| Topic Name: |
Do S&T guys make as much $ as bankers? |
| Message Name: |
Of course the payout |
| Date Posted: |
05/18/2000 |
| In Reply To: |
You are right - I guess I should have qualified my previous statement by saying that my trading experience was with a regional chop shop that had higher P&L payouts than the more respectable bank I know work for. The prestige of your bank is inversely related to its payout percentages. However, this being said, I still believe P&L payout percentages are slightly higher on the equity desk than what your are getting in FI b/c (1) the sheer dollar volumes that are traded are lower on the equity side than FI and (2) there is still less regulation and more information assymetries on the FI side that allow skilled traders to 'hide' additional comp for the IS rep in the execution prices.
Re: soft dollars, these are trade commissions directed to a firm's rep b/c the bank has picked up an expense (Bloomberg, ECN fee, etc). For example, allowing a buyside firm to use a complimentary Bloomberg machine for a year might require that the fund do $100K in commissions. The mutual fund benefits by getting help staying under the 1% expense ratio while incurring trading expenses they would have incurred anyway. Its kind of analgous to frequent flier miles and sometimes results in the rep getting an order for listed stock. |
| Message: |
Of course the payout % at a prestigious firm is a lot less.. That's because the volume and the quality of business you do is a lot higher there. GS clients for example can come in and place $300m orders at a time. While at a regional place this will probably be a total order volume for a whole week.
If you cover the IBMs and GEs at a big BB, chances are your P&L potential will be a lot higher than if you are covering Uncle Joe's Trucking Co. at a regional outfit.
As per soft dollars, you obviously have no idea what you are talking about. The reason that commissions are not in "hard" (real) dolalrs is because of a) costs of running the business have to be accounted for , b) trading desk's P&L has to be accounted for (an IS might've generated $10mm of business but if the desk is flat for the year - there is no pool to pay the bonus to the IS although he did a good job), c) there are lots of intangibles.. you can put a guy into an existing business (to cover Fidelity for example) where even a monkey can generate revenues (a no-brainer) - he can make $20m for the firm but another guy might develop a few completely new accounts and value added ideas which bring the firm $10m --> chances are the 2nd guy will get paid more..
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