Difference Between Sales and Trading
Sales and Trading activities are two very important jobs in investment banking. The term refers to the various activities which are associated with the buying and selling of financial instruments and securities. These types of tasks are executed by an investment bank on behalf of their clients. The task is performed by salespeople and traders, where salespeople call the institutional investors with various investment ideas and possibilities. Traders advise the clients about when to enter and exit from the financial positions and execute the same on behalf of the clients. Traders are paid on how much the profit they have generated from buying and selling instruments. If the investment banking firm is not able to trade efficiently, then it would be very difficult for the firm to create and retain the clients and generate a good amount of profit.
What are Sales?
Sales are the first and important activity in an investment banking firm. Salespeople play a vital role in the firm, where they generate an idea and various investment opportunities for the investors. When investment bank handles the issue of IPO’s they promise to sell off the minimum number of share. To meet the expectations and avoid the need to buy the part of remaining shares, salespeople play a very important role to do this job for investment banks and make sure to sell the required number of stocks successfully as committed. Salespeople also get in touch with portfolio managers and traders’ staff. To know what types of investment the traders are majorly focusing on they also develop good relationships with large investors. In some traditional broker firms, salespeople also act like traders.
What is Trading?
Trader’s main job is buying and selling securities on behalf of the investment banking firm or the client. Traders need to maximize the profits for the risk they are taking. Traders continuously watch the market and use the pricing charts on some well-known terminals like Bloomberg to execute the transactions with accuracy.
Commonly there are two types of trading, agency trading and proprietary trading. In agency trading, traders act like as an agent and in the proprietary trading, traders have the freedom to trade on behalf of banks. But proprietary traders have some limitations to take the risks set by the investment banks.
Head to Head comparison between Sales and Trading (Infographics)
Below are the top 8 differences between Sales vs Trading
Key Differences between Sales and Trading
let us discuss some of the major differences between Sales and Trading:
- Sales and Trading both are very crucial parts of investment banks. Under sales, a salesperson needs to interact with clients and sell investment ideas to them. Where traders are secondary persons and they need to execute the orders effectively.
- Under Sales, the Sales department needs to attend a meeting days before the salespersons start pitching to the clients, the meeting is called morning meeting. On the other side, traders need to spend their time in front computer screen by looking at the pricing charts on trading terminals, to execute the order with the highest accuracy.
- The sales job is very important as it is more of client-oriented work, hence salespeople need to be confident and efficient as they need to communicate with the clients over phone calls and then in personal (if required). As a trader, you need to always be attentive to your computer screen to see the pricing movements and real times researches data, and news about the financial market. Traders need to start their day in comparison to salespeople and work long hours.
- Traders are responsible to execute the trade as per the client’s need and also make sure that at a reasonable price. In sales, commission depends on the volume that is coming in, and in trading; it depends on the pricing (spread).
- Salespersons update themselves about the investment news like quarterly earnings reports or Merger and acquisition news. This helps them to update their existing clients and gain new investors with new opportunities available in the market. While, Investment banks appoint traders with a specialty in the different fields of investments like stocks, fixed income securities like bonds, commodities, and some of them are sector experts like the FMCG sector, the Technology sector, etc. Risk and Capital both manages by the traders.
Sales and Trading Comparison Table
Let’s discuss the top comparison between Sales and Trading:
|Basis for Comparison||Sales||Trading|
|Activity||Sales are a primary and important activity.||Trading is a secondary activity.|
|Key Person||In sales, the salesperson is the key person who needs to sale on behalf of the client.||In Trading, Traders are the key people who execute the transaction.|
|Coordination||Sales department needs to coordinate with the research department and trading department||The trader’s department directly needs to coordinate with the Sales department.|
|Jobs||Sales Person’s job is to introduce the clients with the new investment opportunity. They also play a very important role in underwriting||Trader’s job is to execute a buy or sell order in the secondary market.|
|Profitability||Commissions are largely determined by the volume.||Profits are determined by spread, not by volume|
|Key Requirement||Salespersons update themselves about the investment news like quarterly earnings reports or Merger and acquisition news. This helps them to update their existing clients and gain new investors with new opportunities available in the market.||Investment banks appoint traders with a specialty in the different fields of investments like stocks, fixed income securities like bonds, commodities, and some of them are sector experts like the FMCG sector, the Technology sector, etc. Risk and Capital both manages by the traders|
|Types||There are no explicit types of sales||There are two types of trading, agency trading and proprietary trading|
|Quality||salespeople need to be confident and efficient as they need to communicate with the clients over phone calls and then in person (if required).||As a trader, you need to always be attentive to your computer screen to see the pricing movements and real times researches data and news about the financial market. Traders need to start their day in comparison to salespeople and work long hours.|
As we have seen both sales and trading activities are very crucial tasks in an investment bank. In an investment banking firm sales job is the face of trading. Salespeople need to focus on volume as it will lead to more commission. Traders are more of a trading-oriented job as they need to focus on maximizing profitability using their strategies to trade. In the latter days, the trading of commodities, fixed income securities, derivatives has been booming in comparison to equity trading because of technological advancement in trading software and terminals. Both sales and trading play an important role in the profitability of the bank.
This has been a guide to Sales and Trading. Here we have discussed the Sales and Trading key differences with infographics and comparison table. You can also go through our other suggested articles to learn more –