by Brian DeChesare Comments (50)

Sales & Trading Interview Domination, Part 2: Markets, Brainteasers, and Mental Math

Sales & Trading Interview Domination

This is a guest post from a reader who broke into Sales & Trading (S&T) coming from a non-target school. In Part 5 of this series, you’ll learn all about sales & trading interviews and how to answer the technical and markets-based questions, pitch stocks and investment ideas, and yes, even calculate the square root of 58 in your head.

“The markets are tanking!”

“I just got whacked on RIMM…”

“Europe is going down…”

“Greece is being auctioned off in pieces.”

“China is about to have hard landing…”

“The US unemployment rate is stuck at 8.3%!”

Ah, yes, the fun part of a sales & trading interview.

You better walk in with your best investment ideas, coherent thoughts on current events, and an impressive ability to do square roots in your head.

Or you’ll walk out without an offer.

The good news is that just like with the “fit” side, it’s possible to prepare for the markets, math, and brainteaser questions you’ll get.

The bad news is that it can be more time-consuming, and there’s no way to predict every single question in advance.

Here’s how you can get started preparing for markets, math, and brainteaser questions:

The Distribution

As I mentioned in the last article, first round interviews in S&T tend to be mostly fit-based.

Past that, it rapidly shifts to market-based questions – maybe around 60 to 80 percent of questions in later rounds will be related to the markets, with the rest divided between additional “fit” questions and math / brainteaser questions.

So you need to spend the bulk of your time preparing for all these market-related questions.

Market Mayhem: What to Expect and How to Prepare

There are 5 big categories of questions here:

  1. Tell me about a recent article (or recent trend) you read in the Wall Street Journal.
  2. Pitch me a stock (or other trading idea).
  3. If you had $10 million (or other large number), how would you invest it?
  4. Tell me about major world events.
  5. Tell me what major indices / commodities / FX rates / bond yields / LIBOR etc. are at and why that’s the case.

There are more potential questions, of course, but if you have good answers to these you’ll be well-prepared to handle variations.

The answer to many of these questions: “Read (or at least skim) the Wall Street Journal cover-to-cover, every day – and anything else you can get your hands on.” Never, ever miss reading it or you’ll be in for a shock when you show up for your interview.

If you’re a student, get a university discount or share a subscription with a friend or find any other way to access it that you can.

You can read other newspapers, blogs, and finance-related sites, but never skip the WSJ for any reason – especially not if you have an interview that day.

Recent Article / Trend Discussion

Try to find something on a “sexier” topic, not something mundane (e.g. the unemployment rate, the trade deficit…).

Opinion articles and editorials are very good for these types of questions. Examples:

  • The Real Causes of Income Inequality – It’s Not What You Think
  • Why High-Frequency Trading Helps the Markets
  • The Real Way to Fix Europe’s Economy

If you’ve passed middle school, you understand how to discuss an article: state the main idea, the supporting reasons, and then whether you agree/disagree and why.

As a trader you’ll constantly have to read the news, evaluate it, and see if you can use it in your own trading strategies.

Stock Pitches

The most common mistakes here:

  • Picking a company that is well-known and that everyone else is analyzing (Apple, Google, Facebook, Microsoft).
  • Not backing your stock pick with solid reasoning (both quantitative and qualitative).
  • Not knowing key information about a company such as their leadership, strategy, key valuation multiples, and so on.

And yes, I mentioned that I pitched Apple back when I was networking… but back then it wasn’t as well-known, and it was just for networking purposes rather than an official interview.

How can you find stock ideas to pitch?

  1. Read sites like Seeking Alpha, follow successful investors on Covestor, and read about recent deals and corporate news in the WSJ to get some initial ideas for companies.
  2. Take a “tops-down” approach and pick an industry you’re interested in, get some equity research (free with a TD Ameritrade account) or research it online, and determine the most promising companies in that market.
  3. Pick a big trend in the world (emerging markets, software-as-a-service, unconventional energy resources, etc.) and find a company that can take advantage of it.

Here’s how to structure a stock pitch:

  1. Aim for 60 – 90 seconds – more than that and they’ll lose interest.
  2. Start by giving the company’s name, briefly describe what it does, say whether you like it or don’t like it, whether you’re long or short, and the price target.
  3. Give 3 supporting reasons that explain your thinking and why you think the stock’s price and value are different.
  4. Estimate the potential upside from the stock in a certain timeframe, and how you plan to exit the investment.
  5. Give the potential risks and how you could hedge against those.

Example stock pitch: “I like Aero Dynamix, a leading manufacturer of commercial aircraft engines. It has about $500 million revenue and $100 million in EBITDA and trades at around $20.00 per share, at a P/E of 10x, vs. 11-12x on average for its competitors. I like them and think the price could rise to $25.00 per share, for a P/E of 12x, in the next 12 months.

Right now, they’re undervalued by about 20% vs. competitors because prices and demand have declined in some of their key markets in Europe. But they’ve just gotten started expanding in China, where there’s far more growth, and 10% of their revenue will come from there by the end of the year.

Also, oil prices have fallen 15% in the past several months but that hasn’t been factored into their price yet. As those lower prices move through the system, air ticket prices are likely to decline, which should push up traffic and cause companies to invest in more aircraft, which will help the company.

Finally, they operate at higher margins than the rest of the industry but haven’t received credit for that yet because the market over-reacted to bad news in one of their regions.

The time frame for this investment is 12 months, with a target price of $25.00. I would set a stop loss at $18.00.

The main downside risks are a general market decline, which could be hedged by shorting a broader index, and stagnation in emerging markets, which you could hedge by longing a defensive or blue-chip index or anything else not dependent on developing countries.”

You may get more questions after this initial pitch – they’re likely to ask you more about the risks, how it’s valued vs. competitors, institutional ownership, and what specifically this company has that competitors do not.

The best way to know all this is to get free equity research from a service like TD Ameritrade or other online brokerage accounts and read through reports and online sources that discuss the company.

Trading Ideas vs. Stock Pitches

You may also get asked about “trading ideas” rather than pure long/short stock pitches, so you should have a few thoughts on macro, FX, options, and related plays.

During my interviews, I talked about how the Hong Kong dollar had been pegged to the US dollar for the past 30+ years, and how trading algorithms did not price FX options correctly because the peg had lasted for so long.

I told them that I thought the peg would be removed, as the HKD was undervalued, and the only way for it to appreciate was by removing the peg.

Therefore, purchasing call options on the HKD vs. USD could be an investment with a huge payoff.

I went into more detail than that as the conversation progressed, but this was something that few other interviewees mentioned and so it set me apart.

This was not my original idea, but it didn’t matter – as long as you can back up why you think it’s a good investment, it’s fine.

You need to have examples like this in your back pocket if you really want to stand out.

The $10 Million Investment

These questions are related to the ones above about stock pitches and trading ideas, but diversification is the key element here. You’d be foolish to invest $10 million all into one asset… unless you had another spare $500 million lying around.

So you need to go into detail on the different asset classes you’d invest in, the percentage allocation into each one, and why that makes sense given your investment goals.

You would start by asking for their goals (or stating your own), and then give an estimate of the percentages across different classes such as equities (large-cap, mid-cap, small-cap, international, etc.), fixed income, cash, real estate, commodities, and alternative investments.

It’s fairly straightforward… if you’re younger and can afford more volatility, aim for high returns even at greater risk, and as you get older you aim more for capital preservation and possibly income generation and tax benefits.

Major World Events

There isn’t much to say here – simply put, know what’s going on in the world, from various financial crises and natural disasters to macro indicators like unemployment, new housing starts, GDP growth and inflation, and so on.

If it’s an election year you will be asked about how different parties can impact the markets. Make sure not to pick a side – just show that you are knowledgeable about the impact of the different results.

Rates, Indices, and Commodities

There isn’t much to say here because it’s a matter of following the key numbers each day.

One overlooked point is that you also need a sense of how these have been trending over time – the past few years, the past 6 months, and then where they might go in the future.

You should use and to get all this information:

  • Equities: US – DJIA, S&P 500, VIX; Europe – Estoxx, FTSE 500, VStoxx; Asia – Nikkei
  • Credit: CDX NA IG, CDX NA HY, iTraxx Europe, iTraxx XO; SovX WE, SovX CEEMEA
  • Commodities: Oil and gold
  • Interest Rates: LIBOR, Fed Funds rate, 2-year and 10-year Treasuries

No, you don’t need to memorize every one of these, but you should have an idea of the most important ones for your region.

If you went in and could not answer how oil prices have changed over the past 12 months, your chances would not be good.

Brainteasers and Mental Math

So that’s what you need to prepare for on the markets side.

In some ways it’s actually easier than investment banking interviews because you don’t need to learn about specific topics like merger and LBO models, and it’s more about backing up your answer with solid reasoning rather than being “right” or “wrong.”

But brainteasers are harder to prepare for.

Technically you could get these questions in banking or consulting interviews, but they’re the most common in sales & trading interviews.

The logic behind them: stress test you, and see how analytical you are under pressure.

No, you won’t have to answer brainteasers on the job in S&T but you will be under constant pressure all day, and if you make a mistake you could easily get fired.

Unfortunately, there’s no “formula” for answering these questions – all you can do is practice repeatedly and look online and in books for common questions.

While Vault is normally useless, they sometimes have good sample brainteasers so you should get their S&T guide or any other book on brainteasers that you can find.

Chances are that if you practice enough, you’ll start seeing variations of the same questions being asked… which makes it easier for you.

The most important points with brainteasers:

  • Always think out-loud and walk the interviewer through your thought process.
  • Explain where assumptions come from and how you got there.
  • If you get stuck, explain what you need to do next to continue… and they might point you in the right direction.

If you get the same brainteaser twice, I highly recommend telling the interviewer.

Doing so demonstrates your honesty and shows how you’re different from many other candidates who wouldn’t necessarily act that way.

And after widespread insider trading and securities fraud, honesty is becoming more and more highly-valued in the industry.

I actually had this happen and told the interviewer that I had already heard a particularly difficult brainteaser that he gave me – he told all his co-workers afterward that I was upfront with him, and eventually I won an offer there.

Mental Math Mayhem

If you make the sales & trading vs investment banking comparison you must be quantitative and good at mental math if you want to work in sales & trading – that’s one of the ways it’s different from other markets-based roles like long-only asset management, value-oriented hedge funds, and so on.

Technically they could ask you anything here, but a few types of questions come up repeatedly:


The key here is to break up “ugly” numbers into round ones. Examples:

  • 97 + 55 = (97 + 50) + 5 = 147 + 5 = 152
  • 334 + 567 = (300 + 567) + 34 = 867 + 30 + 4 = 897 + 4 = 901


Subtraction questions are similar but you need to decide when to round up – if, for example, the number’s second digit is bigger than the second digit of the number you’re subtracting from (e.g. 62 – 27). Examples:

  • 62 – 27 = 62 – 30 + 3 = 32 + 3 = 35
  • 934 – 478 = 934 – 500 + 22 = 434 + 22 = 456
  • 934 – 437 = 934 – 440 + 3 = 494 + 3 = 497


When you’re multiplying a 2 or 3-digit number by a 1-digit number, it’s fairly straightforward because you just separate them into smaller groupings:

  • 47 x 5 = (40 x 5) + (7 x 5) = 200 + 35 = 235
  • 432 x 6 = (400 x 6) + (30 x 6) + (2 x 6) = 2400 + 180 + 12 = 2592

It gets trickier when you have 2×2 multiplication or beyond (better hope they don’t give you a 5×5 in an interview).

The trick is to put the number with the larger second digit first and then group them into smaller units once again:

  • 43 x 87 = 87 x 43 = (87 x 40) + (87 x 3) = (80 x 40) + (7 x 40) + (80 x 3) + (7 x 3) = 3200 + 280 + 240 + 21 = 3480 + 261 = 3680 + 61 = 3741

You’ll have to keep track of some larger numbers in your head, so I recommend saying the numbers out-loud when you go through the calculation.

Squaring Numbers

This is easy if you’re asked to square 6 or 7, but most interview questions involve 2-digit numbers.

The trick is to use this formula:

  • X^2 = (X + Y) * (X – Y) + Y^2

And then you set Y such that either (X + Y) or (X – Y) end with “0.” Examples:

  • 89 ^ 2 = (89 + 1) * (89 – 1) + 1^2 = 90 * 88 + 1 = 90 * 8 + 90 * 80 + 1 = 720 + 7200 + 1 = 7921
  • 56 ^ 2 = (56 + 4) * (56 – 4) + 4^2 = 60 * 52 + 16 = 60 * 50 + 60 * 2 + 16 = 3000 + 120 + 16 = 3136

Square Roots

Ah, now for the fun part… it’s harder to apply “tricks” to square roots because you’re almost always going to end up with numbers that have decimal places.

So you should think in terms of square numbers instead. Let’s say they ask you the square root of 58…

  • Think, 7 ^2 = 49
  • And 8 ^ 2 = 64
  • 58 is closer to 64 than 49, so the answer must be above 7.5 and below 8.0
  • So you can say “approximately 7.7” – it’s actually 7.6, but your guesstimate is close enough.

Another common question: what is the square root of .9?

You might instinctively say, “0.3!” or “0.03!” but you would be wrong.

Once again, think in terms of known squares: 0.9 is close to 1, and 1 ^ 2 = 1… so the square root of 0.9 is “approximately 1” (0.95 to be more exact, or you can just say “slightly less than 1”).

Sales Interviews?

What if you’re interviewing with a sales desk rather than a trading desk?

Well, you’ll still get all the markets-based questions because you need to know those regardless of your role.

Brainteaser and mental math questions are less likely to come up, but you should still know the basics because you might have to answer questions from clients or traders on-the-spot.

As mentioned in Part 1, they do focus more on your communication and selling skills – but it’s not a great idea to skip the math and brainteaser prep altogether.

Your Interview Prep Checklist

So when your interview is coming up tomorrow… or in a week… or very soon, here’s what you need going into it:

  • Your “story” and why you want to do S&T over anything else – including related fields like asset management and equity research.
  • 5-6 anecdotes from your resume that demonstrate the skill set needed in S&T, and an idea of how to re-use them for many “fit” questions.
  • Knowledge of all the market indicators mentioned earlier, plus a sense of how they’ve changed in the short-term, long-term, and how they might change going forward.
  • 3 stock pitches, with at least 1 long idea and 1 short idea.
  • 1-2 trade ideas – FX, global macro, volatility, or anything else.
  • 1 recent article or world event and your opinion on it.
  • At least a few hours of practice with mental math and brainteaser questions.

Got Offers?

If you’ve done everything in this series – networking, resumes, and interview prep, you’ll be well on your way to receiving S&T offers.

The problem is that many people complete some of this process, but not everything. Or they only complete part of one step, fail to understand the overall process, or aren’t specific enough with why they want to be in S&T…

Which is sort of like making a trade but then not hedging yourself properly: you could make money, but you could also lose everything if the market moves against you.

Proper interview prep is the same as properly hedging your trades: you’ll never lose everything, and you’ll do better than everyone else on average.

And you might even do the impossible and win multiple sales & trading offers – even if you’re from an unknown school with no on-campus recruiting.

Coming Up Next

That’s it for this series, but we’re always looking to add new material on Sales & Trading. And yes, I’m aware that we haven’t featured much on Sales yet (more coming soon).

What else do you want to know about? Leave a comment below and we’ll add it to the list.

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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  1. Hello Brian,
    Thank you once again for this very detailed article.
    I heard a few weeks ago that in Canada, candidates are very often asked the question “if you had 10,000$, how would you spend them?”
    Does this question require the same level of detail than the traditional “pitch me a stock” ?
    I am reading right now a lot of books about ETFs, smart beta investing but my schedule prevents me from spending hours into “Finding the right value stock”. Would you think it’s enough to talk the interviewers trough Smart Beta ETF’s ideas ? or is it “wrong” in the sense that it’s not a really active way to find out “a promising investment”

    I’m aware it probably depends on the context of how the question is specifically asked, but I am very interested in your opinion about it

    Thanks a lot !!!


    1. That question is a test of asset allocation knowledge and your ability to figure out the person’s goals. You should always respond by asking *for whom* you are investing it and what the person’s financial profile and goals are. Do not go into smart beta or specific concepts like that because this is a very high-level question that is more about your ability to understand a person’s age, income, investing goals, etc. and then recommend a sensible allocation.

  2. Hi Brian.
    I got the chance to the second round in IED of Morgan Stanley in Asia.
    And I think I’m in a program of derivatives instead of the other program, equity.
    I found on the Internet that many questions are about equity, but not so many about derivatives.
    So I’m confused if the questions will also be about some stock pitching or may be more specific on derivatives?

    1. Yes, you will get more specific questions about derivatives as well. See the Hull book to start.

  3. This is insightful and amazing! These are the things that will not be taught in school and students who struggles with interviews should definitely come and check this out! Thank you! I really appreciate it! I developed some ideas for preparing my global markets interview!

    1. Thanks, glad to hear it and good luck!

  4. Is the example of Aero Dynamix fictitious? I could not find information about it.

  5. I don’t go to school in the US and I haven’t done any internships in the US but I’ve done a bunch in my country (emerging market). Is there a point in applying to wall street firms or am I better off trying to get into a BB here and pushing for a transfer

    1. Apply to large banks there and then push for a transfer to a different location.

  6. Wow, this is a thoroughly detailed article ! Thanks for writing this !

  7. So basically, the basic maths. However you’ll need to be able to use them effectively?

  8. In the article, when you say “read the WSJ cover to cover everyday” what do you mean specifically, because I have the online version and it seems as though there is an infinite amount of articles on there, and I get overwhelmed trying to pick out what to read. Any insight on what I should really focus on?

    This was a great article as always, you don’t know how helpful this is. Thank you.

    1. Avatar
      M&I - Nicole

      Focus on current market trends – what’s going on in the overall market. You may want to take pick 1-2 industry you are really passionate about and focus on them. You may also want to hone your knowledge of investing by going to, especially if there are terms you don’t understand on WSJ. Thanks for visiting our site!

      1. Thanks a bunch, just one quick follow up question. When you say pick 1-2 industries, do you mean things such as financials, tech, etc. or commodities, equities, etc.

        1. Avatar
          M&I - Nicole

          Yes i.e. financials, tech, retail. Asset classes – commodities, equities. Its useful to know more about different asset classes to be very honest so if you’re interested in it, yes go ahead and read up about fixed income, commodities, equities, etc. You can then figure out which asset class you enjoy learning about the most.

  9. This sight has given me great insight in to the world of banking.

    Just one quick question. I have been working in commercial sales for the last 2 years after graduating from cambridge one of my colleges has great connections with a hedge fund here in london and has booked me an interview with the CEO after realising just how money motivated I am and how I plan to retire at 50. I haven’t been given much insight into the role I am supposed to be applying for as its very unconventional given my back ground. Do you have any advice on what I should be researching and how to approach this interview?

    1. Avatar
      M&I - Nicole

      I think this article should address your questions

  10. 43*87 is calculated quicker by: (40+3)*(90-3) = 3600 + 50*3 – 9 = 3750 – 9 = 3741

  11. Thanks so much for posting this article! It has been enormously insightful.

    I’m currently a junior at a target school trying to get a trading internship for the summer. I am a math major so I have all the analytical and quantitative skills down. But unfortunately, I only very recently (within the past 5 months) realized that I wanted to pursue a career in trading so I’m having a bit of trouble showing my interest in financial markets on my resume. My school doesn’t offer finance as a minor so I am minoring in the next closest thing: econ. I joined a financial investment club only this past semester (and hence have a very minor role in it). I read as much as I can about the markets online, but I don’t think you can really put “reading” on a resume. I am VERY new to mock trading and I really hesitate on putting down mock trading on my resume for fear of getting grilled on something I am not yet confident in.

    So to sum up that very long explanation (thank you for following along if you had the patience to do so), the only pieces of evidence that I have of interest in financial markets down on my resume are literally just “minor in econ” and under activities, “Financial Investment Club”. Would those 6 words be enough to get me at least a first round interview so that I can at least talk about my market views in order to convey my true interest? I feel like it would be very easy to miss those 6 little words if each resume is only given a minute or two of consideration. Is there anything more I can do based on my circumstances?

    If I really don’t get any offers, what are some good back up plans in addition to PWM?


    1. Avatar
      M&I - Nicole

      Perhaps you can do this quiz and see which other divisions suit you?

      You’ll then have a better idea

  12. Hi Brian,

    first of all many thanks for providing such information, everything is very useful.

    I have few questions about how we can prepare this kind of interviews (Sales/Trading, M&A etc…):

    – How we can improve our technical skills? Do you know some books which can help us in this concern? (apart Vault which is more into how approach an interview).

    – How much time (days, months etc.) we need to prepare us (properly) for an interview? Probably the answer could be: it depends on your knowledges. If this the case: How much time, on average, we need to prepare us (properly) for an interview?

    – How much time (days, months etc.) we need to know the market and how it is running? As above the answer could be: it depends on your knowledges. If this the case: How much time, on average, we need to know the market and how it is running?

    I have this doubts because I am thinking: what happen if I apply for a job and I get a call the following week?

    Many thanks again for your support and sorry for my english.


    1. 1) There are some good resources mentioned in the comments of this article:

      2) Maybe 1-2 hours per day over several months? You could try to condense that all into a few days before the interview instead, but it’s not recommended.

      3) Just read the WSJ and/or FT every day, or least the major stories. Depending on how quickly you read, that might be 30-60 minutes per day.

      I would worry about getting called in for an interview when it happens – prepare as much as you can, but don’t spend time worrying about it in advance before you know your status.

  13. Great article!

    I am currently working for a top-tier BB as a summer analyst in commodities trading tech. My hiring manager, an executive director and the head of my team, seems really friendly to me. I am trying to break into S&T and I was just wondering if it is a good idea to ask him about referal to anyone he knows in S&T?

    Thank you in advance for your kind reply.

    1. Avatar
      M&I - Nicole

      Do you want to work for your hiring manager at all? Is he interested in having you on board FT?

      If you don’t want to work for him and you don’t mind closing the doors of working with him, I’d have an open conversation with him and also ask for a referral….

  14. Avatar
    Howard Schwartz

    I am 55 years old with a fully vested pension waiting for me when I retire. It’s not enough to live on. I majored in art, not finance. I am awaiting the results of the Level 2 CFA exam. I also passed FRM Part 1. Am I in a position to get the IB job for $100k+ that you write about?

    I won’t know how to invest $1 million until I’m exposed to the Level 3 CFA curriculum. I’m learning financial modeling with BIWS and Wall Street Prep. I also don’t have a favorite stock I can recommend (another question Brian suggests we know how to answer).

    Am I ready to go on interviews now with a little tweaking or should I wait until I pass Level 3?

    Thank you.

    All the best,


    1. 1. No. With 20-30 years of experience you’re over-qualified and they wouldn’t hire you (just being blunt here).

      2. At this stage the CFA is not going to do much for you because banks will not recruit you with the amount of experience you have.

      What you need to do at this stage is find some way to leverage your background to work on the operational side of a PE fund, or perhaps join an asset management firm.

      But to be honest (again, just being blunt here) you need to demonstrate a really strong interest in finance / the market for either of those… so if you don’t have a favorite stock to recommend, that is a big red flag and you need to learn the market better first.

  15. I disagree with just a small part of it. I think that if you are interviewing in Europe the right Equity Indices to check would be the main national ones, mainly FTSE 100 (No one really follows the 500), CAC, DAX and these days you should probably know where the IBEX and the MIB are, at least ballpark.
    And in the Bond Space, at least 10y on Gilts, Bunds, Oats, and again in the situation we’re into I’d also know the BTPs and Bonos. It’s better to know all the 10y figures in these countries than knowing the 2s5s10s in just Germany and the UK, it will probably help you to answer questions and reason when doing a FICC trade idea.

    1. Thanks for adding that – you’re probably right. The interviewee / author here was based in the US so he was making an educated guess on the indices elsewhere. Your suggestions sound right on.

  16. How is the ER interview similar to IB?

    1. See this overview:

      It is similar in the sense that you need to know about accounting, valuation, and possibly a bit of merger/LBO models, unlike what you see in S&T interviews. And they will ask “fit” questions that are arguably more similar to what you get in IB interviews.

      1. Thank you Nicole. Have a great holiday!

  17. Where do Equity Research interviews slot in,same as S&T?
    How relevant is S&T/ER going forward?

    Magic article as usual!

    1. There’s a good overview of ER here:

      Fewer brainteaser / math questions, but you still need stock pitches and similar to IB interviews, an understanding of accounting / the financial statements / valuation etc.

      Not sure what you mean by “relevant” – both fields will be around for a long time and have been around for a long time. Can you make as much money as in the 90s or bubble of the 2000s where top performers made millions / tens of millions? No. But they’re still lucrative and pay better than almost any other job aside from executive positions at large companies.

    2. Avatar
      M&I - Nicole

      Equity Research is a separate division from S&T (Equities). Both are under “Equities” / “Securities”. Some may argue that cash equities is a lower-margin/slower growth business. As you progress in equities you may want to gain different product knowledge (i.e. equities, derivatives) so you can cross-sell (trend) and quant skills are still highly valued in equities. As long as you have a passion for and knack in investing, I think both S&T and ER are great places to start off your career in. You can stay, move to the buy-side, or even start your own fund as you progress in your career.

      1. Nicole, ER is not a separate division from equities at every firm; just to point that out.

        Cash equity is lower margin? Yes, it’s very headcount intensive as it needs an army of sales, traders, analysts (I mean equity research here) and lots of support staff, and commission rates have been pushed down, down, down by electronic trading and industry overcapacity.

        That said, one huge advantage, and your article touches on this a lot, is that it’s not capital intensive. Under Basel III, many trading desks will be required to hold capital reserves against market making or counterparty positions they take, but cash equities will not be affected by this. Thus, as long as trading volumes hold up decently (right now they’re abysmal) then cash equity teams have a respectable ROE and people get paid.

        Another point: cash equity teams are often necessary to run an equity derivs. platform. The derivs. will build up a lot of exposure to certain equity-related risks (e.g. dividend exposure), which the cash equity team can help offload/risk manage.

        Lastly, slow growth? All areas in IBD or S&T have moments in the sun; they go in cycles. With capital requirements and new regulations coming on, cash equities could be about to enter such a positive cycle.

        1. Avatar
          M&I - Nicole

          Adam, thanks for your insights. A few things I wanted to point out through my discussions with someone seasoned in the industry. Others’ view may be different from the below and it is fine, but I thought I should just share the below.

          – Cash equities business may be going away in its current form as electronic takes over. Some are already seeing headcount reductions and comp being deeply cut which might lead to further attrition out of the industry
          – Research is indeed headcount heavy and with commissions going lower firms are increasingly trying to allocate the cost of research to clients that “pay” but its really a difficult task. Research can be seen as a cost center which handicaps them as tracing its product to revenue is an imperfect science
          – ROE for cash business, from what I’ve heard, is very low given fixed cost bases, low margins, declining revenues and without some major changes it may stay that way or worsen. And despite it being a “commission” business, much more risk taking goes on than some would think. Clients often solicit risk trades from brokers for small/large blocks so they have guaranteed execution (and they take risk to win ECM business). Bidding and winning these risk trades often “buys” the right to traditional flow trading (ie VWAP on the day) but the risk/reward equation is not good at all (one risk trade can erase a year of commissions), so capital requirements will indeed impact the business
          – EDG/Cash businesses are not nearly as interconnected or dependant as one may think. One can function very well without the other, some of the best derivs houses don’t even have a cash biz or platform is unused
          – Likely that some sort of transformation is upcoming in cash equities (as current form may be unsustainable, likely it will be restructured to need much fewer people and more jr people than sr) but until then, outlook isnt great

  18. Great article as usual.

    If you are interviewing for FICC, would they still ask you questions about pitching stocks or will they instead replace them with questions about pitching an FX, Rate, Credit or Commodity product?

    I read the FT & many other Financial magazines as opposed to the WSJ. Could I cite these instead of the WSJ for the ‘Recent Article’ component of the interview?

    Finally, would they focus more on math questions for FICC Interviews instead of EQ interviews?

    1. Thanks! For FICC I think they could still ask you to pitch a stock, especially if you’re speaking with multiple desks on that day. But other products like the ones you mention are fine to talk about.

      Yes, FT is fine as are other publications, especially if you’re outside the US.

      They will probably focus more on math and have higher expectations there for FICC since it’s more essential to the products. At the entry-level I’m not sure how big a difference it would be, but yes, especially if you’re from a math / engineering background you can expect more depth to the questions there.

  19. Almost exactly the same stuff came up for me (although I’m in the UK), so you get asked about UK indices and news. I will also add that here, they ask you about articles in the FT as well as WSJ-EU.

    The article is of outstanding quality (as always!) and will definitely help anyone trying to break into S&T.


    1. Thanks for sharing! Yeah, reading the FT is essential for the UK / Europe. Glad you found this helpful and thanks for your feedback.

  20. This was one of the best articles on this website. Major props.

    1. Thanks! Glad to hear it.

  21. Wow this was incredibly thorough! The amount of information on this site is staggering. If you read a brain teaser online would you recommend saying so or mostly if the previous interviewer asked you the same question?

    1. Thanks! If you saw a brainteaser online that is more of a grey area but I would still recommend saying something, especially if it’s very difficult, because it will seem suspicious if you arrive at the answer too quickly.

  22. Hello,

    Will internship interviews also have such rigorous markets-based questions? And also about investment ideas if the applicant is not from a finance/economics background….like engineering or something related to mathematics.

    1. They will still ask you about market indicators and stock / investment ideas for sure. And brain teasers and math questions are likely to come up. Maybe not as difficult as for full-time interviews, but they expect you to do extra work outside the classroom to learn this material. Engineering / math vs. finance does not make a huge difference because many traders are actually from an engineering / math background, especially for more quantitative desks.

      1. Thanks a lot Brian.
        That was really helpful…waiting for the next part of S&T.

        1. Thanks! No next part planned quite yet but hope to add more soon.

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