Execution Trading?

[Chris0770]

Hi everyone,

How does execution trading at IB, Hedge Funds etc work.....

For example, the client will request the trader buys/sells X amount of a particular stock.... What is the specific role of the execution trader from there.....the pick up the phone and contact a broker for the price of the stock...If it matches (or better) than the clients request they will execute the order??

I would be very grateful if anyone could shed some light on this for me.

How difficult is this job...what are the pros/cons?

Many Thanks

 

[meanreversion]

Execution trading can be well paid, but it depends on the fund you're at.

Only hedge funds have execution desks. The idea is to achieve "efficient" prices for the trader. Let's say he wants to buy £200mio of an option.. the execution desk could either ask 10 banks each in £200mio and see 10 wide prices, or they could ask 10 banks each in £50mio and trade with the 4 best rates.

Now, having traded with those 4 banks, the price will immediately move against them as they all try to buy options in the market place.. also, the other 6 banks might guess what is going on and move their prices against the banks which are short.

In effect, the execution desk's job is to reduce the likely bid/ask that banks capture, and as such they are unpopular with the banks. Furthermore, there is no element of relationship.. the only concern is the price, and not whether the hedge fund likes a particular bank or its research etc.

Pros - you're not taking risk, foot in the door at a hedge fund (although very very few go on to be traders), feel the "buzz", pay can be good

Cons - receive abuse from traders, banks continually moaning at you, very long hours