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The key difference between working in trading at JPMorgan and working in trading at Goldman Sachs

Handelssaal der Deutschen Bank

Handelssaal der Deutschen Bank

JPMorgan and Goldman Sachs are among the market leaders when it comes to sales and trading. However, they had very different third quarters. While Goldman’s trading business bombed and its fixed income trading revenues fell 44% year-on-year, JPMorgan’s fixed income revenues fell only 8% over the same period.

It has since emerged that JPMorgan’s traders not only had a perfect third quarter, with no loss-making days, but that they’ve had a perfect year. JPMorgan’s traders lost money on no days at all during the first nine months of 2013. By comparison, Goldman’s recently released 10Q reveals that its traders lost money on 15 days in the last quarter. Moreover, Goldman has lost money on 21 days in the second and third quarters combined.

So, what does this mean if you’re thinking of working in a trading role in either bank?

1. If you’re working at JPMorgan, expect incredibly tight risk limits

As the table below, taken from JPMorgan’s 10Q, shows, the bank has cut risk-taking substantially in 2013. In the first nine months of 2013, trading value at risk (VaR) in JPMorgan’s corporate and investment bank was down 44%, with a 46% cut in fixed income trading.

JPMorgan trading VaR, 2013 JPMorgan trading VaR, 2013[/caption]

2. If you work for Goldman Sachs, expect more leniency with regards to risk taking 

By comparison, Goldman’s 10Q shows that risk taking at the bank has remained comparatively stable over the past 10 months.

Goldman VaR to Q32013 Goldman VaR to Q32013[/caption]

Goldman kept risk on, even for challenging products like rates:

Goldman VaR by product Goldman VaR by product[/caption]

So, maybe this was a mistake? Following questions about its performance in fixed income, Goldman may be compelled to rein in risking taking dramatically in the fourth quarter (or else to take risk more effectively). So far this year, though, JPMorgan’s trading floor looks like the steady sensible place to work while Goldman’s has been chasing profits with (possibly misplaced) confidence.

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