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 are one of the principal investment banking functions in the country, where the investment banking team concerning sales provides clients with trading ideas.
• The traders' team conducts the activities concerning the securities purchase and sale and various financial instruments in the market for itself or on the client's behalf.
• Equity research, sales, and trading division perform crucial roles.
• The traders utilize the Bloomberg terminals, conduct the executions on the trading terminals, and then trade on the institutional client's behalf.

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.

Let us now look at how the sales and trading departments work individually within the investment banking firm:

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:

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.

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.

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.

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.

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.

This article has been a guide to what is Sales and Trading. Here, we explain the salary these professionals get, how they get into this field, and their careers & roles. If you are looking for more finance resources to have a look at, here are a few of them:

• What is Wash Trading?
• Net Sales Definition
• Position Trading
• Short Sales vs Foreclosure