Английский язык. Практический курс для решения бизнес-задач

Пусенкова Нина

– Sales and Trading is often the most profitable area of an investment bank, responsible for the majority of revenue of most investment banks. Sales is the term for the investment banks sales force, whose primary job is to call on institutional and high-net-worth investors to suggest trading ideas (on caveat emptor basis) and take orders. Sales desks then communicate their clients’ orders to the appropriate trading desks, which can price and execute trades, or structure new products.

– Research is the division which reviews companies and writes reports about their prospects, often with

«buy» or «sell» ratings. While the research division generates no revenue, its resources are used to assist traders in trading, the sales force in suggesting ideas to customers, and investment bankers by covering their clients. In recent years the relationship between investment banking and research has become highly regulated, reducing its importance to the investment bank.

– Structuring has been a recent division as Derivatives have come into play, with highly technical employees working on creating complex structured products, which typically offer greater margins and returns than underlying securities.

Middle Office.

Risk Management involves analyzing the risk that traders are taking onto the balance sheet in conducting their daily trades, and setting limits on the amount of capital that they are able to trade in order to prevent ‘bad’ trades having a detrimental effect to a desk overall.

Back Office.

Operations involve data-checking trades that have been conducted, ensuring that they are not erroneous, and transacting the required transfers.

Technology – Every major investment bank has considerable amounts of in-house software, created by the Technology team, who are also responsible for IT support.

Recent Evolution of the Business

Investment Banking is one of the most global industries, and is hence continuously challenged to respond to new developments and innovation in the global financial markets. Throughout Investment Banking history, many have theorized that all investment banking products and services would be commoditized. However, new products with higher margins are constantly invented by bankers in hopes of winning over clients and developing trading know-how in new markets. Since these cannot be patented or copyrighted, they are very often copied quickly by competing banks, pushing down trading margins. For example, trading bonds and equities for customers is now a commodity business, but structuring and trading derivatives is highly profitable. Each contract has to be uniquely structured to match the client’s need, may involve complex pay-off and risk profiles, and is not listed on any market.

Possible Conflicts of Interest

Potential conflicts of interest may arise between different parts of a bank, creating the potential for financial movements that could be deemed as market manipulation. Authorities that regulate investment banking (the FSA in the United Kingdom and the SEC in the U.S.) require that banks impose a Chinese Wall which prohibits communication between Investment Banking and Research and Equities.

Some of the conflicts of interest involved in investment banking are:

Historically, equity research firms were founded and owned by investment banks. One common practice is for equity analysts to initiate coverage on a company in order to develop relationships that lead to highly profitable investment banking business. In the 1990s, many researchers allegedly traded positive stock ratings directly for investment banking business. Companies would also threaten to divert investment banking business to competitors unless their stock was rated favorably. Increased pressure from regulators and a series of lawsuits and prosecutions curbed this business to a large extent following the 2001 stock market tumble.

Many investment banks also own retail brokerages. Also during the 1990s, some retail brokerages sold consumers securities that did not meet their stated risk profile. This behavior may have led to investment banking business or even sales of surplus shares during a public offering to keep public perception of the stock favorable.

Since investment banks engage heavily in trading for their own account, there is always the temptation or possibility that they might engage in front running.

Source: Wikepidia

Essential Vocabulary

1. underwriting (UW) n –

андеррайтинг (покупка ценных бумаг у эмитента для перепродажи или собственных инвестиций); страхование; гарантирование размещения займа

underwriter n – андеррайтер, гарант

underwrite v – гарантировать, страховать

2. syndicate n – синдикат (консорциум)

syndicate v – синдицировать, образовывать синдикат

3. lead manager – лид-менеджер (ведущий менеджер: банк, являющийся главным организатором и гарантом займа)

4. blue sky law – «законы голубого неба» (законы ряда штатов, предназначенные для защиты от мошенничества при эмиссии и торговле ценными бумагами)

5. pre-emption n – покупка прежде других; преимущественное право на покупку

pre-empt v – покупать раньше других; приобретать преимущественное право; осуществлять преимущественное право

pre-emptive a – преимущественное право

6. prospectus n – проспект эмиссии

7. quiet period – «тихий» период (период до и некоторое время после регистрации эмиссии, когда запрещено заниматься ее рекламой)

8. gun jumping – нарываться (торговля ценными бумагами на основе еще не обнародованной информации; незаконное принятие брокером приказов на покупку новых, еще не зарегистрированных ценных бумаг)