Sales and Trading in Investment Banking

Sales and trading refers to yet another segment of investment banking, the first one being the research department. It is one of the main functions of the investment bank where the team related to sales offers clients the required trading ideas. On the other hand, the traders’ team performs the activities related to the purchase and sale of the securities and the other financial instruments in the market for itself or on behalf of its clients.

Sales and trading in investment banking deals with providing investment opportunities to investors and also keep the market liquid. To become part of it, one requires having excellent communication and analyzing skills to assess deals and communicate the same to the clients.

Sales and trading in investment banking is one of the most important segments of the investment banking sector. Though the department is one, there are two functions that are carried out here. One is sales where the sales officials help clients with buying and selling ideas. These clients can either be individual investors or institutional investors. They also share the strategies that are likely to help investors in reaping profits.

The next function of this department is trading where the team helps clients to execute the trades, they are interested in.

An integrated investment bank with a research department, and a sales and trading department. Equity research and sales and trading division play a vital role. They work in a very integrated fashion. So, it is equally crucial for us to understand the meanings of sales and trading because this is the heart and soul of research and trading, making money for the investment bank. So let us now look at how the sales and trading department within the investment banking firm works.

When the research department comes out with its own set of reports, the buy and sell on specific stocks, they talk to the institutional investors or send their equity reports first thing in the morning to the investors. Institutional investors may get convinced by the idea of trading in such securities because they may believe in the recommendation of the research department. They may look forward to executing certain trades, so a particular mutual fund may be interested in buying Microsoft stock for $10 million. Hence, when these large deals happen, $10 million, $20 million, etc., investment banks try to match the buyers with the seller without affecting the actual execution price to a greater extent. So, if there is an order of $100 million on Microsoft, that is huge. If it starts getting orders, the share price will increase because there will be few sellers. However, the buying momentum is still on; it may reflect that Microsoft’s price may rise by 5% or 10%, or maybe we are speculating on that part. But yes, it may escalate. So, an investment bank matches the buyers and the sellers and tries to keep the execution price or the price at which they will buy at a minimum. They also buy and sell securities out of their account to facilitate securities trading.

So let us look at exactly how the sales department now functions. So, there are two separate mini divisions within the sales and trading division; one thinks of it as the sales department. Hence, the sales department is thinking of a research division coming out with their calls first thing in the morning before the market starts so that this sales guy may attend a morning meeting. 

Now, the morning meeting is all about the research, and the head of research, sales, and the sales staff would attend the meeting to understand the daily calls. For example, as we said, Microsoft may be a buy, so they hear the analyst out why it would buy or sell the sales and trading job is to talk to these institutional investors and tell them that your particular stock moves up may move down. 

So, the portfolio manager in writing may think about executing certain trades in the direction of sales from the investment banks. That is how the sales team works. Between the sales, guys are also responsible for constant communication between the research analyst and the trader from the investment bank. 

Hence, as we said, a research analyst prepares the research report and buy-sell recommendation; the sales staff hear those recommendations and talk to the portfolio managers. If there is a $10 million or $20 million to execute the trade, the sales staff passes this trade to the traders from the investment banks, so this is a trading division.

Let us see how trading functions. Now, what is the objective of trading essentially? As we said earlier, traders need to execute the trade that is buying or selling the securities on behalf of institutional clients and ensure that the execution price is minimal. So, they are the ones who constantly look at the price charts minute by minute. They use Bloomberg terminals and execute those executions on the trading terminals. Then, they trade on behalf of their institutional clients. Many traders are sector experts, some specializing in technology stocks, or others may be FMCG, pharma, etc. Overall, it is the sales and trading job. Traders find the minimum execution price for the institutional investors. 

As we said earlier, traders need to execute the trade that is buying or selling the securities on behalf of institutional clients and ensure that the execution price is minimal. Let us see how trading functions. Now, what is the objective of trading essentially? As we said earlier, traders need to execute the trade, buying or selling the securities on behalf of institutional clients, and ensure that the execution price is minimal. So, they are the ones who constantly look at the price charts minute by minute. They use Bloomberg terminals and execute those executions on the trading terminals. Then, they trade on behalf of their institutional clients. Many traders are sector experts, some specializing in technology stocks. In contrast, others may be FMCG, pharma, etc. Overall, it is the sales and trading job. Traders find the minimum execution price for institutional investors.

To build a career in the sales and trading department of investment banking, one must have excellent analytical skills and trading experience, the ability to work under pressure, experience in banking and finance (preferred), a strong understanding of the industry or company, the assets of which traders would be dealing with.

The department of Sales and Trading in investment banking offers huge job opportunities to individuals aspiring to build a career in finance. Starting from an intern to executive and management levels, aspirants get a chance to join and grow in the sales and trading department of investment banking.

Some of the job roles that this department offers to finance career aspirants include the following:

1. Intern: The interns are expected to prepare presentations for clients, prepare financial reports and models, and offer support to sales and trading activities. It is an opportunity to understand how the sales and trading department of investment baking works.
2. Analyst: While the sales analysts remain on a call with clients for pitching and giving market updates to them, the trading analysts prepare records of trading activities and assess the market from time to time, documenting important instances.
3. Associate: A sales associate is one who builds relationship and ensure trade bookings. On the contrary, trading associates maintain the relationships and perform market making.
4. Vice President: This person is the one who builds relationships with large investors, becoming a relationship manager for investment banking firms. When it comes to trading, they are the ones who take care of the risks associated with trading activities.
5. Managing Director: An MD manages the sales team and the trading desk as applicable. They are those who oversee larger trading activities, bigger deals, and riskier trades.

While the average salary of a sales and trading analyst is $104,477 in the United States in 2023, the same for a sales and trading associate ranges from $118,750 to $140,000. On the other hand, the average salaries of the vice president and managing director reach a considerable high of approximately $186,311 in a year and $350,000 a year, respectively.

The following tips can be useful for individuals looking for a job in the sales and trading department of investment banks:

• Establish A Network: Creating a network with experienced professionals working in reputed investment banks can help one increase exposure to relevant job or internship opportunities.. 
• Request For Interviews: Individuals can leverage their network and request people for informational interviews. Such interviews can strengthen connections with experienced people who hold influential positions in top organizations. At the same time, they can help individuals get useful information that can help improve their career prospects.
• Stay Up-to-Date: The last tip in this list is to remain up-to-date. For this, one needs to carry out thorough research concerning financial markets on a regular basis. Also, they must stay updated regarding the latest news that impacts the markets.
• Obtain Certifications: Individuals may consider completing courses that come with a certificate, for example, the Investment Banking Mastery Program. This course is created by an industry expert who has trained more than 100,000 learners worldwide. All key investment banking concepts and techniques are explained with the help of examples that help you develop practical knowledge. You can complete this course at your own pace and get certified, enhancing your resume. This, in turn, can help boost career growth. 

Let us understand the concept better with the help of this sales and trading in investment banking example.

Suppose Sam joined as an intern in the sales and trading department of XYZ Company, an investment bank headquartered in the United States. As part of the responsibilities, Sam had to prepare presentations for clients. Additionally, he had to create financial reports, models, and conduct market research and analysis.

After working as an intern for 6 months, XYZ hired Sam as an analyst based on his impressive performance. The new position requires him to get on calls with multiple clients and provide them with key information. Moreover, he has to maintain records concerning trading activities and evaluate the changes taking place in the market on a regular basis.

In investment banking, the sales and trading functions are subject to continuous evolution on account of technological advancements, changing market dynamics, and regulatory changes. According to experts, the future and challenges associated with the two core functions will be linked to these key aspects only. Let us understand better via the following pointers:

• Regulatory Environment: Considering that compliance has become a key focus area for investment banks, professionals in the sales and trading department need to develop the necessary skills to handle the growing complexity concerning operations efficiently.
• Changing Client Requirements: Considering the growing demand for customized, complex solutions and services, professionals must enhance their capabilities. Or else, they will fail to provide their clients with strategic insights that can fulfil their needs.
• Technological Effect: Algorithmic trading, as well as automation, are proving to be game-changers for the investment banking space. With computers performing several trading tasks that are routine in nature, professionals must adapt and focus on enhancing skills associated with higher-value tasks that involve utilizing creativity and human judgment.
• Market Evolution: With new products emerging, for example, cryptocurrency-related assets and complex derivatives, individuals require new skills to achieve success. In addition, the increasing dependence on data for decision-making is making it crucial for professionals within the industry to acquire new skills. 

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