The Student Room Group

Difference between Interdealer broker and Trader

What’s the difference between the two? They both do similarthings, like connecting buyers and sellers to make a trade/deal.... Also which is harder to get in to?
Original post by mr T 999
What’s the difference between the two? They both do similarthings, like connecting buyers and sellers to make a trade/deal.... Also which is harder to get in to?


IDBers are traders' minions (jk).

Trading is quite a broad field. At i-banks, their job is split into two: agency trading and flow trading. Agency is in essence acting as a broker for large institutional clients.

Agency:
If Pepsi wanted to sell their 1m share stake within say, Apple. They'd call up the trader at the bank and him and and his team will break down the trade into block trades to be executed in such a way that it doesn't affect the market at large.

They'd price the securities, figure out when to enter and exit and how to place the order. In comes the IDBer, the trader would contact the IDBer to place their trade through them - i.e. the IDBer is executing the trade on behalf of the trader at the bank who is in turn making trading decisions on behalf of Pepsi.

The result is the trader at the bank makes commission from Pepsi, and the IDBer executing the trade makes commission from the trader.

Flow:
Say McDonalds wants to buy 2mm shares of Citi. The trader at the bank would make a market by simultaneously offering a bid and an ask price. So what they'd do is use the bank's inventory (i.e. the bank's money) to purchase these 2mm shares, then they would sell the 2mm shares onto McDonalds - making money from the difference between what they sell it for and where they bought it at (the spread).

In this case, the trader would engage with an IDBer to connect themselves to a seller of 2mm Citi shares whom they can buy from (IDBer takes commission for this transaction), and then trades these newly acquired shares with McDs directly.

IDBers are effectively executing trades for and connecting large-scale buyers and sellers (mostly banks and other financial institutions).

Posted from TSR Mobile
(edited 7 years ago)
Reply 3
Original post by mr T 999
What’s the difference between the two? They both do similarthings, like connecting buyers and sellers to make a trade/deal.... Also which is harder to get in to?


Inter dealer Broking is harder to get into at the fresh graduate level since there are fewer places available. All large banks have big S&T departments although hiring has gone down a bit recently. ICAP I believe does run Spring week internships though so maybe that's not as hard to get into but most brokers don't really advertise placements for graduates.
Original post by Trapz99
Inter dealer Broking is harder to get into at the fresh graduate level since there are fewer places available. All large banks have big S&T departments although hiring has gone down a bit recently. ICAP I believe does run Spring week internships though so maybe that's not as hard to get into but most brokers don't really advertise placements for graduates.


It's still easier to get through the process for an IDB firm than it is for S&T at a bank.

Posted from TSR Mobile
Reply 5
Original post by Princepieman
IDBers are traders' minions (jk).

Trading is quite a broad field. At i-banks, their job is split into two: agency trading and flow trading. Agency is in essence acting as a broker for large institutional clients.

Agency:
If Pepsi wanted to sell their 1m share stake within say, Apple. They'd call up the trader at the bank and him and and his team will break down the trade into block trades to be executed in such a way that it doesn't affect the market at large.

They'd price the securities, figure out when to enter and exit and how to place the order. In comes the IDBer, the trader would contact the IDBer to place their trade through them - i.e. the IDBer is executing the trade on behalf of the trader at the bank who is in turn making trading decisions on behalf of Pepsi.

The result is the trader at the bank makes commission from Pepsi, and the IDBer executing the trade makes commission from the trader.

Flow:
Say McDonalds wants to buy 2mm shares of Citi. The trader at the bank would make a market by simultaneously offering a bid and an ask price. So what they'd do is use the bank's inventory (i.e. the bank's money) to purchase these 2mm shares, then they would sell the 2mm shares onto McDonalds - making money from the difference between what they sell it for and where they bought it at (the spread).

In this case, the trader would engage with an IDBer to connect themselves to a seller of 2mm Citi shares whom they can buy from (IDBer takes commission for this transaction), and then trades these newly acquired shares with McDs directly.

IDBers are effectively executing trades for and connecting large-scale buyers and sellers (mostly banks and other financial institutions).

Posted from TSR Mobile


Thanks that made it alot clearer. So since they both related and work with each other, could a interdealer broker become a trader and vice versa?

Original post by Trapz99
Inter dealer Broking is harder to get into at the fresh graduate level since there are fewer places available. All large banks have big S&T departments although hiring has gone down a bit recently. ICAP I believe does run Spring week internships though so maybe that's not as hard to get into but most brokers don't really advertise placements for graduates.


I'm gonna assume since the IDB firms don't advertise as much; does that mean theres less competetion and eaiser to get in to?
So would I have to cold email my CV to the interdealing broking firms then and ask for internship?
Original post by mr T 999
Thanks that made it alot clearer. So since they both related and work with each other, could a interdealer broker become a trader and vice versa?


Not really, they don't share the same risk management skills.. I mean theoretically anything is possible, but it would be unlikely.

As for internships, the cold email/call method should work - ICAP has its own formal internship scheme however. I believe the larger IDB firms take on graduates regularly.
Reply 7
Original post by Princepieman
It's still easier to get through the process for an IDB firm than it is for S&T at a bank.

Posted from TSR Mobile


True
Reply 8
One other thing OP, while you can apply for Broking internships, you can't exactly apply for trading internships- you have to apply for sales and trading internships which usually involve both sales and trading, so it could be difficult to become a trader
Reply 9
Original post by Princepieman
Not really, they don't share the same risk management skills.. I mean theoretically anything is possible, but it would be unlikely.

As for internships, the cold email/call method should work - ICAP has its own formal internship scheme however. I believe the larger IDB firms take on graduates regularly.


So I have a better chance of getting in to IDB than trading, if I were to apply for internship/graduate scheme, right? Is the pay scale quite similar as well or does being a trader pay more?
Original post by mr T 999
So I have a better chance of getting in to IDB than trading, if I were to apply for internship/graduate scheme, right? Is the pay scale quite similar as well or does being a trader pay more?


Ok. Now is the point where I have to tell you to toughen up, and stop thinking about probabilities of getting a role. Aim for whichever job you find more interesting, they both pay well (obviously, trading has more upside) so that shouldn't be a concern.

At the end of the day these two jobs are completely different. One is a sales-y, relationship based role and the other is a risk management, strategic, results oriented role. They fit different people.
Reply 11
Original post by Trapz99
One other thing OP, while you can apply for Broking internships, you can't exactly apply for trading internships- you have to apply for sales and trading internships which usually involve both sales and trading, so it could be difficult to become a trader


Yes I am aware of that, but I can always specialise during the programme and focus more on trading compared with sales.
Original post by Trapz99
One other thing OP, while you can apply for Broking internships, you can't exactly apply for trading internships- you have to apply for sales and trading internships which usually involve both sales and trading, so it could be difficult to become a trader


you can apply directly for trading internships
Original post by gr8wizard10
you can apply directly for trading internships


Can you? Where? I thought banks only take applications fro "sales and trading" or "securities division" not specifically for trading.
Original post by Trapz99
Can you? Where? I thought banks only take applications fro "sales and trading" or "securities division" not specifically for trading.


on a banks website, i know barc do a trading internship

Quick Reply

Latest