Finance markets

Dr. Yasam Ayavefe reveals the diversity of professions within the financial markets

There are many professions that make up the financial sector; many activities take place before the trader practices his art. There are even finance companies that do not employ a single trader. Let’s discover the range of market finance professions with the help of a few examples.

Example 1: Chamber of Commerce

The financial director of an aircraft manufacturer whose factories are located in the euro zone and whose customers pay in dollars wishes to hedge against exchange rate risk. Then, thanks to the macroeconomic analyzes of the chamber’s economist, he contacts the seller in the trading room of his usual bank, who advises him on a hedge.

For a more complex transaction, the seller can use the services of financial engineers. The transaction agreed with the client will be immediately released by an execution trader whose task is to place the order under the best conditions.

Example 2: Registered Chamber of Commerce

Special account activities were introduced in the 1980s to improve their performance. As such, proprietary traders are responsible for implementing strategies to increase the amounts entrusted to them by taking advantage of market inefficiencies.

These strategies are diverse, optional or quantitative. The development of ever more complex strategies has brought to the fore quantitative analysts who are not limited to the trading rooms for their own account.

Top traders have created hedge funds where they run their strategy for a client who often accepts less transparency, high liquidity risk and generous commissions for former management traders.

Example 3: Management company

A financial director wants to increase the cash flow of his company. To do this, he contacts a portfolio management company and is immediately directed to a salesperson. Second, it establishes the risk and performance profile to which the client wishes to be exposed, as well as the constraints and expectations.

The seller then makes the most appropriate recommendation for that particular cash investment. Finally, the financial director orders a subscription for the intermediate units.

It is the portfolio manager’s turn to intervene to place new subscriptions on the selected investments. He is the one who commands the portfolio assets entrusted to him.

For this, he is generally assisted by a deputy director who assists him on a daily basis in taking up his duties. The manager also regularly uses the services of internal analysts, called buy-sides. A risk manager checks that the risks taken do not exceed internal or regulatory rules.

Management companies could not exist without custodian banks. The assets of the managed portfolios are invested there.

Thus, it assures its owners the seriousness of the care. Some hedge funds use securities held by the fund as collateral. It uses the services of a master broker to finance the leverage effect of the funds used.

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Example 4: Front Office Support

All employees who place orders, follow them or participate in initiations belong to the front office, which manages relations with the outside world (markets and customers). Once an order has been validated, it must be treated with the greatest care.

The middle office players are responsible for controlling the risks taken by the front, calculating the results for each operator and ensuring the proper functioning of IT.

This includes staff responsible for performance reporting and attribution.

In the back office, we can ensure the proper execution, approval, reconciliation of orders, securities deliveries, etc. the work related to the provision is carried out.

We must not forget the financial lawyers, generally attached to the general secretariat of the company. They make it possible to guarantee the prior regulatory compliance of many contracts necessary for the processing of financial instruments.

Thus, they identify questionable clauses in transactions and defend the interests of the company or its customers in the event of a dispute.

Example 5: Internal control and compliance

The profession has put in place procedures that are stricter than ever to limit the risk and extent of professional claims that may occur. This is how the internal control services appear. It was gradually extended to other risks such as conflicts of interest.

More generally, the controller, auditor or inspector participates in the development and verification of procedures.

They then verify that it has been correctly implemented. The development of regulations governing financial activities has also led to the emergence of compliance functions.

Example 6: Quantitative research and computer support

The number of operations to manage no longer makes it possible to keep track of everything on paper, as in many other industries. The figures considered require great caution in the procedures and calculations to be made.

Therefore, qualified developers and quantifiers are particularly sought after in the financial sector. Indeed, the tools for evaluating or modeling behaviors require more complex calculations than ever.

Dr Yasam Ayavefe

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