Life as a Rates Trader v1
Even though I am not yet a trader, I get, and ask, a fair amount of questions about this topic and so I thought I should put up some initial observations. I fully expect a fair amount of the following to be wrong – some factually wrong, some conditionally wrong, others correct but misleading. I hope to be able to correct my own observations if in future I do end up as one.
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- Resources – the sheer amount of resources available to you is like no other civilian, non-managerial job on earth. Quants and IT folks. The trading screens. The connections to data sources. The sell-side research. After a while you kind of take it for granted but, coming through the places I have worked, I never fail to remain slightly in awe of the responsibility this entails.
- Professionalism – You have to know your shit. If that takes learning the details of several intricate computer systems for pricing, or working through option and interest rate derivative mathematics, or looking for long term economic data, down to knowing your counterparties and keeping up to date with newsflow, there is no excuse for you not knowing what you have to know to do your job well. Same goes for internal and external counterparts – and you have the full right to yell at the other guy if he is screwing up (and they you).
- Skillset – Linked to the professionalism piece is the skillset involved. You don’t have to be a nice person, though it helps. You just have to make money. You don’t have to be a good salesman, though it helps. You just have to make money. You don’t have to be good at office politics, though it helps. You just have to make money.
- Everything that helps make money counts towards professionalism – identifying mispricings, cutting losses, providing quotes to salespeople, taking bets with the odds in your favor. Programming isn’t essential though it will make your life a lot easier if you can do it. An interest in global economic affairs, with a tolerance for governmental bullcrap and unexpected events that seem inevitable in hindsight, is a must. To be a valued part of the team, one also needs to contribute and defend unconventional ideas. That goes for any job; however in this one those ideas do have one solid metric for evaluation and you get feedback essentially instantly.
- Hours -People talk about traders who having ridiculously short hours, but I am discovering that this is a myth. What is true is that you can have short hours if you want to; unfortunately if you do that you may not do well or have the job much longer. Having good ideas means putting in the time and elbow grease to do the research, and you don’t get to do that during market hours. Behold the late-night trader working away on Excel with his Bloomberg and Reuters feeds blipping away trying to get an edge up before the next day starts. However this is entirely a quality-not-quantity rule and if you have your best thoughts while inebriated then the local bar (we have three) is your oyster.
- Benefit to Society – A common criticism about people in finance, and more so traders who will aggressively short your house and rub his hands with glee when you get foreclosed on. Let’s not pretend – there are no direct benefits to society. One man’s loss is another man’s profit – in a narrow sense it is very much zero sum. But let’s also not foolishly ignore the secondary benefits to society. Countertrend trading – true risk taking – reduces financial and economic volatility. Carry-based trading helps transmit monetary policy. The “holier-than-thou” approach from people outside finance, who often themselves don’t do a great deal for society, is not very constructive.
- Gender, Race Balance - I count only two female traders out of about 30ish. The racial split is almost boring – g10 done by white or raised-in-majority-white-countries guys, each emerging market done by two to three people from those markets. So really there are only two to three spots for a trader per bank given where the trader comes from. So once the trader holes up there, it is difficult to get another guy in unless someone leaves. I don’t think there’s a concept of “spare capacity” as the job of a trader is for most purposes infinitely scalable.
to be continued.
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