ADD ADVICE TO FAVCapital markets
If you are ambitious and ready to delve into the world of bonds, shares and complex derivatives, head to the capital markets for a lucrative career.
Capital markets are where the products created to help companies grow are traded. There are two divisions within the capital markets. One is concerned with trading shares and is called the Equity Capital Market. The other, the Debt Capital Market (DCM), is concerned with bonds. The DCM is also known as fixed income, because bonds offer a fixed income guarantee.
The bond market is much larger than the equity market, and analysts will become expert in one or the other, although in some banks there has been a recent move to amalgamate the two into one division.
The work of capital markets
As well as the trading of bonds and shares, the capital markets are also places where more complex products such as equity-linked bonds, securitisations and derivatives are traded.
Equity-linked bonds are bonds that can be converted to shares at a certain price.
Securitisations are securities issued on the standing of pools of assets rather than organisations, which is what shares or bonds are based on.
Derivatives can either be futures or options. A future is something you agree to buy at a fixed price on a fixed date, while an option is the right (but not the obligation) to buy or sell at a fixed price on a fixed date.
Driven by the greater depth of analysis that can be achieved with developments in IT, derivatives have been one of the great success stories of recent years, becoming one of the most profitable areas within capital markets.
Job roles in capital markets
There are three functions concerning a product on the capital markets. First, the product has to be researched. Second, it has to be sold (effectively this is the bank taking the research findings and selling a strategy based on them to the client). The third part is trading.
Read more about sales, trading and research.
Training in capital markets, as with other areas, is mainly conducted in house. Analysts might take qualifications, such as the Securities and Investment Institute’s Certificate in Securities and Derivatives, as staff need to understand the regulatory framework. However, the more advanced training will come from within the bank itself, as this is regarded as an aspect of a bank’s competitive advantage.
Job descriptions
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- Capital markets
- Corporate finance
- Fund management
- Mergers and acquisitions
- Operations
- Sales, trading and research
