Trading Vs Investment Banking

OK, I was having an argument with my friend about these two jobs at an Ibank. Please contribute with your opinions.

1: Which is harder to get into as a grad (in terms of competitiveness and requirements - I said IBD)
2: Which pays more, (i.e on average,and also who can potentially earn the most)
3: Which is more prestigous? ( I think IBD - why else would you work 15 hour days, if your at a top firm you'll be working on some mega deals)
4: Which requires better quant skills (you can break it down to areas if you want such as derivs, equity etc.)

other general comments welcome!!

Reply 1

Mos Def

17

1) S&T is most competitive, don't know if that means harder
2) I believe IBD pays more initially, but a traders potential salary can be double and above than the people in IBD
3) I would say this is an opinion, my opinion is the more revenue you make for a bank, and potentially yourself, the more prestige.
4) I think traders need strong quant skills.

I'm just an A level student, but my cousin is a trader and this is what i have picked up from him. Take it as a pinch of salt if you may...

Reply 2

Speed-Charm-Color

1) Trading is harder to get, generally markets is similiar to ibd, but then a lot end up doing sales, structuring etc.
2) differences within FO are more based on the individual than the division
3) Def trading, see 1) Plus IBD grads are usually limitied to a 2-year stint.
4) Trading

Reply 3

PortfolioManager

7

Mystaree

OK, I was having an argument with my friend about these two jobs at an Ibank. Please contribute with your opinions.

1: Which is harder to get into as a grad (in terms of competitiveness and requirements - I said IBD)
2: Which pays more, (i.e on average,and also who can potentially earn the most)
3: Which is more prestigous? ( I think IBD - why else would you work 15 hour days, if your at a top firm you'll be working on some mega deals)
4: Which requires better quant skills (you can break it down to areas if you want such as derivs, equity etc.)

other general comments welcome!!

My views:

1. IBD is more competitive, way more applications go there. Seen it.
2. Over the long-run I think IBD pays better. However, top traders will definitely get paid much more than an average IBDer. IBD also has better job security. Top M&A client executive can also get much better than an average trader.
3. I view both positions the same, traders and bankers both get the 'wow' factor when you tell people what you do.
4. Trading requires more 'quant skills', specifically derivs. Having said that, IBD can get complex too when you do financial modelling. But overally, IBD requires less quant skills hence the reason why you have people applying from many degree disciplines (which lends to my first point on why IBD is more competitive).

Reply 4

Mystaree

OP

What about Equity sales, trading,etc. I've read on here, that's where all the non quant guys go? so would ibd require more quants than equity

Reply 5

marinemike

2

(Rather than creating a new thread, I'm reviving this one.)

I have some questions about trading, perhaps someone here could enlighten me:

My understanding of a traders' role is that they price and transact financial instruments. They do this either on behalf of a client (be it a billionaire business man or an institutional investor) or they take positions on behalf of the bank itself (which I know as proprietary trading).

To take a random example of a well known bank; just suppose I got a job on an equity trading desk with Barcap. Would my role be a combination of trading on behalf of the client + trading with Barcaps money itself, or strictly for the client/strictly for Barcap?

And finally, just where does the requirement for numeracy, quick thinking, instinct et al come into things if the trader is simply carrying out the orders of his client, little more than a monkey?

I have this image in my head of an institutional investor calling a salesman... He asks the salesman for ideas, and the suggestion is firm x and price y. The client orders 1,000 shares, and so the salesman tells the trader to buy 1,000 x at y or close to. What specialized skills did the trader need to do this?
Clearly my impressions are all wrong, can someone set me straight?
Thanks for any info!

Reply 6

roussell

marinemike

(Rather than creating a new thread, I'm reviving this one.)

I have some questions about trading, perhaps someone here could enlighten me:

My understanding of a traders' role is that they price and transact financial instruments. They do this either on behalf of a client (be it a billionaire business man or an institutional investor) or they take positions on behalf of the bank itself (which I know as proprietary trading).

To take a random example of a well known bank; just suppose I got a job on an equity trading desk with Barcap. Would my role be a combination of trading on behalf of the client + trading with Barcaps money itself, or strictly for the client/strictly for Barcap?

And finally, just where does the requirement for numeracy, quick thinking, instinct et al come into things if the trader is simply carrying out the orders of his client, little more than a monkey?

I have this image in my head of an institutional investor calling a salesman... He asks the salesman for ideas, and the suggestion is firm x and price y. The client orders 1,000 shares, and so the salesman tells the trader to buy 1,000 x at y or close to. What specialized skills did the trader need to do this?
Clearly my impressions are all wrong, can someone set me straight?
Thanks for any info!

How do you think a trader prices all his products? He/she uses complex financial calculations to find their implied value and then trades based on that. So if for example you are a rates derivatives trader, you have to make your own curves using implied future interest rates, then consider all the upcoming news events (non-farm payrolls, jobless numbers, house sales, FOMC meetings) and come to a conclusion as to where you think the markets are going to move in the next day/days/weeks/months etc. You then have to take positions based on your calculations and assumptions, and hedge them with reverse products (eg fed futures against rate swaps). You have to be able to calculate the potential risk/reward of a position in a split-second meaning your mental arithmetic has to be strong, because if you wait too long the price you've been offered may have moved away from you. Last summer 1m fed futures prices were moving 10-20bps and back again in minutes. That's a lot of money you can lose if you're not on the ball at all times.

As for the amount of risk a trader can take on, whether he's flow or prop, it all depends. Most traders are flow, but still have at least one side book where they take prop positions. And just because you're making a trade on behalf of a client doesn't mean there's no maths involved in it. You can make a lot of money if you offer a price to your clients which allows you to hedge with a nice spread in between. Obviously you can't go screwing over your clients or giving bad prices because they'll just go elsewhere but if you're good at what you do, flow trading, especially in the volatile markets of today, can be very profitable.

Reply 7

marinemike

2

interesting, thanks.

Trading Vs Investment Banking

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