BITSians on Wall Street
By Anupendra Sharma (’87 Eco Instru), Sandeep Mukherjee (’95 Phy Mech)
Sales And Trading (S&T)
Wall Street conjures up pictures of men in colourful jackets, screaming buy and sell, making strange hand gestures, and electronic tickers running across the screen. Millions are being made and lost as the seconds roll by. Its adrenaline pumping action. This is the Wall Street most of us know.
Some remnants of this picture remain – in the pits of Chicago, but it is disappearing quickly. Much of the trading has moved off the trading floor. Men and women in suits, sipping lattes behind desks on trading floors that are larger than football fields. There is a buzz in the air, but not the same noise and action that was reminiscent of the 80s. A lot of the trading is done by computers.
Welcome to the future of trading on Wall Street.
Trading is an instinct. The best traders in the world can “feel” the market even though it has moved to the computer screens.
If you look at the securities industry as a whole there are two major divisions – equities and fixed income. Fixed Income gets its name from securities that have a fixed coupon on the notional, like government bonds. However the fixed income market is much bigger and more complex that equities. It broadly includes credit and interest rates. Over the last few years, fixed income has powered the profits on Wall Street as Equities sputtered after 2000.
Sales brings in business to the firm – from other financial institutions that are looking to buy and sell securities. Trading execute orders that sales brings into the bank. Sales people are out selling when they are not in the office taking orders. Cultural fit and an ability to sell helps in this business. Very simplistically, Traders make money when they buy low and sell high.
IMPORTANCE OF S&T
Over the past few years, S&T has overtaken investment banking (advisory/equities/debt) in terms of being a source of profits for the bank. This is due to the enormous volumes of trading being generated by hedge funds, who have made the markets very efficient, but also due to the enormous amounts of capital that the banks have risked on a daily basis through their own superstar proprietary traders.
BITSians in S&T
There is one BITSian in Sales – Rajiv Rangarajan (‘00, IIM-B MBA, Deutsche), and five in trading. Sreenivas Kopparapu (’93, Pace MBA, Barclays), Karthik Krishna (’93, IIM-C MBA, Deutsche), Siddharth Swarup (‘93, Columbia MBA, Merrill Lynch), Nirav Shah (‘93, Lehman) and Prasanth Subramanian (‘98, IIM-C MBA, Lehman).
 Srinivas Kopparaju worked at Wipro in the finance and banking vertical, which made him quite interested in the field. With the money he saved from his Wipro job, he bought a one way ticket to the US (and an F1 visa) and landed at his brother’s place. He found a job pretty quickly at a Quantitative Analytics firm in NYC, where he worked full-time, while studying full-time at Pace University. He completed the MBA in 3 years. After completing his MBA, he found a job Donaldson, Lufkin & Jenrette in research and eventually transitioned into trading. He says he wishes he had applied to a better business schools.
Karthik Krishna was a software engineer before his MBA. Deutsche was the first firm to make him a summer offer at IIM-C. He says the interesting paychecks made it difficult to resist. He is currently a Vice President in the Emerging Markets Structured Products Group.
Siddharth Swarup pursued a Masters in Chem Engg at the National University of Singapore after doing a BE in Chemical at BITS. He then worked for an Environmental Consulting firm in Hong Kong and London for about 4 years. While in London, he met some people who were interning at Goldman Sachs in their Fixed Income division and that’s where he learnt about the field. It sounded quite interesting. So he decided to give both the MBA and finance career a shot. He is now an Associate in Credit Derivatives Trading at Merrill Lynch.
Rajiv Rangarajan did Mech at BITS. He got exposed to Finance during his MBA at IIM Bangalore. The courses and projects he did at IIM Bangalore shaped this decision. His favourite course in MBA was macroeconomics, where he authored an interesting paper on monetary policy which got published in the IIM management review. That was the real turning point. Post MBA, he joined Deutsche Bank in June 2004 as a senior analyst. After completing their global graduate program in London, he moved to work in New York, completing short rotations in different functional areas before he joined his current position in sales – Selling Interest Rates Products to Hedge Funds. Only one year into Deutsche, he is handling really big accounts very early in his career.
Life in S&T
Sales & Trading is a weekday job. Though it is as pressured – there are budgets and quotas to be met, positions that could win or lose millions of dollars, the job starts at 630 and ends at 6pm. And no one comes in on weekends – unlike the bankers and research analysts who have work to do even when the markets are closed.
Rajiv works in Fixed Income Sales and Trading. Within fixed income, he works with interest rate products – these are instruments that depend on the level of interest rates in the economy. There are several instruments that are derived from interest rates – and are called derivatives. Examples are swaps, options on interest rates and so on and so forth. His group is called Cross Rates Sales, which sells different interest rates products to Hedge funds across the world. Hedge funds are large investment houses that use capital from its investors in risky financial instruments. They take a lot of risk and hence are termed to be levered (ie even though they may have $10 million in capital, they would have a potential exposure of 10 times that figure). Rajiv’s job is to provide liquidity to his clients who might want to trade these instruments and also suggest innovative trade ideas. He says “I tread a very fine line between managing client relationships and keeping the traders happy.”
Karthik works with Governments, Central Banks, Hedge Funds, Corporates/Banks in the Latin American/Carribean region to design and execute structured products in order to manage, hedge and transform the risks in their books in the most efficient and profitable way. He does a lot of work with derivatives technology.
Srinivas runs the Emerging Markets Credit Derivatives Trading for Barclays. Credit Derivatives are one of the hottest areas on Wall Street or “the cutting edge in global fixed income and the new frontier in finance” as Srinivas likes to describe it. His job involves market making and proprietary trading in Emerging Market sovereigns and corporates. The business also has a highly structured component to it which involves devising and implementing investment, risk management and balance sheet solutions for Barclays’ global client base involving emerging market countries or corporations.
Siddharth also works in structured Credit Derivatives. He trades options on Credit Default Swap contracts, first-to-default baskets and other correlation products such as CDOs. He prices and risk manages these securities. In derivatives trading, he works on the cutting edge of financial innovation. The work is highly competitive and one requiring quick decisions, which Siddharth says he thrives. “It brings out the best in me”, he says. He starts work early (before 7am) and is usually done by 7pm. He never works weekends which gives him time to pursue non-work interests.
The widespread acceptance of Credit Derivatives greatly the increased the liquidity of this business. Siddharth says that “Global clients have begun to recognize the merits of the products. Since, these are fairly complex financial products it has taken a while to gain acceptance.” The market has grown at an extremely fast rate. Hedge funds have emerged as the biggest players in these credit derivative products. This has also increased the competition within the industry requiring reinvention and continuous innovation.
Qualifications and Skills
Karthik believes that one should have (i) A lot quantitative and analytical skills, (ii) Cross disciplinary – Statistics, Legal, Marketing and (iii) Most importantly, interpersonal skills and trustworthiness which are critical in winning and maintaining business. In terms of degrees, PhDs and MBAs. Karthik says BITS helped by giving him a lot of exposure, competitive spirit and the essence of camaraderie.
Siddharth credits the MBA. “The MBA has definitely helped in this both in terms of securing the job and being able to successfully do it. MBA/CFA are probably good degrees to have in my field if you decide to move into the field rather than starting into it after undergrad.” But he says that there are a lot of people who have just college degrees and no advanced degrees and end up being very successful in this job.
Future of S&T in India
The Indian Bond market is a USD 200bn market. Not too many countries can boast of a bond market that is 40% of the GDP. The Indian equities are also the darling of US investors who think the future is in India, China and Japan. Hence there has been a lot of activity from domestic and overseas investors and the Indian markets have proven their stability in the face of intense activity.
Fixed Income sales and trading is very nascent in India. The liquidity in these instruments is very limited and due to absence of hedge funds or other investment houses that can take risky bets, the market for derivatives in general is small. However as the government deregulates the financial services sector, this sector should pick up. The opportunity to exploit proven market ideas and practices is very alluring.
Key traits to trading
You have to be willing to work under pressure. This is an extremely fast market, and there is no room for error. In terms of other traits, Karthik says technical aspects are clearly vital. So are Ethics, since you are deal with someone else’s money. Communication skills and clarity of thought are very important in converting opportunities into profitable transactions.
Siddharth adds humility. Attitude is everything and having a good one can make all the difference.
Rajiv believes students should seek information aggressively. Cocooned in Pilani, Goa, Dubai, we know nothing of Wall Street. But there is a lot that one can read and learn independently. If this is of interest, seek as much information as you can. Tap into your alumni pool. He encourages students to get in touch. More importantly, he says that students should be willing to take risks early in their career – not the tried and tested path. Think through all the alternatives you have (like an MBA or doing a one yr Masters in Finance from a US school even if it means taking a big loan) and go with what you really want to do. Even if it doesn’t click, because it is so early in your career, you can reverse them. Be a go getter – Aggression is very valued on Wall Street. Be well mannered but not too docile. You must have the urge to learn and explore new things all the time. The early years are always rough but if you can ride them out – you’ll be a winner (no pain, no gain!).
What after
S&T
Karthik believes that he will go back one day in the role of an investor in small businesses. Those businesses have the highest growth prospects. Rajiv says he may go back to India at some point, but at this stage he has no plans. With India growing, it is likely that at some points all the alums would get ample opportunities. Srinivas says he will continue to build the Barclays business in India over time.
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