Prop trader vs. trader @ major IBs

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pdicartery

What is the difference between them? What do traders at major IBs do? Do they also trade for the firm or do they mainly execute customer's trades? I am just not too sure what those traders at IBs do that make them so much money...

Do they generally have larger capital allocated to them to trade so their bonuses are bigger?

Do they require higher or more sophisticated math (like stochastic calculus, a lot more modeling and quant analysis) than prop trading business?

Why is it hard to go from working as a prop trader to a trader at major IBs? or more generally, why do they look down on us (if any) ?
 
hello,


prop traders USE the banks money to trade. They have a buy-low sell-high strategy.

sale-traders - as theyr known (not sales people) execute customer trades, and aim to make profit on the spreads.

prop tradres are typicaly the big dogs. theyr kinda oldish.. theyr the dadys. they make the most money - and lose most too. they get paid the most too.. some bond traders make millions a year.

they dont use sophisticated technology. actually if u havent met one, ud laugh how 'normal' they are.. nothing out of this world about them.. they use the same ideas as everyone else but with more expereince and gut feelings.. i met some big dawg couple of weeks ago, he didnt even look at technicals. he was weird though, he told us how the market speaks to him like a person, and he made himself and hes traders make notes on what the market was telling them every day lol he was nuts.


but generally, props buy low, sell high. no shorting.


having said that, recently banks have started seting up hedge-fund like teams..like GS and MS.

see below a recent news:


"April 13, 2006 -- Morgan Stanley has created an all-star team of bond traders to wager its own cash in the market, a move that is raising eyebrows of its crucial hedge-fund clients.

Bond executives at Morgan told The Post the change will put clients' needs first, rather than focus on longer-term trades for the investment bank's own account, which is "kind of opposed to the idea of customer business," according to one trader.

All told, about 30 of Morgan's asset-backed bond traders, analysts and technology specialists are moving to a different floor at the firm's headquarters.

A senior Morgan executive told The Post that feedback from mutual and pension funds "has been excellent. They are always concerned about us being distracted or putting ourselves first."

However, he acknowledged that hedge funds "might have some concerns."

The chief investment officer at a $5 billion Midtown hedge fund called the arrangement "a hedge fund with a lower cost of capital, pure and simple."

Morgan, he said, "will compete with us for product, and their best traders are off the desk."

The move comes as Wall Street's biggest firms have evolved into something close to hedge funds. They are using massive capital bases and access to cheap capital to place huge bets for their own accounts.

Proprietary trading might be the last great gold rush on Wall Street. Morgan's primary competitor, Goldman Sachs, earned $16.3 billion in net revenue trading for its own account last year.

The hedge-fund executive said fighting the trend toward greater prop trading was useless.

"What's the difference between having a separate [prop] group versus a Goldman that takes the same kinds of risks on the various trading desks?" the executive asked. "
 
Quote from pdicartery:



Why is it hard to go from working as a prop trader to a trader at major IBs? or more generally, why do they look down on us (if any) ?
More...


wtf?

who the helllllllllllll said such a thing?


if u're good, got the records to back it up, show me and ill get u a desk at a IB. r u nuts? the truth is u, u need to be good..

how old r u man?

if u actualy know, prop traders r the ones look down on banks. most successful traders at IBs make millions for banks and dont get enough bonuses in their eyes. .so they leave and start hedge funds..

anyways, if u wanna be a trader at IB u need to be up to scratch. and if u're reallllllllly good, u wouldnt want to work for anyone. you'll go work for urself.

go google Steven Cohen. learn from the guy. no IB bullshit.
 
nice post..

so what kind of people do they look for when hiring? any special sills, education?

the jobs seem slim to none for those... and mostly for the connected, like every other job.
 
and yes, if u work for a bank and ur good, u can hold positions with $100millions.. and thats where there %small comission turns out to be hugeeee..

how old r u btw? im just curious
 
hey batman,

Sorry if it sounded offensive, but that was the general feedback that I've gotten from asking around a few people.

I think people have this general bad impression of "prop trading" business because there are just too many prop trading firms out there that burn and churn its own traders, making profits and/or commissions no matter what. Therefore, when you usually go out and ask people about "prop trading," you would get a negative look with a big "no-no" as their response.

From your reply, it seems your track record can get you anything IF you are good. Now, how does one go from prop trading to hedge fund? You just walk in with your track of record? They don't require specific skills?

Sorry if my questions are stupid/naive, I am pretty new to this prop trading business. So bear with me. :)
 
Quote from BudFoxx:

nice post..

so what kind of people do they look for when hiring? any special sills, education?

the jobs seem slim to none for those... and mostly for the connected, like every other job.
More...

it depends.

if you're young:

you need to have education. a good one at a good school, in subjects like economics/maths/engineering/finance. post graduates have advantages.

recruitment is very tough, typically 3-4 round of tests/interviews.

i was recently at a final round at UBS (which i failed) but one of the boys that was offered a job was a true maths genius.. u need to be money-hungry.. and u gotta want it. NETWORKING ALSO HELPS alot. if u now people etc.

experience always outweighs education.

if ur older and know the business.. with experience and have a good record then u can get a interview. IBs have unlmited desks, if you're good you'll be employed. if u're not profitable, ull be kicked out. turn over is very high.

if anyone wants tips/advice going for a bank maybe i can help here.. but u really gotta be good.
 
Quote from pdicartery:

hey batman,

Sorry if it sounded offensive, but that was the general feedback that I've gotten from asking around a few people.

I think people have this general bad impression of "prop trading" business because there are just too many prop trading firms out there that burn and churn its own traders, making profits and/or commissions no matter what. Therefore, when you usually go out and ask people about "prop trading," you would get a negative look with a big "no-no" as their response.

From your reply, it seems your track record can get you anything IF you are good. Now, how does one go from prop trading to hedge fund? You just walk in with your track of record? They don't require specific skills?

Sorry if my questions are stupid/naive, I am pretty new to this prop trading business. So bear with me. :)
More...

hey,

i can tell from your post you dont know much about this area which is fine.

if you wana be a trader at a hedge fund, they'll find u and come to you if u're good trust me. hedge funds r hidden anyways, and its impossible if u wanna apply to them unless theyre posting for vacancies.

it seems to me you're more interested in working for a IB/HEDGE fund than actually trading and making money. this isn't a good attitude. but its fine, u just want lots of money like everyone else. and u get the most at banks/funds because of the huge capitals.

how a person goes from prop to bank, to fund, or bermuda or the moon is a matter of:


1. having what it takes
2. wanting it

typically, those that are good, dont work for others. they go and start something of their own. check people like Meriwether or cohen who run their own funds.

if u wanna work for a hedgeF, tel me ur age, location, education, experience, and then maybe i can advise u.. if u were good enough u would start ur own fund.. most of these top traders at banks blow up anyways.. and they get paid and kicked out.. theyr not the best.

if u go from prop to bank its kinda silly because ud only go from prop to bank uf ur unsuccessful..and its obvious to them..

if your successful ud go from a bank to prop or a hedge for absolute. esp. if u have client contact.
 
Aren't the skills most individual screen traders develop and use that are suitable for their personal trading good for that and that alone, esp from institutional point of view? Sure you can show them a steady track record, but if it all comes down to years of "tape feel", jumping on a few contracts or few hundred shares at a time for even a decent income, it would seem like no one would take you seriously. Not that I would know anything beyond what I do, but I'm assuming the type of trading an individual does when risking his own capital is probably alot further away from those who trade institutional BP than most would tend to believe, not just difference in position sizing etc.

The hidden risk for those younger ppl who have a chance to somehow start straight out trading their own capital is that what you know/will learn really doesn't have much application beyond your own account. What happens when what you know stops working, or for some reason or another you're forced to look for a paid position in the industry? You're pretty much stuck. "Read the tape pretty well for five years" doesn't really impress anyone, does it?
 
Quote from illiquid:

Aren't the skills most individual screen traders develop and use that are suitable for their personal trading good for that and that alone, esp from institutional point of view?
More...

of course its good. its great. but show me one of them thats knocking at door of a bank? show 1 single one that makes 1% return for certain on the BOND CURVE and ill get u a job.

the point is first, most of these individuals are not knocking at anyones door.

secondly, the systems are very personalised, which is difficult to overpass.

most people that actually come here are enthusiats, theyr like the passionate enthusiate that visits the car shows, and builds his or her own car. no doubt they have talent. but id say only 5% of people here r the real thing and rarely have time to post here and believe me those people wouldnt work for a bank. I woudlnt personally if i was good. i wish i could work for a bank so theyd' train me, and pay me enough to survive and learn the business.
 
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