January 30, 2013
The following article is an outcome of our interaction with Mr. Jatin Grover and Mr. Atul Kumar, both of whom have a rich experience in the world of finance.
Mr. Jatin Grover holds B.Tech. in Instrumentation and Control Engg. from NSIT, Delhi and MBA from NITIE, Mumbai. He has been working with the Equity Derivatives trading desk at PNB Paribas, Hong Kong for almost a year. Jatin has also worked for Barclays Capital as a Fixed Income/Commodities Analyst and Equity Derivatives Analyst at Credit Suisse, London. He also holds an FRM.
Mr. Atul Kumar is a B.Tech from IIT, Kharagpur and MBA from IIM, Indore. He is currently running his own financial training company EduPristine. Before launching EduPristine, Atul worked with private equity investment arm of Reliance Capital. Atul has also worked with the India’s largest treasury at State Bank of India (SBI).
We had a good discussion on the job profile of a trader at an I-Bank. I thank both Atul and Jatin for the insight provided. Hope you will find the information extremely useful.
The day generally begins just before the opening of the markets at around 8:00 am to 8:30 am (depending on the firm) and ends a few hours after the markets close i.e. around 5:30 pm to 6:30 pm. The work basically involves trading the securities (mainly derivatives and fixed income securities and a small volume of equities and exotics). The traders work in close contact with the research department of the firm which suggests the traders which securities they should buy and which they should sell. During the market hours you will be extremely busy.
All merchant banks like Goldman Sachs, Lehmann Brothers, Deutsche Bank, PNB Paribas etc. As well as several derivatives trading companies like the Futures First.
Goldman Sachs are considered the top employer.
The firms hire people with strong analytical ability as traders. The people with undergraduate degree from a top school as well as MBA graduates (again preference for top B-school grads) are considered equally suitable. You should have a knack for solving toughest of puzzles and mammoth calculations in a split second. The interviewers specifically want to assess how quickly you can pick up the trends. International certifications in finance (specially CFA Program) greatly helps in improving your chances of making the cut.
Another important factor that the interviewers test is your risk taking ability. You are generally put into a situation where your returns depend on the risk you take and the interviewers look forward to a response that has the right combination of risk versus return. Thus., if you are too risk averse or extremely aggressive and uncalculated risk taker be assured of rejection.
The candidate should be able to convince the interviewer that he is strongly inclined to work as trader (this is important since the companies spend a lot of resources on traders in their initial years and don’t want them to leave after just a couple of years) and should know in great detail about the company he is applying for and why he wants to work for that particular company and what sets the company apart from its rivals.
An intern with an investment bank greatly improves your chances (some banks like the Goldman Sachs don’t even consider you if you have not done an internship with them). The route majority people follow is through a PPO during the summer internship.
Another important aspect an interviewer looks for is Ethics. Since you will be required to trade with the firm’s money, the firm wants to make sure that you are not one of those who will launder the money.
But still becoming a trader is largely a luck game. There can be cases where even after working for several years in the industry and having supreme qualifications and extreme analytical abaility you may not be able to become a trader and somebody with much lesser or comparable qualifications and experience gets the opportunity.
Typical salary for a trader is generally around 8-10 lakhs but there are bonuses of as large as 10-12% of the profits earned thus the actual salary is way higher.
You can be pretty sure of your working hours unlike the people working in M&A division or the research division etc. You are not required to travel so much as the people in M&A and Consulting need to.
You would see that people of Asian origin get paid almost one-third the amount their European and American counterparts get.
The bonuses are linked to the market performance so if the markets are bearish then you obviously make much less money than you do when they are bullish. Moreover, the job security too is linked to the markets and a lot of people get fired during a recession. Typically, you may be fired without any prior notice, giving you just about 15 minutes to pack your belongings and say goodbye to your colleagues. And more importantly, once fired it is almost impossible to be able to find work anywhere else (but then within a few years you make enough money to survive comfortably for several more years).
The career generally begins as a junior trader where you learn the skills on the job. After a few years (typically 5-6 years) you become a senior trader. During the boom time, there are enough opportunities to switch companies (obviously with increasing salary), though not during the recessions.
Typically, there is a high burnout rate and the traders generally retire quite early (at around 40-45 years).