go through friends and referrals at the other place – see the articles here on lateral hiring. Headhunters tend not to be too helpful for moving to another bank.

  35. Avatar
    Derivatives1

    I currently work for a bank in Derivatives in credit and equities, I find that banking is not very stressful at all and does not offer the challenge that I expected. The most difficult part is learning the systems and procedure, the product and math is the easy part which took me only took me three months to learn when I started. If you can think quickly you will do well. You have to build a name for yourself and be very social. I haven’t worked on a trading floor but I would like to move to the floor hopefully this would actually have a little stress.

  36. Big question on trading, do you have any strategies for a graduate student that is in engineering and attending Stanford? I guess the best thing to do is attend informational session and contact the career office for future summer internships.

    Do you think it’s necessary for me to switch from my current major as an Environmental Engineer into the MS&E program to break into trading? Or do they prefer someone with just a mathematical background and that’s fine?

    1. Yeah, information sessions and alumni networking are the standard methods. Career center is useless they don’t know anything.

      You don’t need to be an MS&E major for trading, in fact you might have better luck from an engineering background.

  37. Hey Brian,

    I’m really curious as to why anyone would go to i-banking as opposed to trading. I mean you get paid more than a banker, you work less hours than a banker and the work is much more exciting than a banker’s. Care to explain?

    1. The exit opportunities are not as good, and you stand a higher chance of getting laid off if you don’t perform well.

      With trading your skill set is very specialized and all you can really do is more trading – but banking gives you the option to do more things from investing to business development to even trading

  38. Assuming your not trading derivatives, do you still need to be a math whiz to be a trader? In general what level of math are we talking here differential calculus or partial differential equations. I know it depends in part on your product but can you at least give me a generalized answer for say less complex (non-derivative) products?

    I’ve heard that even if your good at math on paper or with Excel, it means nothing. My understanding is that to trade, you must be able to make tough calculations quickly and accurately on the fly, or you don’t even stand a chance.

    Can you elaborate on the truth to this rumor?

    1. I don’t think you use calculus or PDE for this type of trading, especially for anything outside derivatives.

      I’d say your assessment – that you need to be quick at doing math but not necessarily the next Einstein – is accurate.

      Also note that entry-level traders usually just USE software / models created by Ph.D.-level quants, so there is not nearly as much math required until you reach that level.

      1. Regarding the math for non-derivatives trading, most of it is having a sense of large numbers and doing quick mental math (100,000 shares of stock at 38.9–how many shares would you have to sell to reduce your exposure below a certain $ amount, for example)

        Also, part of the math requirement is just to “fit in”–especially with more math oriented positions. Some desks have senior traders that came from rigorous quant backgrounds and they pride themselves in their quant abilities—they would not want to teach a junior guy who does not have a strong quant background–even though the work does not involve differential equations.

        so no, you do not “NEED” to be a math whiz..but at some desks, you might need an engineeirng/math oriented background for “street cred” points in order to gain the approval of the rest of the desk

  39. M&I Thanks. I am trying to gain as much knowledge as I can about the industry so I can make informed decisions and start planing for the future. This site is great!

    Questions:
    1. What are some positions with in a hedge fund besides trading?
    2. What is the pay like for these employees at hedge funds?
    3. What is a “in the ballpark” range for a base salary for a trader at a hedge fund. That is all salary excluding bonuses.
    4. Is it rare to get hired by a hedge fund straight out of college? Meaning, are most of them in I-banking or some other place in the industry first?
    5. Anything else I should know?

    Thanks.

    1. 1. Research, operations, accounting, etc.

      2. Much less than trading, except for maybe research.

      3. Really depends on the fund… I would say $100K or less assuming it is a well-known fund with fairly sizable AUM. If it’s a tiny shop your base salary might be $0 or almost nothing though.

      4. Yes, usually you go in from i-banking first.

  40. With that established, I have two questions:

    What would you guys say the difference between M&A work and Equity Capital markets is? Is ECM more closely related to the markets…is it anything to do with S&T?

    Also, I am currently going into my Junior year at a non-target school. I have a 3.9 and am just about top of my class for all the University-run finance-related activities. For example for this entire upcoming year I am doing an internship with the university hedge fund designed for seniors. I want to stay for this year. For lack of a better way to put it..Should I transfer schools after this year to a target school. I am about 2 hours from NY, and I figure I can get into a good undergrad school via transfer, work my ass for for 1.5-2 years and get the degree from the better school (schools only transfer so many credits, so you cant transfer as a senior..) Should I do it, is it worth it..do I have a chance to transfer into Stern?

    1. Yes ECM is more closely tied to the markets, but you mostly work on IPOs and related deals so it’s not really similar to S&T. Some people say your exit options are a bit more limited with ECM, but I don’t know for sure.

      I mean you can transfer if you want, but is it really worth it at this late stage? It depends on how much you’ve networked up to this point… Stern is a lot better for IBD recruiting, so if you feel like you don’t know that many people and haven’t networked that much and don’t mind extra time in school and are very serious about banking, sure, go ahead…

  41. This site is gold.

    1. I agree.

  42. Thank TJ. That post was a big help. I don’t know as much as I would like to about the various jobs on Wall Street. I know a lot of info about investment banking, hedge funds, traders, and stock brokers. However, I lack knowledge beyond that. If I was to choose a job from the list of professions I am familiar with it would be I-banking. Simply because I am not interested in being a stock broker and the compensation contracts for being a trader or managing a hedge fund is to risky for me. Maybe, after making some cash as a banker it would then be more logical and a bit safer to work for a hedge fund. If only the hours were not so terrible in banking. Would you mind going into detail about some other professions on the street, preferably ones that have to do more with the stock market and other equities than banking? Thank you for all your time and help. It is defiantly a big help.

    1. David: A couple quick points

      1) There is no such thing as “normal” hours / “safe” professions in finance. Everything is more risky than normal jobs, because your fate is tied closely to the market… if the economy goes downhill, you get laid off.

      2) Hedge funds are completely different from banking – banking is more about working long hours on extended projects, whereas many hedge funds are more about short-term trading and only being focused during market hours… though you often work beyond that depending on the fund.

      Honestly I would strongly suggest talking to people in the field rather than asking us online… there’s only so much you can say in the comments, and I think you’ll get much better responses / also be able to network a lot by talking to people in the field, in real-life.

  43. Hi, I am 18. I am about to embark on my Journey to college. I am very interested in investment banking. There was a point when I thought i knew for sure that it was what I wanted in life. I love following the stock market and learning about various investments. I also love money. However, the more research I do the less sure I have become. I would appreciate if a few bankers could tell me about their experiences on the job. Do you guys like your jobs? Why, or why not? Would you recommend your profession to friends and family?

    If you have read my post, and have gotten this far thank you! I know you guys must be tired.

    1. To date, I’ve yet to meet any bankers who “like” their job. I-banking is mostly administrative work (copying, formatting, producing presentation materials) and occasionally some interesting modeling, which also gets repetitve and definitely conforms to the law of diminishing returns. I was very gung-ho about doing M&A my freshman year…I can tell you after actually having experienced it that this is no longer the case.

      That said, it’s relatively good compensation for the amount of education and experience that most new analysts have coming into the job and provides some great opportunities once you put in your 2 years or whatever – i.e. you can jump to hedge funds, private equity, etc.

      Also, liking the stock market means little in banking, in my opinion. I went weeks without even watching CNBC or knowing whether the S&P 500 was up or down for the week. To me, it sounds like buy-side would be a good place for you. For example, asset management or equity research. You can definitely intern at bulge-bracket banks in these groups (research is tougher to get into) and still make the jump to hedge funds.

      Hope all this helps – I wish I’d had someone telling me this before I went into i-banking. Best of luck.

  44. I’m decidedly interested in doing something in a prop trading capacity after having done a banking and S&T internship. I have one more summer coming up before I graduate and was wondering if you have any suggestions as to where I could go to look for internship opportunities for that sort of thing. Few sites that I’ve seen post anything like that or offer much info and other hedge funds/prop shops don’t even have websites. Any suggestions? Should I just be calling different shops up and asking for unpaid internships?

    1. I don’t think there’s much info. / jobs on prop trading online – I would probably do some cold-calling of local places and/or see if your school/alumni have any info. or if anyone is in the industry.

  45. Avatar
    Future Hopeful

    Brian,

    Which internship?
    A botique investment bank, $3 Billion Hedge fund, or MM PE Firm.

    Thanks.

    1. I don’t think you can go wrong with any of those, but if you want to do banking after graduation I would probably go with the boutique bank.

  46. Hey Zeke, im just wondering… is the work of a trader really exciting?? Do you look forward to going into work everyday? And do you have a work-life balance?

    1. Things can move quite quickly so it can be exciting, but stressful too. There is better work-life balance than say, consulting or banking in terms of hours. However, some traders also can’t sleep when a lot of money is on the line and they are responsible if anything goes wrong. Your P&L track record follows you wherever you go in the future–future employers will ask what your P&L was so in that sense it is stressful.

  47. Another off topic question. Is there a more specific place to go to see how to contact headhunters? I was given a list of about 15 direct contacts but i was wondering how to approach it besides an email saying “Hi i do this, worked here, and want to do __”

    1. There’s not much to it – just keep the email short, include something attention-catching in the subject (either the person who you got their name from, where you worked, where you went to school) and ask about something very specific, then propose a few days/times when you can meet.

      1. I would say email head hunters doesnt get you the same results as the phone call. I would call for the first few days until you speak with them directly and then send an email as a follow up. I think nowadays they get so many emails that a phone call will really get you noticed and they can tell you on the spot if they are working on something.

  48. A bit off topic, what happened to the resume review service? The link leads to a “404 Not Found” page.

    1. It’s not available at the moment – you can check with Kevin on Management Consulted and ask, because he has a couple people now from finance backgrounds etc. helping with resume editing and I know the quality is good.

  49. at a large bank, who are you making trades for?

    1. Typically asset management/investment firms, like pension & mutual funds mostly (IMO at least, from what I’ve seen at work).

    2. Yup mostly large institutional clients – think Fidelity and other places like that that manage huge sums of money.

  50. How did you get a job as a derivatives trader? you came from management consulting, is that at all common?

    What is recruiting/hiring like for traders? how is it different than for Banking/M&A? From networking, to the actual interview process..

    Is it hard to break into trading out of undergrad with a background in finance (i.e. not math). How would one get a leg up in this process, how about getting an internship at a regional prop trading firm? Does anyone move from M&A (FT or Summer) to trading, is that background at all attractive?

    I know thats a lot I just threw out there, so any response is much appreciated. Thanks, great article.

    1. There are generally fewer spots available when it comes to recruiting in trading versus banking. I did not take the typical path to get in so would not be in a position to advise on the “typical” way to get in. Having a compelling story that matches your background can help if you are from a non-typical background–but will not guarantee you a shot.

  51. Could you tell me more about job stability and opportunity to progress significantly in this field?

    Thanks!

    1. It really varies what products you trade. At the moment, banks are cutting risk limits for discretionary trading given the last few years so the upside is somewhat less than what it used to be. The skill set is limited–less transferrable (if you ever want to leave the industry) than say management consulting or banking–though the work can be exciting.

  52. great overview! as a recent grad im always trying to find blogs/accounts of th real environment and work lifestyle brokerage/investment bank. The nearest competitor i can think is the wishy washy hypothetical overview! Anyway rambling – point is I really appreciate the work you guys put in!

    Would love to read about a broker experience… I hardly sense that much interest in broker (market maker/sales trader) roles on the web for some reason….

    1. Thanks for the suggestion – see what I can do, though this site seems to attract mostly banking/PE/trading guys and not much in the way of brokers…

  53. What is the pay for a trader compared to a banker?

    1. At the entry level it’s usually in the same range, but as you move up it can become extremely variable (as with banking, but even more so).

      I would say that the top traders generally make more than the top bankers, though at that level, what’s the difference between $20 million and $10 million?

      At some small prop trading firms they may allow you to make a % of your P&L even if you’re relatively new, but those types of arrangements are not easy to find.

    2. I can’t give specific numbers at the moment, but I can reasonably say the base salaries are not too different for first years of banking. Bonuses are quite unpredictable as they are a function of the group’s P&L, bank-specific policies, and subjective judgments of how much people “like you.” Your group’s P&L could be up millions mid-year but if the P&L tanks to below zero on the day the bank calculates bonuses–you could come out with nothing. So it’s quite unpredictable.

  54. Avatar
    SUPERBANKA

    Nice Article…. so do people you work with shout a lot and scream at the phone?? Or are they more civiliseed? What about the hours… do u get home by 5? And of course the stress. There is clearly a lot of stress involved but how do you cope with it?

    1. In terms of noise level, there is definitely less shouting and screaming than there is on the floor of the exchanges. However, the phones are constantly ringing and traders do raise their voices at times to get an order through or just to make sure he can be heard over the noise of the rest of the floor.

      The hours are much less than in banking though intense–8:00 to 5:30 or 6:00 is typical though there are some non-trading desks that are usually out at 5. And of course, this varies by group.

      Perhaps we’ll cover more on stress and hours in a future article. Thanks!

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