Why do different front offices have different structures?

Razvan Ilie

Member
C++ Student
From what I have seen so far on the sell side, banks tend to have very different structures in their front offices.

The common assumption from what I've read on the forums here is that there are three types of quants in the front office:
  • Research quants: research pricing models and/or trading strategies
  • Implementation quants: take the research and turn it into code or programs that the traders can use
  • Trading quants: trade the strategies that are implemented
However, I have noticed that this is often not the case, at least not on the sell side. I have heard of separate cases where:
  • all quants that work at a same desk work together as a team on everything from research to trading
  • each desk has one team that does both research and implementation but the traders are people with business/finance backgrounds who use the models
  • each desk has their own research team, then one central "support to the traders" team for all desks that does implementation for the traders who may or may not be quant traders
Can anyone explain why banks structure their front offices differently and also some od the advantages/disadvantages of each?

From a career perspective, does one structure force you to learn some skills that may not transfer well to other structures, or fail to teach you some skills that would?

Is this different between buy side/sell side?
 

Ken Abbott

Managing Director
Your question is fair but hard to answer. Why do some families have two kids, some have more and some have none? Why do some towns elect Democrats and some elect Republicans? Why do some people like sedans and others roadsters?

Academia has departments with department chairs. They have adjuncts, assistant professors, associate professors, and full professors. Courses are half semester or full semester.

The business world has so such rigidity in terms of order. Org structure is a function of (among other things) business conditions, corporate culture, and personalities. Every company is different.

There’s no better or worse. The quant function used to be primarily desk-focused, with little central management. That has largely been displaced by the Goldman “strat” model, where the quants form a team of their own and are deployed as needed. (Morgan Stanley switched over to this structure around 2009.) Central management makes hiring easier and keeps compensation equitable. Local management allows for bespoke functionality. I’ve seen both work and I’ve seen both fail. It varies by company and desk,
 
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