Investment banking vs sales and trading: what is the difference?

Inside a large firm, investment banking and sales and trading are two divisions with different clients and different days. The investment banking division works with companies and governments that want to raise money or do a deal. The sales and trading division works with the funds that buy and sell securities, executing their trades and making markets with the firm’s own money. Both are called “the bank”, and the phrase “investment bank” sometimes means only the first[1Source 1Philippe Espinasse, IPO: A Global Guide, 3rd ed. (Hong Kong University Press, 2018), §1.5.2, “The markets side”.].

What each division does

The investment banking division is responsible for giving financial advice to corporate and government clients and helping them raise, retire or manage capital, and for strategic advice on acquisitions, divestitures, mergers and restructurings[2Source 2David P. Stowell, Investment Banks, Hedge Funds, and Private Equity, 3rd ed. (Academic Press, 2017), ch. 10, “Investment Banking”, p. 222.]. Its bankers work in industry coverage groups and product groups, and its output is transactions[2Source 2David P. Stowell, Investment Banks, Hedge Funds, and Private Equity, 3rd ed. (Academic Press, 2017), ch. 10, “Investment Banking”, p. 222.].

The sales and trading division, often just called the trading business, focuses on serving large institutional clients, mutual funds, hedge funds, pension funds, sovereign wealth funds and insurers, in the secondary markets, and on working with the banking division when a client raises capital or hedges a risk[3Source 3David P. Stowell, Investment Banks, Hedge Funds, and Private Equity, 3rd ed. (Academic Press, 2017), ch. 5, “Sales and Trading”, p. 118.]. It employs thousands of people, traders, salespeople and research analysts alongside risk, compliance, legal and technology staff, and at most of the largest firms it produces substantially more revenue than the banking or asset management divisions[3Source 3David P. Stowell, Investment Banks, Hedge Funds, and Private Equity, 3rd ed. (Academic Press, 2017), ch. 5, “Sales and Trading”, p. 118.]. Its work is providing analysis and ideas, market access and execution, financing for clients’ positions, and liquidity through market-making at the firm’s own risk; the revenue comes as fees and commissions, as interest, and as the spread between the prices at which the firm buys and sells[4Source 4David P. Stowell, Investment Banks, Hedge Funds, and Private Equity, 3rd ed. (Academic Press, 2017), ch. 5, the description of the sales and trading business, pp. 119–120.].

The people on the floor

Three jobs make up the markets side. Research analysts follow a type of security, often with an industry or country focus, recommend ideas to clients and publish reports. Salespeople sell securities in their area to a group of institutional clients, supported by the research. Traders and market-makers buy and sell in the market, either for the clients the salespeople serve or, in proprietary trading, for the firm’s own account; sales traders talk to clients directly and also execute[1Source 1Philippe Espinasse, IPO: A Global Guide, 3rd ed. (Hong Kong University Press, 2018), §1.5.2, “The markets side”.]. One textbook, describing a single large firm’s securities division, adds strats, who build products, measure risk and find opportunities, and structurers, who design the more complex derivative solutions[5Source 5K. Thomas Liaw, The Business of Investment Banking: A Comprehensive Overview, 3rd ed. (Wiley, 2011), “Securities”, pp. 55–57 (one firm’s divisions, as the section says).]. At that firm a trader is described as sitting at the centre of the information flow between the sales force and the systems that execute, and as facilitating trades by providing liquidity with the firm’s capital[5Source 5K. Thomas Liaw, The Business of Investment Banking: A Comprehensive Overview, 3rd ed. (Wiley, 2011), “Securities”, pp. 55–57 (one firm’s divisions, as the section says).].

The difference from banking is the position the firm takes. When a bank advises on a merger it is an agent. When a market-maker buys a block of stock from a fund and holds it until another buyer appears, minutes or months later, the firm is a principal with its own money at risk, and the decision to do so is affected by research, regulators, litigation, competitors, ratings and much else[4Source 4David P. Stowell, Investment Banks, Hedge Funds, and Private Equity, 3rd ed. (Academic Press, 2017), ch. 5, the description of the sales and trading business, pp. 119–120.]. An investment bank can trade as a principal for its own account, as an agent for a client, or as a counterparty standing willing to buy or sell and so creating a market; even in facilitating a client’s trade it risks its own capital[6Source 6Michel Fleuriet, Investment Banking Explained: An Insider’s Guide to the Industry (McGraw-Hill, 2008), “Financial Role”, p. 38.].

Careers and hours

The same titles apply on both sides, analyst to managing director, but promotion can be faster for particularly capable people in trading, and while pay starts comparable or slightly lower, over time it can be higher for high-performing traders because they can produce more revenue[7Source 7David P. Stowell, Investment Banks, Hedge Funds, and Private Equity, 3rd ed. (Academic Press, 2017), ch. 10, “Trading and Sales”, p. 225.]. Entry is similar: analyst positions for college graduates, associate positions for third-year analysts, business-school graduates and occasionally people from other industries, with many more analysts promoted than in banking, and doctorates hired into the quantitative areas[7Source 7David P. Stowell, Investment Banks, Hedge Funds, and Private Equity, 3rd ed. (Academic Press, 2017), ch. 10, “Trading and Sales”, p. 225.]. Trading is “a highly analytical position that requires a large number of daily decisions” and quick assimilation of information from many sources[4Source 4David P. Stowell, Investment Banks, Hedge Funds, and Private Equity, 3rd ed. (Academic Press, 2017), ch. 5, the description of the sales and trading business, pp. 119–120.]. The hours differ in shape: a trading day runs with the markets, while banking runs on deal deadlines late into the night; the article on hoursWhy do investment bankers work such long hours?Junior bankers work 80 to 100 hours a week because deals run on deadlines, several at once, and senior comments arrive late. The mechanics, from the sources.Words of the trade · revised 28 September 2026 · 900 words · 9 sources · 4 min covers the banking side.

Frequently asked questions

Is sales and trading part of investment banking?

It is part of an investment bank, but not of the investment banking division. The phrase “investment banking” sometimes means only the advisory and underwriting side, with sales and trading called the markets side or the trading business[1Source 1Philippe Espinasse, IPO: A Global Guide, 3rd ed. (Hong Kong University Press, 2018), §1.5.2, “The markets side”.][3Source 3David P. Stowell, Investment Banks, Hedge Funds, and Private Equity, 3rd ed. (Academic Press, 2017), ch. 5, “Sales and Trading”, p. 118.].

Which brings the firm more revenue, investment banking or trading?

At most of the largest firms the sales and trading division produces substantially more revenue than the investment banking or asset management divisions, according to the textbook’s figures for the largest global firms[3Source 3David P. Stowell, Investment Banks, Hedge Funds, and Private Equity, 3rd ed. (Academic Press, 2017), ch. 5, “Sales and Trading”, p. 118.].

Do traders and investment bankers have the same titles?

Yes, analyst through managing director, though promotion in trading can be quicker for capable people and the entry classes differ, with more analysts promoted and more quantitative doctorates hired[7Source 7David P. Stowell, Investment Banks, Hedge Funds, and Private Equity, 3rd ed. (Academic Press, 2017), ch. 10, “Trading and Sales”, p. 225.].

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  author       = {{xlsx.dev}},
  title        = {{Investment banking vs sales and trading: what is the difference?}},
  howpublished = {xlsx.dev Wiki},
  year         = {2026},
  month        = sep,
  url          = {https://xlsx.dev/wiki/investment-banking-vs-sales-and-trading}
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