Sales and trading — S&T or 'the floor' — is the business of buying and selling securities and derivatives for the bank's institutional clients. The two big silos are equities and FICC (Fixed Income, Currencies, Commodities). Within each, sub-desks specialise by product: cash equities, equity derivatives, prime services, and program trading on the equity side; rates, credit, FX, emerging markets, and commodities on the FICC side.
The sales side
The sales side is client-facing. Sales coverage maintains relationships with institutional buyers and sellers — hedge funds, mutual funds, pension plans, insurance companies, sovereign wealth funds. Salespeople pitch trade ideas, take orders, market new issues, and feed flow information back to the trading desk. They are paid on production credits — a complex internal system that allocates revenue to the people who originated each trade.
The trading side
Trading is the book-runner. Traders make markets — quoting bid and ask prices that clients can hit or lift — and manage the risk of the resulting positions. A market-making desk earns the bid-ask spread on flow and tries to hedge or unwind inventory before the market moves. Profitable market making requires deep knowledge of order flow, fast risk management, and the willingness to take inventory positions clients want to offload.
The Volcker Rule and the end of prop
Before the 2010 Volcker Rule (a Dodd-Frank provision implementing a ban on US bank proprietary trading), large parts of S&T were proprietary — traders deployed the bank's own capital to take outright positions on directional and relative-value views. The Volcker Rule largely ended that, with carve-outs for market making and underwriting. Banks have continued to take positions disguised as 'inventory' but the scale has come down dramatically. Genuine prop trading now lives at hedge funds and at firms like Citadel Securities, Jane Street, and Hudson River Trading, which have eaten much of the market-making business banks used to dominate.
S&T compensation is heavily formulaic. A senior trader on a profitable desk can earn $5-15M+ in a strong year; the same trader on a losing desk can be cut at year-end. The pay-for-performance structure is sharper than IBD, and the variance is correspondingly higher.
FICC is much larger than equities by revenue. The FX market alone trades $7+ trillion a day; rates and credit add multiples of that. The largest banks (JPM, Goldman, Citi, BofA, Morgan Stanley, Barclays, Deutsche, BNP) all run global FICC franchises, though the post-2008 era has seen consolidation, with European banks pulling back and the top US banks gaining share.
Exercise
The CFO of a Kenyan corporate calls a sales coverage at Stanbic and asks: 'I want to sell USD 50m worth of Kenyan T-bonds maturing 2034 — what's your best bid?' Walk through what happens between the CFO's call and the trade executing. Who quotes the price? Where does the risk go? How does the bank make money? And how is the bank's risk managed if the market moves before the bonds can be on-sold?