Interest rate swaps and guilt trader - Hamish Darbyshire

Investment Banks have the most extraordinary number of jobs within them, it can be completely mind-boggling. Every time we went near one we found a whole new department or group of people that do something we’d never heard of. This seems to be due to the immense specialisation within banks where it can be quite possible to sit next to someone but have no idea about what they do.

There are a couple of major distinctions worth highlighting. Investment Banking or ‘IBD’ tends to be the department which most people imagine when thinking about an investment bank. They are the one’s doing huge M&A deals, putting in incredibly long hours (14 hours+ each day including weekends for months at a time is not uncommon) and schmoozing with business leaders. Work/life balance is not easily found but on the flip side the work you do will likely be high profile and give you an enormous breadth of business and finance experience. This means that if you want to leave London or Investment Banking at some point you shouldn’t have a problem as the skills gained are very transferable. We met ex bankers in companies ranging from renewable energy start-ups to large pharmaceuticals.

Capital Markets is where you’ll find the traders, salespeople and research analysts. They’re market based and are the one’s you see on TV shouting down phones, sat in front of 5 of computer screens. They’re monitoring market activity and reacting immediately to any changes. It’s noisier and a bit more adrenalin fuelled than IBD. One of the big perks of Capital Markets (other than the actual job), is that the hours tend to reflect those of the market. That means early starts with most people in the office by 6.30 but it also means you tend to be out by 6.00 in the evening. And there is almost never weekend work. So if you’re an early riser the work/life balance is pretty good especially compared to IBD. One limiting factor though is that you’re in a highly specialized role usually in a very specific market area, so there’s not much in the way of transferable skills. If you’re an FX institutional salesperson it’s not that easy to move into another product area and you’re going to be tied to working in London (or another major financial centre).

Beyond these two areas you have a massive range of middle and back office functions. There’s technology, operations, legal, finance, marketing and HR for a start. So if finance interests you then it’s definitely worth looking at the breadth of what’s on offer. The other thing that struck us about banks was just how diverse they were. Without doubt they had the most mixed workforces we saw, with every member of a team often from a different country. What that means is when you’re applying for a job you’re not just up against your peers in this country but across the world.

Who are you and what do you do?

My name is Hamish Darbyshire I work for Barclays Capital and I work as an interest rate and swap trader.

What is Investment Banking?

An investment bank is an upscale commercial bank which holds and obtains financing for people on large scale, for large corporates and for large investors.

What attracted you to this career?

I think my degree helped, I did maths at Nottingham University and I knew that trading was fast paced and dynamic role so I didn't think I would ever be bored, and I think I was right.  Trading is very high profile for being a numeric discipline.  Since I studied maths, and most traders would have studied something numeric, means I had a good start to go about searching for a job in the first place.  I also think I work well under pressure and I have just been interested in financial markets since I was young so I it suited all needs really.

What does your job involve?

In most basic terms it involves buying something and selling it hopefully at a higher price and not a lower one.  Essentially as a market maker, my job is to buy and sell for clients of Barclays Capital, so I will take a position on from a client and hope to off lay that position in the market and make a small margin for myself in the process of trading that.

What are Interest rate swaps?

Interest rate swaps and government bonds are part of the fixed income markets, so they are part of the interest rate markets.  Essentially, Government bonds and interest rate swaps allow corporates and investors to gain exposure to the interest rate markets, so they can invest in Government bonds if they want to deposit cash that they own, or as a corporate, a corporate may issue some bonds to investors to raise capital and they can choose to do it as fixed rates or as floating rate lines and interest rate swap market allows then to swap from fixed rate bonds into floating rates.

What do you do on a typical day?

On a typical day, I will come in and take a look at the position of the book as it currently stood, so I wouldn’t be flat in every single bond or ever single interest rate swap.  I would have residuals in certain areas and in other areas I may be the other way around and I would take a look at this in the morning and throughout the day I would try to get myself as flat as I could so I had essentially no risk.  Throughout the day you would be having client trades which would go against what you were trying to achieve.  At the end of the day you would close your book and the next day you would come in and start the whole process over again, always trying to remain flat risk.

What is flat risk?

Flat risk means you don’t have any exposure whatsoever to any moves in the market, so however the market moves whether it goes up or it goes down, interest rates go up or interest rates go down you don’t earn any money or you don’t lose any money whatsoever so any P&L or profit you gain on the day will remain at the same level depending on whether market goes up or down.

Who do you liaise with on a daily basis?

The people I have the most contact with are the people immediately on my desk, other traders next to me, secondly brokers, who will facilitate deals to other counter-parties and then thirdly sales people, amongst Barclays Capital.

What's the difference between Sales and Trading?

Well trading is specific to manage the banks risk and ensure that all trades that the bank puts on are at the right level and hopefully earn some amount of profit in the process.  Sales is much more of a diplomatic role and they have to be able to negotiate between the traders and the clients themselves, to be able to get a trade done at the correct level, so sales act as an intermediary and sales is also very important for managing client relationships to make sure that what trades the clients have on, they are aware of the risk they are taking themselves and hopefully everyone can be a winner of all these trades.

Describe the process of your work?

A trade would be initiated by a client.  So a client would phone up Barclays, speak to the sales person and say for example “I want to buy this bond, where can I buy it”?  The sales person would then phone me up and ask me my price and I would look at the trade and then, say the price of this bond is £100, and I will sell it to the client for £110, that is my price.  The sales person will relay it to the client, that he can buy it for £110 and he says ok, fine that is done.  So essentially I have sold a bond which I think is worth £100 for £110.  In order to lock in that £10 profit, have to then go and buy the bond back from somebody else in the market which hopefully I can do at £100 or cheaper in order to make the money I have hopefully gained.

How do Traders work with the Quantative Analytics department?

The quantitative analytics department basically form the backbone for our pricing structures, on a day to day basis we won’t necessarily work with them very frequently it is more like we will ask them to perform certain tasks which will inevitably feed into our computerised systems which will be able to tell us prices on an instant basis.  If we have problems with these prices or we disagree with the way they are modelling certain things, we will go back to them and say can you change that model slightly or tweak it here and tweak it there and it will affect our prices going into the future.

What are the speicialisms within your industry?

Well I am specifically on the sterling desk which is concerned with the pound interest rate swaps and the UK government bonds, then there is a Euro desk which is exactly the same but for European Government bonds and for European interest rate swaps.  There is a dollar desk for US dollars and we have across the floor some foreign exchange desks which deal specifically with currencies in foreign exchange options as well.  Then there are other desks which are kind of derivatives of the main interest rate swap markets, which are like cross currencies swaps which is kind of a combination of the two sides of the trading floor.

If they weren't sure where they wanted to put you or you weren't sure which broad area you wanted to go in you would be able to gain some exposure to all of the different desks.  I think most people, if they do a little bit of research when the come to apply, will learn the difference between foreign exchange and currencies and the fixed income rate markets and the equity markets and the credit markets so I think that is information that is easily obtainable on the internet.

What are the best bits about your job?

The best bit about my job is that it changes on a day to day basis, the variety and the dynamics of the market, mean you are never bored and there is never nothing to do, essentially there is always something to be looking at, so you are constantly stimulated.

What are the worst bits about your job?

There is the pressure to an extent but I think to be a trader, you need to be able to work in a pressurised department, I think that is part of the job which is why you want to do it.  The worst thing is there is a lot of admin involved in trading, which ultimately you have responsibility for your position, which involves putting on lots of trades during the day, and if you miss a single trade you will have gained risk that you didn't know about.  So you could, at the end of day, find out about this trading, and could have earned or lost x number of pounds and I think the worst thing about trading is going through all the admin and making sure exactly what you think should be in it, is in it.

What has been your greatest achievement?

I think my greatest achievement was when I was asked to price up a particularly large trade on my desk which is unusual for someone in my position, having only worked there for 18 months and I was given full authority and full responsibility for the trade which was a success for Barclays Capital so I think that was my greatest achievement being given the responsibility quite early.

Any regrets?

I think in an investment bank every job is highly specific, so when I started at Barclays, I was assigned to my desk and I didn’t quite get the experience to rotate at different teams and the sales force and the investment banking division and the credit division and I think in retrospect, having that experience just for a week maybe on each desk would be beneficial to me now.

What is the pay like and are there any perks?

I have got no real comparison but I am only 18 months in and I haven’t had any complaints yet.

The perks mainly are when the traders can be taken out to various locations in London and they often try to impress you so they take you to some of the best places in London, that is one of the best perks I think.

How long is a working day and do you have to work out of hours?

I think I am fairly lucky actually.  Working in investment bank has a stigma for working very long hours; working in trading I think is better than most areas because you can only trade when the markets are open and they are generally open in reasonable hours so you go home at reasonable times. Working in the sterling market is particularly good because they are closed a lot more than the European and the US markets.

Interviewer: So when would you be expected to get at your desk and what time would you be able to get out of the office.

I get into the office between 7.00 and 7.30 and I leave generally between 5.30 and 6.30

Is there much in the way of travel?

It is rare for a trader to travel but there are occasional visits when we will be asked to visit clients in other parts of the UK or overseas if they are overseas investors.

Do you have to be based anywhere in particular?

In terms of being in London it is a must because to do what I do you need the information flow and the information flow comes from everyone being in one place where all the trades are happening. So if you were tying to attempt to do this from home, you wouldn’t have access to any of the information so you would find yourself in a mist.

What is the working environment like?

It is a mixture, there are definitely more men than there are women.  It is a mixture in terms of dress code because the traders will sit next to the sales people and there is a different dress code across the two.  Traders are allowed to be a little bit more casual, whereas the sales people have to a bit more formal because there is a chance they will be meeting with clients.  Depending on whether it is a busy day or a quiet day it can become very loud or on a slow day it can be quite dull and you might end up playing cricket on the trading floor.

How did you get into your job?

I don’t think you have to have any particular degree; some degrees will be more beneficial than others, as will a strong academic performance be more beneficial than a poor one.  I got the job simply by applying to numerous places and I also got some experience in an internship and basically just trying to find out exactly the job role you want to have and try and find people to speak to who are going to be able to offer you a place.

What's the application process like?

It was an online application at first, followed by a telephone interview, and then a face to face interview.  At Barclays it was fairly quick, other institutions, I have heard it is more multiple interview procedures, I'm not a great fan of those.

What are the key skills required for your job?

My job requires a high level of discipline there is no room for errors so you have to be very precise and you need to be a good communicator to be able to communicate exactly what it is you will do and exactly what it is you will not do.  So you need to be straightforward, you need to be numerical because what you are dealing with is numbers and you need to be able to think independently.

What's your top tip for breaking into your industry?

Since all the applications processes are the same initially, you need to spend time to put together a really strong online application.  If your online application is successful you then need to really get to know people when you get to go down to the institutions, because it will be people who are offering you the jobs not computers, so looking good on the system isn’t good enough you need to make sure you make a good impression with individuals with relationships.

What's the career progress and how quickly can you move up the career ladder?

We had an initial training programme which lasted two months and then that was followed for me, straight on to the desk I am working on, so I have now been working on the desk for 18 months, for some people you may get to rotate around other desks to gain some experience but I think the two months training at Barclays is enough and then they will just get you straight into the job and learning on the job is the best way.

In terms of job titles for my job, I don’t think it is entirely relevant, what is more relevant is the level of responsibility that you are given, so the level of risk you are allowed to take and the level of revenue to you are expected to generate.  There will be people on the same title who will be expected to generate different amounts of revenue and most likely be paid differently according to what is expected from them.  In terms of career title progression there are regular reviews, I think every six months there are performance reviews and possibly every year there are promotion reviews coming in from the ground up there are certain titles that you acquire after certain time but then having reached maybe the second or third rung up the ladder, it then becomes more of a discretionary process.

Where do you see the industry going?

Well I was lucky because the hot spot when I started in the industry was probably in the credit markets and not in the fixed income markets but since about August last year, things have turned around and the credit markets, I think, have become a little less liquid and more troublesome and the fixed income markets have become the place to be at the moment and I think that is going to continue for at least another year yet.

Is there scope for movement during or after this career?

In terms of skills which are portable into other roles, I don’t think being a trader will help too much, I think it demonstrates a level of understanding and it demonstrates an ability to learn very quickly.  But the skills I have are fairly specific to the role and so I think it would be difficult to move into something different with my kind of skills.

What are the industry resources that someone interested in joining must know about?

Well everybody talks about the FT and that certainly does help, I personally use the online FT, which summarises the stories and gives you the general gist without having to read the whole newspaper every single day.  In terms of gaining some experience which I think is very important before you start, there are some online trading platforms, one specifically on Facebook where you can put down some fictional money and trade around and hope to earn a profit or possibly make a loss but I think, learning from your mistakes is a great way to learn and if you can do that with fictional money before you start I think you are better for it.

Is your day on the trading floor constantly manic?

That is real, it is what it is like but it isn't like it all of the time, I think if you were to see that in movies, movies are unrealistic because they would show you that all of the time, but it isn’t like that all of the time.  Occasionally it gets busy when markets get more volatile on a Friday in the month when some data comes out and markets become volatile and people start getting upset or other people start getting happy and it gets a little louder but there are times when the markets can be dead and people are falling asleep at their desks.

Interviewer: Do you ever not want to leave your desk in case there is a big trade that you are going to miss, do you try not to go to the toilet or anything like that?

That happens quite a lot actually and sometimes when I do what to leave, my boss will tell me “no you can't go because we might have that trade any second” and of course it wont turn up for an hour.

If you weren't in this career, what would you be doing?

Well I joined the RAF when I was at university and they taught me to fly but I never quite made it to fast jet pilot so I think I would probably be trying to do that.