The sales and trading (S&T) division within an investment bank is responsible for buying and selling investment products on behalf of the bank and its clients, which include mutual funds, hedge funds, asset managers, and corporations.
S&T primarily involves two core functions: sales and trading. Sales pitch buy and sell recommendations to clients, while traders execute these trades in the open market.
The sort of trading that S&T specializes is known as flow trading. They are to make markets on stocks, bonds, currencies, commodities, their derivatives, or other financial instruments, with funds from a client, rather than its own funds. The term "flow" in flow trading refers to the flow of orders that traders handle on behalf of their clients (institutional investors and large corporations). The primary role is to match buyers with sellers and earn commissions for the service, akin to keeping the flow of trades moving seamlessly through the markets. This type of trading has lower risk exposure since positions are often hedged or offloaded to other market participants or clients.
Contrary to popular belief, the S&T division does not engage in actively trading and managing a portfolio, as the Volcker Rule of the Dodd-Frank Wall Street Reform and Consumer Protection Act prohibits proprietary trading activities at banks due to conflicts of interest.
Typical work hours in this division range from 50 to 70 hours per week, with schedules usually spanning from 6/6:30 AM to 6 PM, depending on premarket and post-market obligations.
Trading floors are organized into an ecosystem of desks, each focused on dealing with different financial products and staffed by experts with in-depth knowledge of the specific intricacies associated with each product.
While banks may have numerous desks, major ones typically fall into specific categories: