Sales and trading professionals work at a variety of employers—from large “bulge bracket” investment banks and regional firms, to wholesalers and hedge funds.
Full-service bulge bracket investment banks usually provide both financing and advisory services, as well as the sales, market making, and research on a wide range of financial products including equities, currency, commodities, credit, rates, and financial derivatives. It’s very common for one bulge bracket bank to be competitive in investment banking, commercial banking, asset management, private equity, venture capital, mortgage finance, and more. Leading investment banks (by revenue) worldwide include JPMorgan Chase, Goldman Sachs, BofA Securities, Morgan Stanley, Citi, Credit Suisse, Barclays, Deutsche Bank, Wells Fargo Securities, and Jeffries LLC.
Most investment banks have a financial holding company structure, which serves as a shell corporation that issues common stock, the bank’s equity capital, financing the bank’s activities. The bank’s equity capital also serves as a financial backup in the event of any write-offs from bad loans or investments.
Boutique firms tend to service one type of customer very well, or are very good at one type of transaction. Specialty firms focus their expertise on covering one or several market sectors, and can be thought of as mini-investment banks with a sales desk to support the trading effort, and investment bankers trying to nab the big deal away from the larger firms on the basis that the firm offers specialized service and expertise in a particular market niche. Boutiques and specialty firms include Allen & Co., Ladenburg Thalmann, Neuberger Berman, Miller Tabak + Co., Sanders Morris Harris, Jefferies Financial Group, Piper Sandler, Cowen, and Baird.
Some firms swim in small ponds and pick up the business that the New York City junkyard dogs overlook. These firms can be good alternatives for those who either are unable to land a position at a bulge-bracket firm initially, or who wish to live outside NYC. In some cases, specialty regional firms focus on one sector of the market that happens to be geographically concentrated in one region. Regional firms include Trustist Securities; Wedbush Securities; KeyCorp (KeyBanc Capital Markets); Harris Williams & Co.; B. Riley FBR; Raymond James; and Janney Montgomery Scott.
These are typically floor-trading positions on regional or secondary exchanges. Options trading is a very entrepreneurial business—all it takes is a seat on the exchange, a willing trader, and a financial sponsor. The more developed a firm becomes, the more it is able to invest in a sales organization to solicit order flow. Firms in this category include Susquehanna Investment Group, O’Connor & Co., and Group One Trading.
These firms are low-cost traders of large volumes of over-the-counter (OTC) securities. Wholesalers are, as their name implies, firms that specialize in trading OTC equities at low cost. These firms typically have a sales organization to support the firm’s traders, but there is not much of a commitment to investment banking relationships. They make their profits by trading large volumes to make up for the lower commissions. Wholesalers include Charles Schwab & Co. and Pershing (owned by The Bank of New York Mellon).
On the buy side, hedge funds are a major employer of sales and trading professionals. They are typically organized as legal entities onshore (United States) or offshore (Caribbean or other tax havens). The onshore entity is structured as a limited partnership. It has a general partner and limited partners. The general partner can be an entity or individuals, and in most circumstances is the fund manager, who may or may not have a portion of personal assets invested in the fund. The limited partners have limited liability depending on how much is invested in the partnership. General partners have unlimited liability since they have accepted legal responsibility for the actions of the hedge fund. This means that they could be subject to lawsuits. An offshore entity is typically organized as a corporation or other investment company form (limited liability company or limited company) in tax havens such as the Cayman Islands, Jersey, Bahamas, Bermuda, and the British Virgin Islands. There is no general partner, and the fund is overseen by a management company. Investors in offshore funds are typically non-U.S. residents because of the tax implications of this legal structure. Leading hedge funds by assets under management include Bridgewater Associates, Renaissance Technologies, Man Group, AQR Capital Management, Two Sigma, Millennium Management, Elliott Management, BlackRock, Citadel and Davidson Kempner Capital Mgmt.