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Buy Side & Sell Side. Alexander Motola, CFA. Sell Side. Brokerage Syndicate Custody & Prime Brokerage/Lending. Sell-Side/Brokerage. 4 Positions Broker Sales Trader Trader Analyst. Sell Side/Broker. Broker is a Buy Sider’s primary contact at the investment bank Broker’s job is to:

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buy side sell side

Buy Side & Sell Side

Alexander Motola, CFA

Alexander Motola, 2013

sell side
Sell Side
  • Brokerage
  • Syndicate
  • Custody & Prime Brokerage/Lending

Alexander Motola, 2013

sell side brokerage
Sell-Side/Brokerage
  • 4 Positions
    • Broker
    • Sales Trader
    • Trader
    • Analyst

Alexander Motola, 2013

sell side broker
Sell Side/Broker
  • Broker is a Buy Sider’s primary contact at the investment bank
  • Broker’s job is to:
    • Understand client needs, what services they need/want, what kind of stocks and ideas they are interested in, provide information & ideas; bring analysts and management to buy sider clients
    • Generate commissions for his firm

Alexander Motola, 2013

sell side sales trader
Sell Side/Sales Trader
  • Sometimes called “trader”, the real title is “sales trader”; sales traders don’t trade stocks but act as intermediaries between buy side traders and sell side traders (either floor or electronic traders)
  • Job is more relationship based than technically based

Alexander Motola, 2013

sell side broker1
Sell Side/Broker
  • Clients want:
    • Idea generation
    • Access to analysts & research
    • Access to managements
    • IPOs
    • Swag & Benes
    • Conference Access
    • Travel Arrangements (Intl)

Alexander Motola, 2013

sell side trader
Sell Side/Trader
  • Employee of investment bank who either matches trades between clients, runs a book (P&L), or works on a floor or pad
  • Does not talk with clients, just other sell side traders and prop traders
  • Paid based on profits as agent but mostly as principal

Alexander Motola, 2013

sell side analyst
Sell Side/Analyst
  • Paid via commissions and trading volume in stocks under his/her coverage
  • Usually works in a team oriented around an industry
  • There are associates and analysts
  • Associates build models, listen to calls, field marketing calls, talk to management/companies, attend industry conferences, etc.; basically they are apprentice analysts

Alexander Motola, 2013

sell side analyst1
Sell Side/Analyst
  • Analysts manage 1 or more associates, control their product, perform higher level analysis, meet with management
  • Analysts build their own “brand” (Johnson, Blodget, Cohen, Meeker); their franchise is often more important than their employer
  • Analysts meet with clients, build relationships, and make “calls”

Alexander Motola, 2013

sell side syndicate
Sell Side/Syndicate
  • Syndicate is the investment bank’s new issue pipeline
    • They handle IPOs, secondaries, follow-ons, bond issuance, etc.
    • They market to the issuing companies, often using their analysts’ reputations
    • They dictate pricing, distribution, and road show (in conjunction with management)
    • Track distribution post offering and provide stabilization as necessary

Alexander Motola, 2013

sell side custody etc
Sell Side/Custody, etc.
  • A broker will also sell other services to buy siders, including:
    • Custody
    • Currency trading
    • Derivatives and hedging
    • Lending
    • Borrowing
    • Leverage
    • Prime Brokerage

Alexander Motola, 2013

sell side i banking
Sell Side/I-Banking
  • M&A and Syndicate
    • They have their own Analysts and Associates (Associates are higher scale jobs than Analysts in I-banking)
    • Little actual direct investing

Alexander Motola, 2013

buy side equity research
Buy-Side/Equity Research
  • 4 Positions
    • CIO/Investment Committee
    • Portfolio Manager
    • Analyst
    • Trader

Alexander Motola, 2013

buy side cio
Buy-Side/CIO
  • CIO or IC
    • Sets standards of research; might also oversee analyst staff
    • Can make investment decisions
      • Sometimes there is a “buylist”
    • Approves research
    • Sets economic direction or investment style direction
    • Manages or oversees portfolio risk

Alexander Motola, 2013

buy side pm
Buy-Side/PM
  • Portfolio Manager
    • Might oversee analysts (team approach)
    • Makes investment decisions for their strategy
    • Provides marketing for their strategy; client communication
    • Likely to be involved in the design of their strategy or evolution of their strategy

Alexander Motola, 2013

buy side analyst
Buy-Side/Analyst
  • Analyst
    • Various levels of Analyst
    • Key function is company and/or industry research
      • Modeling, company contact, visits, industry evaluation, news, etc.; whatever is demanded by the strategy
    • Possibly some marketing support

Alexander Motola, 2013

buy side trader
Buy-Side/Trader
  • Trader
    • Implements PM decisions
      • Timing
      • Size
      • Price
      • Market action
      • Liquidity supplier or demander
      • Talks all day to sales traders and uses “the box”

Alexander Motola, 2013

buy side fixed income
Buy-Side/Fixed Income
  • PM/Analyst/Trader
    • Most FI is specific, unlike stocks; with a stock, you can always go out and buy what you want, with FI you can usually only buy what’s available
      • This usually means that the Trading role is integrated into the PM and Analyst role

Alexander Motola, 2013

typical path analyst
Typical Path (Analyst)
  • Undergrad in a Technical Field (Computer Science, Finance, Engineering, Marketing)
  • Work in the field, gaining industry expertise
  • MBA, emphasis in Finance
  • Associate (buy or sell side)
  • Promotion to Analyst
  • Possible Promotion to PM

Alexander Motola, 2013

buy side firm structures
Buy Side Firm Structures
  • Team Approach
  • Segregated
  • Star Driven
  • Combinations of the above

Alexander Motola, 2013

compensation
Compensation
  • Sales & Trading Compensation
    • Analyst $ 80K - $ 150K
    • Associate $ 180K - $ 250K
    • Vice Presidents $ 300K - $ 500K
    • Managing Directors/Partners $1MM+
  • Per “Wall Street Oasis”

Alexander Motola, 2013

compensation1
Compensation
  • Investment Banking Compensation
    • Summer interns/associate: $71,300 (+$9,400)First year analyst: $85,300 (+$28,700)Third year analyst: $111,400 (+$51,600)First year associate: $120,000 (+$39,900)Third year associate: $149,000 ($60,700)Vice President: $255,700 (+$116,800)Managing Director: $273,400 (+$135,600)
  • Per “Wall Street Oasis”

Alexander Motola, 2013

compensation2
Compensation
  • Investment Banking Compensation
    • Summer interns: $58,000 (+$3,100)First year analyst: $67,000 (+$21,000)Senior analyst: $82,100 (+$21,100)First year associate: $71,500 (+$33,000)Senior associate: $99,200 ($36,200)Vice President: $140,000 (+$100,700)Principal: $145,600 (+$157,500)
  • Per “Wall Street Oasis”

Alexander Motola, 2013

compensation3
Compensation
  • How much you make is very dependent on:
    • What type of firm you work at (who owns it)
    • Where the firm is located
    • Size of firm
    • Bonus philosophy
  • This is in addition to the usual: your position, experience, etc.

Alexander Motola, 2013

other aspects of the job
Other Aspects of the Job
  • Mentally challenging, with many new problems to solve; constant learning environment
  • Very long hours
  • Very performance driven; you get a report card every day
  • There is nothing additive to the production of goods; stock market is zero sum game for active investment

Alexander Motola, 2013

other aspects of the job1
Other Aspects of the Job
  • CFA and/or MBA virtually required for many positions, just to get to the interview
  • Can be a highly competitive environment (both within your firm and outside it)
  • It’s difficult to get a definitive performance advantage

Alexander Motola, 2013

thursday
Thursday
  • UBXN SW, SARIN SP
  • CEO (CNOOC ADR)
  • KRFT
  • MCHP
  • WM
  • PFE
  • CLX
  • MCD

Alexander Motola, 2013

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