Sales Traders: Less Numerous, More Sophisticated
Sales traders are becoming less numerous within bulge-bracket equity desks, and their role is changing. But they're far from an endangered species.
As automated trading platforms give the buy side more options for controlling orders, "the traditional role of an equity sales trader is clearly undergoing a transformation," says John Giesea, president and chief executive of the Security Traders Association. "The number of sales traders in aggregate appears to be shrinking, by virtue of less demand for the traditional role of the sales trader."
As the title implies, a sales trader is part salesperson, part trader. Historically, their work involved staying up to the minute on each stock that each customer traded or owned, keeping the customer informed, and using their knowledge to obtain the best possible prices for each order. The role developed as a means for sell-side firms to provide a high level of service to institutional accounts, rather than simply act as order-takers.
Today, the formerly separate roles of research sales, trader and sales trader are being blurred as automated trading and shrinking commissions force equity trading desks to cut costs. As a result, sell-side headcounts are shrinking, and sales traders appear to be bearing the brunt.
"I had literally 10 times as many assignments looking for institutional sales people as looking for sales traders," says Edward Storm of Comprehensive Recruiting. "Every firm on the sell side is looking at adding high-quality sales people to its institutional sales team. But it's not the same any more for sales traders."
More Demanding and More Technological
"Sales trading and trading are being blended together, and by the nature of that blend, somebody loses," says Will Geyer, president of JonesTrading Institutional Services LLC, a nationwide execution-only equity trading firm headquartered in Westlake Village, Calif.
The work of remaining sales traders has grown more both demanding and more technological. Not only does today's sales trader typically cover three to four times as many stocks as a decade ago, he or she must also follow related asset markets, such as options, that can affect trading in individual stocks and the overall market.
"The level of expertise has to rise, to provide that value to the buy-side," says Giesea. "The skill set is significantly enhanced compared to what the job description was a few years ago. It's much more three-dimensional than I think it was historically."
On the technology side, sales traders now instruct institutional customers in the fine points of a multitude of electronic trading platforms that compete for their business. "Many bulge-bracket firms are taking on a consultative role, helping buy-side customers choose algorithms," Wall Street & Technology wrote in a 2005 article that heralded the rebirth of traders as "execution consultants."
Where the Jobs Are
Meanwhile, opportunities for sales traders who possess both the new and traditional skills continue within boutique "high-touch" execution firms, including JonesTrading and Greenwich, Conn.-based Weeden & Co.
"We're aggressively hiring," says JonesTrading's Geyer. "We're looking for experienced sales traders, that have proven value to their customers." The 32-year old firm has 11 offices across the U.S. and currently employs 165 people, including 80 traders.
Larger sell-side firms moved away from the traditional labor-intensive customer service model "because it doesn't scale well" with current technology and economics, Geyer says. That pullback leaves an opportunity for niche players who focus on "high-touch, high-effort trading." For instance, JonesTrading's Web site says its sales traders "come to each trade with the pulse of the market, using their insights to actively source liquidity and take trades to the tape."
As of Dec. 17, eFinancialCareers shows 15 job postings that include the phrase, "sales trader." The openings typically call for several years' experience, a proven book of business that can be brought to the new employer, and regulatory licenses such as Series, 7, 55 and 63. Sales traders may be paid either a salary plus bonus, or a draw plus percentage of the commissions they generate, often accompanied by a minimum guarantee.
Recruiter AC Lion says its clients - who include bulge brackets, Tier II and boutiques - have several openings in New York, Boston and London. Top performers can attain two-year guaranteed contracts worth upwards of $2 million a year in cash and stock, AC Lion's ad says. Analytic Recruiting is advertising for a senior equity sales trader in New York who "is very familiar with the institutional trading community and has current responsibility for sales coverage of several active and transferable buy side relationships."