Investment Banking Trader - what risk capital you get to trade with ?

[TrAndy2022]

I heard from an FX trader that they can trade up to 1000 lots or $100mm unlevered and they cannot make than more $3 to $4 million losses (below zero). And they get only 3% to 5% of all profits from that. So that would result in something like $90k risk capital for the beginner trader up to $200k risk capital. Is that true ? Not more for better traders or only the very rare exceptions in a bank ?

So basically a $2 million funded account with a prop firm where you get 80% profit split and you can have 10% max. drawdown (below zero) = $200k risk capital.

And the best thing you can trade on your own PA (personal accounts) like you wish on a prop firm. You cannot do in a Bank. You need to hold at least for 4 weeks a profitable trade.

So why then choose the trader in a bank position when you need to study first (a lot of garbage or non-trading related stuff) and nowadays having much prop activities is also not wanted in a bank ?

One other question. Could you scale a lot in a bank ? Never heard that. So you make $5 million profit and then you trade $500 million positions ? Not allowed or is it ? (because additional scaling on profits is not allowed in that way on prop firms (that so called retail FX prop firms)).

If you know other trading positions like Equity Derivatives Trader for example, then please say what kind of max. position you can have (as prop position) and profit split after ?

There is usually large overhead in the banks, so on your first million profit you only meet minimum expectation and get no bonus, which makes it worse.

So if you do not need a Bloomberg for trading (prop) only, what are the advantages in terms of risk capital on how much you can make as Trader in a bank ?
Or have been any advantages only in the past existed ? (Before 2008)

 

[traider]

u get deal flow
color for the day

 

[TrAndy2022]

u get deal flow
color for the day

I never heard you can make a lot of money from flow. Am I wrong or what do you mean by that ?

 

[ETJ]

Depends on the product and regulatory environment. Equities, Indices, FI, and Vol. products. Salary, bonus, and benefits. There are a number of former bank guys on the forum and I expect they may chime in. Keep in mind Dood Frank limited activities a bit
Let's talk about a successful trader who meets or exceeds the team benchmark,
Capital - all you can deploy. A proven vol. desk may be working with 10 figures, and a FI operation covering a large inventory even more.
You get a base of a couple of $100,000 again based on proven success - maybe more. Bonus, and this is a gross generalization - the team hits its benchmark and the team bonuses could be around 10% of the book's profit. There was a story on the forum a few months back about a Senior Goldman guy whose bonus was over $100 million and he left to set up his own shop. Vol has been particularly hot lately and leveraged returns have been impressive.
The compensation formula is pretty standard across banks, hedge funds, and family offices.

 

[ETJ]

Mar 6, 2023



Goldman’s Top Equity Trader Whose Pay Rivaled CEO’s Makes Surprise Exit
Sridhar Natarajan, Bloomberg News

(Bloomberg) -- Goldman Sachs Group Inc. is losing stock-trading rainmaker Joe Montesano, a key player in its ascent to the industry’s No. 1 rank in equities for two straight years.

The 46-year-old recently informed the firm he is stepping down as head of equities trading for the Americas and leaving to take a break, according to people with knowledge of the situation. He has yet to line up another job.

He’s among a group of top producers at Goldman whose pay has rivaled the more than $75 million awarded to Chief Executive Officer David Solomon over the three-year Wall Street trading frenzy set off by the pandemic. In 2021, Montesano even out-earned Solomon’s $35 million package, nudged ahead by his global oversight of the bank’s lucrative program-trading business, the people said, asking not to be named discussing confidential information.

The program-trading desk generated more revenue per employee than almost any other team at the investment bank that year. And the firm’s broader equities business pulled ahead of JPMorgan Chase & Co.’s and Morgan Stanley’s in both 2021 and 2022, with cumulative revenue of almost $23 billion.

The business is expected to slow down this year with analysts expecting an additional decline of roughly 6% in equities revenue at Goldman. That would still leave it substantially higher than what it was posting before the pandemic.

A company spokesperson declined to comment.

Montesano joined Goldman in 1999, the same year it went public, working for a subsidiary, Hull Trading, known for quantitative- and technology-driven strategies. He bounced around various equities posts before snagging the top US-based equities-trading job.

What Goldman calls program trading is better known in the industry as an index-rebalancing business. It develops systems to predict which stocks will be added or knocked out of benchmarks because of mergers, earnings growth or slowdowns. That business had breakout years in 2020 and 2021 before cooling.

To keep ahead of rival banks and vie with the world’s most sophisticated hedge funds in that arena, Goldman assigns traders and coders to help develop mathematical models and software tools that it uses to deploy its own capital. Traders on the team are compensated with an eye on keeping them from being poached by other banks or buy-side shops, making it one of the most envied spots at the firm.

 

[2rosy]

I never heard you can make a lot of money from flow. Am I wrong or what do you mean by that ?

you're wrong. what do you think a trader at a bank does? it's not prop or speculation. also, heavily automated now.

 

[TrAndy2022]

you're wrong. what do you think a trader at a bank does? it's not prop or speculation. also, heavily automated now.

yeah I know, but I heard and I know from myself that 90% of profits do come from prop activities in a bank, despite it is not more such allowed or to be wanted. You have other profit figures ?

 

[TrAndy2022]

Mar 6, 2023



Goldman’s Top Equity Trader Whose Pay Rivaled CEO’s Makes Surprise Exit
Sridhar Natarajan, Bloomberg News


(Bloomberg) -- Goldman Sachs Group Inc. is losing stock-trading rainmaker Joe Montesano, a key player in its ascent to the industry’s No. 1 rank in equities for two straight years.

The 46-year-old recently informed the firm he is stepping down as head of equities trading for the Americas and leaving to take a break, according to people with knowledge of the situation. He has yet to line up another job.

He’s among a group of top producers at Goldman whose pay has rivaled the more than $75 million awarded to Chief Executive Officer David Solomon over the three-year Wall Street trading frenzy set off by the pandemic. In 2021, Montesano even out-earned Solomon’s $35 million package, nudged ahead by his global oversight of the bank’s lucrative program-trading business, the people said, asking not to be named discussing confidential information.

The program-trading desk generated more revenue per employee than almost any other team at the investment bank that year. And the firm’s broader equities business pulled ahead of JPMorgan Chase & Co.’s and Morgan Stanley’s in both 2021 and 2022, with cumulative revenue of almost $23 billion.

The business is expected to slow down this year with analysts expecting an additional decline of roughly 6% in equities revenue at Goldman. That would still leave it substantially higher than what it was posting before the pandemic.

A company spokesperson declined to comment.

Montesano joined Goldman in 1999, the same year it went public, working for a subsidiary, Hull Trading, known for quantitative- and technology-driven strategies. He bounced around various equities posts before snagging the top US-based equities-trading job.

What Goldman calls program trading is better known in the industry as an index-rebalancing business. It develops systems to predict which stocks will be added or knocked out of benchmarks because of mergers, earnings growth or slowdowns. That business had breakout years in 2020 and 2021 before cooling.

To keep ahead of rival banks and vie with the world’s most sophisticated hedge funds in that arena, Goldman assigns traders and coders to help develop mathematical models and software tools that it uses to deploy its own capital. Traders on the team are compensated with an eye on keeping them from being poached by other banks or buy-side shops, making it one of the most envied spots at the firm.

One of the rare exceptions. What I meant (on my first post) is for starting traders within the first 5 years as investment banking trader. Of course if one could build a very successful trading record over many years there are many opportunities, like hedge funds for example and so on...

I mean with own compounding on his profits this trader above on GS would be already billionaire I guess. So that bonus just an excuse for the bank or looks like. There is or I see no other way than scaling on your own when you made a certain level and cannot scale more on your job (bank/prop/fund), where you get the most out of your edge. One cannot make more profits than capturing 100% of all those profits on his own. But I was referring to traders within first 3 to 5 years.

 

[2rosy]

yeah I know, but I heard and I know from myself that 90% of profits do come from prop activities in a bank, despite it is not more such allowed or to be wanted. You have other profit figures ?

define prop activities. give some examples. Is this a US bank?

 

[TrAndy2022]

define prop activities. give some examples. Is this a US bank?

No, not a bank or like that; for example FTMO, MyForexFunds (MFF), or BespokeFundingProgram (BFP) recently, where you get $ 2million on funding without scaling in one go with 10% MDD.