1. What Is Equity Sales Trading

Pascal Lauener/Reuters Jamie Dimon, the chief of JPMorgan Chase, defended bank transparency at the World Economic Forum in the Swiss resort of Davos.Traders at the top Wall Street firms racked up nearly $80 billion of revenue last year. But understanding how they produced all that money is far from simple.The financial crisis revealed the dangers of banks having murky balance sheets. And some investors think banks’ disclosures are still inadequate. “The major financial institutions in the U.S. And around the globe are utterly opaque,” Paul Singer, the founder of a large hedge fund called Elliott Management, said last year.At a conference this week, Mr.

Singer clashed with, chief executive of, over the subject of bank transparency. In the exchange, Mr. Dimon said hedge funds were hardly transparent and added that JPMorgan’s annual report was 400 pages long.Trading results are good place to start when assessing whether banks release sufficient information.At large banks, sales and trading is a major source of revenue, often dwarfing the fees that they earn from arranging deals or managing other people’s money. For instance, had sales and trading revenue of $18 billion last year, compared with $5 billion from activities like advising on mergers and handling initial public offerings.Shareholders benefit from good disclosures because they can better assess what value to place on a bank’s business.

Trading revenue is not only large – it can also be extremely volatile, bolstering profits one quarter, then hurting them the next. With the right data, investors can do a better job of identifying what drives revenue up and down.Another dynamic effects trading these days: regulation. Revenue from trading could decline as new rules stamp out certain types of bets. Tougher capital rules could also make the trading that is allowed more costly for the banks.When it comes to sales and trading, Wall Street firms have differing levels of disclosure.’s investment bank, which contains some operations, arguably has the clearest breakdown of what goes into its trading revenue.Like all big Wall Street firms, Bank of America says that the vast majority of its trading relates to servicing clients who want to trade in and out of stocks, bonds and derivatives. To facilitate the activity, banks keep such financial assets on their balance sheets to meet customer orders.Each quarter, Bank of America provides the main contributors to trading revenue in a reasonably easy-to-read format.The most recent disclosure shows Bank of America’s traders booked revenue of $11.8 billion in 2012. Of that, $3.3 billion came from net interest income, which is the interest and other income earned on the securities that Bank of America holds for market-making, minus the bank’s cost of financing those positions. The revenue also included $1.8 billion from commissions and fees.The largest contributor in this area is called “trading,” which was responsible for $5.7 billion of revenue last year.

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For the sake of clarity and consistency, it makes sense to relabel this type of revenue “market-making.” That’s because it mainly represents the gain Bank of America makes when it buys securities and sells them on to clients at a higher price.It also includes any gains or losses that occur when the bank marks up or reduces the value of the trading assets that it holds on its balance sheet.

The interview is meant to test for finance knowledge, market interest and ability to handle stress. For sales, interpersonal skills and the ability to communicate why a trade makes sense to a client is important. For trading, being calm and remaining rational is key. Contents.Behavioural Interview QuestionsThe trading floor is an intense work environment and S&T professionals need to be sure that a candidate can be trusted to do work effectively and is reasonably intelligent. Sales, trading and structuring demand different personalities.Everyone has to be smart (with sales leaning more towards EQ, but sales teams stress as a means of bolstering credibility), but salespeople have to be good communicators with an understanding of markets while traders will need to convey they have well-reasoned views and are calm under stressful situations. Structurers are expected to be more cerebral.Getting the right person is more important for S&T than it is for investment banking, as investment banking has several checks and balances along the way that make it difficult for a junior team member to directly lose money for the team. In S&T, one incorrect trade ticket and a bank can lose money in the millions.On the trading floor, you always need to have a view.Why are you interested in finance?This needs to convey an interest in markets and what drives your interest.Why should we hire you?This is a rehash of the 3 strengths question.

You should outline your three answers A, B and C before going into supporting statements. Anything that supports a passion in finance should be discussed in your answer (e.g.

Trading and sales is possibly the area of investment banking you've heard most about. Traders and sales professionals are the front office revenue engines of. Sales and Trading (S&T) is a group at an investment bank that consists of salespeople, who call institutional investors with ideas and opportunities, and traders, who execute orders and advise clients on entering and exiting financial positions.

You follow financial news, you have a personal portfolio, you were in an investing club etc.). Keep in mind that anything mentioned may be tested.What do you do for fun?Extracurricular activities is a common way for interviewers to judge fit. If you do not do anything outside of academics, you should find a hobby/sport as soon as possible – team sports are especially valued. This is especially important for the trading floor.Walk me through.Explain how your work and educational experience have progressively led you to this role in 30 seconds in a structured manner.and was in the Western Investing Club and was on the Dean’s Honour List taking courses ABC.

I worked at Deutsche last year in Equity Derivatives Trading where I did XYZ including work a turret and memorize everyone’s coffee in various permutations (2 creams 1 sugar, 2 creams 2 sugars, cinnamon and lemon) and I read all of Warren Buffett’s shareholder letters in my spare time and have no friends.Why did you not get a sales/trading position out of school?You need to prepare a valid reason for not getting a sales/trading role straight out of university. Spinning an interesting narrative could give you an advantage over the conventional candidate. If this group rejected you before, that strategy does not work and you have to show your hunger in coming back.There was a great opportunity to do something in an industry I was interested in. However, I found that I enjoyed the most and as I am interested in (sales/trading) outside of work and liked the material in the CFA.Why did you choose to go to your university?If you went to one of the target schools, you should be in good shape for this question. Otherwise, you need to justify your choice and persuade the interviewer to hire you instead of a.Why did you want to work for our firm?You should know some key facts (eg. Market cap, CEO) about the firm you’re interviewing for, a good place to start is our. Generally, each bank has a group that they’re known for, it is important to know what that is.When the CEO is particularly famous, you may be asked “What do you think about James Gorman’s leadership?” in which case you must be well equipped with some knowledge of his recent interview with Bloomberg, the Times or the New Yorker.What books have you read?Do you read books?

Well you should. It’s ok to say something unique like Capital in the Twenty-First Century that is related to industry as well as to say Battle Hymn of the Tiger Mother as long as you are willing to have an intelligent conversation about the themes and why it was of interest. Cliches are not good.

Harry Potter is not good.If you are interviewing for a specialized product, it is worthwhile to mention something in the space provided you know what it is about (if you are interviewing for commodities, The Prize by Daniel Yergin is good).What does a trader do?Review and memorize the key points in our.How risky are you?One of the most important attribute to a trader is being able to manage risk – taking on just the right amount of risk to balance profit and loss. Be ready to provide an example that demonstrates your risk assessment and management skills. Technical Interview QuestionsTechnical interviews for S&T are much less streamlined and predictable than investment banking technical questions. S&T will come with many open ended questions where the “correct” answer is one where there is a view that is supported by reasonable arguments – whether or not XYZ actually goes in that direction is irrelevant (and post-interview, regardless).Different desks will ask different questions, but the interview will usually include questions relating to that particular trading product.Having a good grasp of accounting for derivatives, when derivatives are used and what drives asset prices are key to making a good impression. Equity Markets Interview QuestionsWhat are dividends?Dividends are periodic cash payments distributed to shareholders. Both common and preferred shareholders can receive dividends, but a firm must pay preferred shareholders first before common shareholders can be paid.What are stock splits?Stock splits divide a company’s shares into fractions, usually of equal value.

This is usually done when the company’s stock price increases significantly. A split ensures that the company’s shares remain affordable and therefore liquid (anyone has the capacity to buy 1 or more shares in the company).Alternatively, when stock prices drop precipitously to become penny stocks, respectable firms will generally undergo a reverse stock split to stem volatility.What is a stock buyback/share repurchase?Stock buybacks are another way for companies to return money to its shareholders by buying back stock in the secondary market. For and equity derivatives you may be expected to know about Normal Course Issuer Bids and Substantial Issuer Bids.Tell me about a stock in your portfolio.If you mention that you have a personal portfolio, this may be a question that comes up.If you are an investor, be prepared to pitch a few stocks, and why you invested in the stocks at the time you did. If you are a trader, be prepare to outline the factors that drive your trading decisions.

Short-term investment decisions are generally more appropriate for a trading interview, and will focus on macroeconomic trends and themes.Pitch me a stock that you would buy or sell now.A variant of the “pitch me a stock” question, this requires you to with current market conditions. You should keep up with current events with the WSJ/Financial Times/Economist.You need to keep your pitch brief, as traders/salespeople have limited attention spans, the general rule is 1 minute or less.You should also be prepared for follow-up questions such as “what is your investment horizon and why?”.Pitch me three stocks.This question tests your interest and the depth of your knowledge in the stock market.

You should prepare at least 3 stock pitches prior to the interview.What are 3 significant things that happened in the markets this past week?Traders are looking for someone intellectually curious who will be engaged with the drivers behind the work. Unlike investment banking which tends to be more regional, markets and products are global and never sleep.

No matter where you are in the world, the trading floor is affected by the Federal Reserve, the price of oil and the S&P 500.As such, the WSJ and Bloomberg are going to be much more relevant than Dealbook. Knowing commodity prices and where the TSX is at is very important when interviewing for a Canadian bank.Why did the tech bubble burst? Why did the financial crisis happen?This is rarely asked on the trading floor now as people have short memories, but for nerdier quant groups, this will come up.Generally, bubbles occur when investor confidence pushes the price of the securities significantly above its fundamental value.

The tech bubble is no different. The term “Irrational Exuberance” was coined by Fed Chairman Alan Greenspan to describe this phenomenon.The sentiment behind this bubble was that the growth of companies with any online presence or loose relation would be astronomical, but a realisation that normal valuation principles still applied and that many of these companies had no feasible timeline to profit (or even revenue) resulted in markets receding. Literature suggests that a Barron’s article sparked the reversal.If you had $1 million what would you invest in?There is no single correct answer to this question. You may want to start with describing your risk tolerance based on your financial position and your expected outlay.

Then, based on the current market conditions (stock market, bond market, commodities market), allocate assets based on how far they deviate away from their fundamental levels.The main thing that the interviewer is looking for is the quality of your thought process and your ability to articulate your ideas.What if you had to invest that in a single company?Start the answer the same way you would with the previous question, and transition into a stock pitch. You may need to prepare multiple stock pitches beforehand, see our on it for more details. Capital Markets Interview QuestionsWhat is the key difference between a primary market and a secondary market?Primary markets are where stocks and bonds are issued through investment banks (this includes Initial Public Offerings and Seasoned Equity Offerings).Secondary markets are where they are subsequently traded by institutions and individuals.What is a repo?A repo (repurchase agreement) is a transaction where the seller of a security reaches an agreement to buy the security from the buyer at a later date for a predetermined price. The seller is effectively a lender, loaning the security to the buyer, the borrower.What is a reverse repo?A reverse repo is a transaction where the buyer of the security reaches an agreement to sell the security back to the seller at a later date for a predetermined price. As this is simply the other side of a repo transaction, the lending relationship is the same.If the interest rate in the U.S. Increases, how would this affect the USDCAD exchange rate?The US dollar would strengthen relative to the Canadian dollar, holding all other things constant.

What Is Equity Sales Trading

Investors will pour into a higher yielding asset assuming no significant delta in risk or expected devaluation.Empirical evidence suggests that the economy is relatively hotter as well if the central bank is raising rates. Recent Federal Reserve and Bank of Canada actions have supported this.You may segue into a discussion on purchasing power parity and expectations where you expect the Canadian dollar to appreciate instead, but do not do that.Should a company issue debt or equity under current market conditions?The decision is largely influenced by the cost of capital, which is partially determined by stock market conditions and interest rates (remember interest expense is tax deductible). Generally, the company will choose the cheaper financing option (however, there are other factors at play, eg. ).Where do you think the Canadian economy is going next year?Understanding the current trends in commodity prices (especially oil), unemployment, the stock market, and government policies (fiscal, monetary, foreign etc.) is crucial when answering this question. There is no single correct answer, but speaking articulately on all the relevant points is expected.What is the current state of interest rates?You need to know what the interest rates are in Canada and the US, and the consensus on where they’re moving towards. You also need to know who the governor of the Bank of Canada is (Stephen Poloz and his tacky suits), and who the Chair of the Federal Reserve is (Janet Yellen).You may also be expected to know who the governor of the Bank of England is (Mark Carney) due to London’s relevance in global markets and because he is Canadian. Mario Draghi is the head of the ECB.What are the objectives of the Federal Reserve?The main objectives of the Federal Reserve are identified to be “maximum employment, stable prices, and moderate long-term interest rates”.

The Fed uses various instruments of monetary policy in order to fulfil their mandate. These include:. Open Market Operations. Changing the Overnight Rate. Changing the Reserve RequirementsWhat is the difference between currency depreciation and devaluation?Depreciation occurs in a flexible exchange rate system, where the value of the domestic currency decreases relative to foreign currency.