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Technical interview question about Equity Trading for Mid-Level Sales and Trading

Can you walk me through how you would execute a large equity block trade without significantly moving the market?

Sales and Trading

Technical

Asked at

Deutsche Bank

Difficulty :

Medium

Explanation

This question tests your operational knowledge of trading execution and your ability to minimize market impact. Recruiters want to understand your approach to handling large trades while managing risks. Common pitfalls include ignoring the importance of timing or failing to address regulatory considerations. A strong response demonstrates a clear understanding of execution strategies, such as using dark pools, algorithmic trading, or splitting the trade across multiple sessions. Preparation involves studying trading execution techniques and their applications.

Answer Example

To execute a large equity block trade, I would first analyze market liquidity and determine the optimal timing. I would split the block into smaller trades, using VWAP (Volume Weighted Average Price) algorithms to minimize price impact. Additionally, I’d leverage dark pools to execute a portion of the trade discreetly. In a past scenario, I managed a $50M equity trade by splitting it over three sessions and using dark pools, achieving execution within 0.2% of the target price.

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