Financial trader
Financial traders buy and sell shares, bonds and assets for investors, including individuals and banks. They make prices and execute trades, seeking to maximise assets or minimise financial risk.
There are three types of trader: proprietary, flow (market) and sales. Flow traders buy and sell products on the financial markets for the bank's clients. Products include securities and other assets such as futures, options and commodities. Proprietary traders trade on behalf of the bank itself. Sales traders take instructions directly from clients, placing orders and advising them on market developments and new financial ventures. They are intermediaries between the client and the market maker.
Their aim is to buy low and sell high. They do this by analysing economic data, technical analysis, experience, cross-asset correlations and identifying undervalued and overvalued prices.
While there are many similarities in the work of flow and proprietary traders and those working in sales, their roles differ substantially. The main difference is risk - sales traders don't take risk while flow/proprietary traders take risks seeking reward.
Flow and proprietary traders focus on executing trades at the right price. Traders sit at workstations in a dealing room, tracking market movements. Markets can move rapidly and trading can be hectic. The role combines speaking with colleagues, making phone calls and making instant decisions. Traders in this area must be alert and ready to make decisions based on the smallest movements in the market. They react to a change in parameters and constituents that is not already implied by the current market price.
The price should reflect the intrinsic value of the asset, which can change at any second for multiple reasons. Their decisions are informed by in-depth market reports provided by their firm's investment analysts and by sales traders, as well as streamed market news from agencies such as Bloomberg and Reuters .
Traders also use their own technical analysis. Much of the job is based on independent thinking. Independent thought, especially in proprietary trading, adds value to any team. During the first year the trainee performs relatively menial tasks such as data analysis and administrative duties before being trusted to be responsible for the firm's money.
The typical work activities of a flow or proprietary trader include:
Traders in sales are more focused on the relationships with clients - analysing, exploring and marketing new financial offers that they believe will be attractive to their clients. They work closely with the other traders, providing them with information on their products.
The typical work activities of a sales trader include:
Although this area of work is open to all graduates, a degree in the following subjects may increase your chances:
Entry standards are high, usually requiring a minimum 2:1 degree, and the selection process is demanding. An assessment may include interviews and psychometric tests, sometimes all in one day. Foreign language skills are an advantage as banks gear themselves up for growth, not just in Europe but also in Asia and Latin America.
Entry without a degree or HND is difficult, although it may be possible to enter the industry in administrative roles, make contacts and eventually move into trader positions.
Pre-entry experience is not needed but vacation work/internships/placements give a marked advantage. The large number of lay-offs during the recession has affected the graduate labour market so that it becomes even more important to secure an internship.
Candidates need to show evidence of the following:
Networking and following up contacts can pay off. Check with your university careers service for a list of past students entering the industry who are happy to be contacted. Ask your family, friends, and associates to see if anyone can put you in touch with someone working in the field.
Competition for entry is intense. Generally, vacancies are limited and the entry standards are consistently high. Do not wait for jobs to be advertised - write speculative applications, expressing your interest and your suitability should a post arise, and enclose an informative, targeted CV. Be prepared to make a large number of well-researched and carefully thought out applications and be persistent. You must be able to promote yourself effectively and give evidence of the reasons you think you will be successful in this career. Read the financial press, attend presentations and do thorough research about potential employers and the opportunities they offer.
Major investment banks recruit graduate trainees and also offer internships or work experience, often on an annual basis. Closing dates are normally in late October and early November for opportunities starting in the following summer or autumn. Banks may start to fill positions once applications open so you are strongly advised to apply early.
For more information, see work experience and internships and search courses and research.
Comprehensive on-the-job training is provided from day one and is often organised on a rotational desk basis. This usually consists of shadowing a more senior trader, watching and listening to what is going on and learning the trading language (how to phrase questions and trades).
This training is supplemented by lectures, seminars and conferences. If traders are specialising in a product for a specific country, language training is frequently provided.
Before traders conduct any business, they must qualify to be placed on the stock exchange’s list of people who are eligible to trade. You are required to become an approved person by the Financial Services Authority (FSA) .
The Chartered Institute for Securities & Investment (CISI) offers relevant FSA-approved qualifications for traders. The SII Certificates programme consists of a regulatory unit and a specialised technical unit. Traders often have to take the exams relevant to other European exchanges. Those choosing to do further study often go on to the Chartered Financial Analyst (CFA) programmes at the CFA Institute .
Most firms pay for examinations, but individuals are expected to contribute a lot of self-study time. Graduate trainees are expected to learn quickly from other traders when starting out and need to be prepared to take on some menial tasks in the early days to assist their traders.
Generally, new graduates should expect to be considered as 'trainees' for the first two years. However, after that time it is likely that they will move up to the next level, provided their performance is satisfactory. Once operational, traders who have completed their SII Certificates (Chartered Institute for Securities & Investment (CISI) ) may take the SII Diploma or more often the Chartered Financial Analyst programmes from the CFA Institute .
Although different banks have different job titles, promotion is generally structured in the following way:
It would be normal for traders to reach associate level about two to three years after their graduation. After associate level, the numbers able to reach executive director level are significantly lower. If you have proved yourself after about five years, it is usual to be given responsibility for a small team, possibly two or three small teams, and then to head up a new desk trading a new product or in a new country.
Regular moves between banks are possible at all levels, although such moves are more common from associate level and above. As many trading banks are international, there are opportunities to work in other locations and countries.
Most traders work in the City, which describes the UK financial services sector rather than a physical place. The City is made up of a number of financial institutions involved in banking, asset management, insurance, and services to business. Major institutions include the Financial Services Authority (FSA) , The Bank of England , Lloyd's of London and a number of market institutions, such as the London Stock Exchange (LSE) , IntercontinentalExchange (ICE) and The London Metal Exchange . In addition to this, there are thousands of firms, which include insurance companies, investment houses and financial advisers.
The vast majority of traders are employed by investment banks. An investment bank is usually a financial house whose role is to finance the trading and commercial activities of others and themselves. In the UK, these financial houses were known as merchant banks, but this term is not so commonly used today. The major investment banks have offices in financial centres throughout the world.
Investment banks have a high profile in the City and recruit significant numbers of graduates during peaks in the economic cycle. There is keen competition between the investment banks and selection is equally rigorous.
Specialist investment management firms employ a small number of traders. Treasury departments of very large companies may also employ a few traders, but this is less common.
Most vacancies are filled via specialist recruitment agencies, by word of mouth and through speculative applications.
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