The Sell Side

Sales and Marketing

 

The salespeople are in charge of selling structured products to existing or new clients.

They get commission for the transactions they settle. 

This remuneration depends on:

- the number of deals

- the size of the deals

- the nature of the deals

 

Before issuing a SP, salespeople will spend time with potential buyers explaining the payoff mechanism and potential return.

Salespeople use different marketing methods to explain a product and emphasizes its uses: back-testing, stress-testing,...

 

Traders and Structurers 

The role of the structurer generally involves creating new structures as well as pricing these structures.

 

When creating new products, the structurer is involved in innovation.

However, there must also have a close interaction with sales to understand what the investors are willing to buy.

The structure is of key importance since an IB can stand out with its capability of innovating in a competitive market. 

 

When pricing SP, the structurer analyses all the risks and work with traders to agree on the levels they charge for taking on those risks. 

 

After a deal has been closed, the SP is booked in the portfolio of a trader who will then be in charged of hedging its risks.

Therefore the role of an exotic trader in an IB is primarily that of an hedger more than a speculator.

However, complex products have very elaborated risks and it is not always possivle to hedge them completely. 

The trader should therefore manage them as best as possible within specified limits. 

 

Sales are primarily interested in closing as many deals as possible to increase their commissions.

Traders want business but will not want to take on unhedgeable risks if they feel such positions will cost them money.

 

--> different balances of power at play on the trading floor with different actors having diverging interests

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