Once the financial products have been created in the capital markets they enter the secondary market where they are bought and sold by the traders. Every day financial products worth millions of dollars are traded in the secondary markets.
Typically, the sales people advise their clients on the investment options. This advice is based on the research produced by the research wing or sourced outside. The traders carry out the trades on behalf of the clients.
The secondary market has two main categories: equities, and fixed income. Equity includes stocks while fixed income includes corporate bonds, government debt, interest rate products as well as currency. Both categories also have their own simple and complex derivative products.
As we said earlier, traders buy and sell securities using advanced systems at the click of a button. Sales people advise clients on what to buy and sell. Research people are analysts who research and produce advice reports for various asset classes.
Within the trader’s category, there are various types of traders:
- Flow traders: These traders buy and sell products on behalf of the bank’s clients. A majority of the traders are flow traders and trade on the client’s behalf.
- Proprietary traders: These are a special group of traders who trade with the bank’s own money.
- Execution traders: Execution traders are employed for pure trade execution purpose. They are employed by some banks and hedge funds and their job is to just place the trade on request from analysts and fund managers. This is more like a support function.
- Sales traders: These are a hybrid of flow traders and sales people. Sales traders will recommend products to clients and then execute the orders themselves.
The research analysts research various asset classes. For example, as a researcher, you may be researching IT stocks, or may be analyzing interest rates or foreign exchange rates. Researchers provide recommendations and/or economic outlook.
Sales people also specialize in specific asset classes as well as type of clients. They need to manage clients and meet annual goals.
Depending on the role, there are various skills that these jobs required. For example, it is very important for sales people to have good customer relation and communication skills. You need to be good at convincing clients. As a research analyst, you should have strong analytical skills. An important skill for a trader is to be quick.