Sales and trading desks explained: rates, credit, equities, FX

What does each sales and trading desk trade?

Every desk does the same basic job, which is to quote prices to institutional clients and manage the position that is left after a trade, but the product changes the rhythm, the math, and the clients. Banks group rates, credit, FX, and commodities together as FICC (fixed income, currencies, and commodities), and run equities as a separate division.

The names below are the standard ones. A given bank may split them further (emerging markets, securitized products, inflation) or merge them, so read the desk list on the bank's own student page before an interview.

• Rates: government bonds, interest rate swaps, and options on rates. Driven by central banks, inflation, and growth data. Very large, very liquid, very macro.
• Credit: corporate bonds, high yield, leveraged loans, credit default swaps. Driven by company fundamentals and the default cycle. Closer to equity analysis than people expect.
• Securitized products: mortgage and asset-backed bonds. Heavy on modeling of prepayment and default. Often sits inside credit.
• Equities: cash stocks, program trading, equity derivatives, and prime brokerage for hedge funds. Driven by earnings, flows, and volatility.
• FX: spot currencies, forwards, and FX options. Trades around the clock across time zones and moves on rates, trade, and politics.
• Commodities: oil, gas, power, metals, and agricultural products, often for producers and consumers hedging physical exposure.

Which S&T programs are open right now?

The table below is read from each bank's own careers site. Open means we saw the live posting there, Expected means last cycle's public record says it is coming, and No data yet means neither is true. Most banks hire S&T summer analysts as generalists and place them on a desk later, so the program you apply to is usually the division, not the desk.

How does a trading desk make money?

A flow desk earns mostly from the spread between where it buys and where it sells, plus fees on larger or more complex trades. The trader's skill is pricing that spread well and then holding or hedging the leftover risk without giving the spread back.

A worked example, with round numbers: a client wants to sell $10 million face value of a corporate bond. The bond's mid price is 99.60. The trader bids 99.50. If the trader later sells the bond at 99.60, the desk earns 0.10 points on $10 million of face value, which is $10,000. If the market drops a point before the trader sells, the desk loses $100,000 instead. That gap is why risk management matters as much as the quote.

Each desk measures risk in its own units, and knowing the unit is a quick way to sound like you have read about the desk.

• Rates: DV01, the dollar change for a one basis point move in yield. A $10 million bond position near par with a duration of about 9 years has a DV01 of roughly $9,000 (10,000,000 x 9 x 0.0001).
• Credit: spread duration and CS01, the dollar change for a one basis point move in the credit spread.
• Equities: delta (exposure to the stock price) and, on derivatives desks, vega (exposure to volatility).
• FX: the dollar value of each currency position, and pips, the fourth decimal place of most currency quotes.
• Commodities: exposure by contract month, because next month's oil and next winter's oil are different trades.

What is the difference between flow and exotics?

Flow desks trade standard, liquid products in size: government bonds, plain swaps, spot FX, cash equities. The work is fast, the margins per trade are thin, and the edge comes from pricing and managing inventory well.

Exotics or structured desks trade custom products built for a specific client, such as a note that pays out based on a basket of stocks. Margins per trade are wider, trades are fewer, and the math is heavier. If you love options theory and stochastic calculus, you will hear about exotics desks. If you love speed and the tape, flow.

Which desk fits which kind of person?

There is no best desk, and the people who do well pick for temperament, not for which desk had the biggest year. Use these as a first sort, then test them on calls with people who sit there.

• You follow central banks and macro data for fun: rates or FX.
• You like reading companies' financials and arguing about whether they can pay their debt: credit.
• You like stocks, earnings, and lots of client contact: equities, especially cash or program trading.
• You like options math and volatility: equity derivatives or rates options.
• You like physical markets, weather, and supply chains: commodities.
• You want the most quantitative seat and are strong at modeling: securitized products or exotics.

How should you prepare to talk about desks in an interview?

Interviewers will ask which desk you want and why. A specific answer, tied to something you actually follow, beats a vague one every time, and you are allowed to change your mind later. Do this in the month before your first round.

1. Pick two desks you would honestly take, one primary and one backup.
2. For each, learn the main products, who the clients are, and the unit the desk measures risk in.
3. Follow one live story for each desk every morning: the latest central bank decision for rates, a recent bond deal for credit, a big earnings move for equities.
4. Have a one minute view on each story: what happened, why, and what you would do.
5. Ask on every networking call what the person's desk is like day to day, and log the answers so you can quote them.

Questions students ask

Do I pick my desk when I apply to S&T?

Usually not. Most banks hire summer analysts into the division and place them on a desk during or after the summer. Some applications ask which desks interest you, so have an answer ready.

Is FICC or equities better for a first job?

Neither is better in general. FICC is bigger at most banks and more macro. Equities has more client contact on the cash side and more math on the derivatives side. Pick the one whose markets you already read about.

Do I need to know options pricing for an S&T interview?

Know the basics: what a call and a put are, what moves their price, and what delta means. Derivatives desks will go deeper, and quant-leaning desks may ask about volatility.

What is the difference between a market maker and a hedge fund trader?

A bank's market maker earns from serving clients and managing the risk that comes with it. A hedge fund trader takes positions for the fund's own returns. The skills overlap, the incentives do not.

Which desk has the best hours?

Hours track market hours more than the desk. FX can start early for European markets, and commodities can follow overseas sessions, but most seats end near the US close.