Proprietary and Self-Employed Financial Trading

[qlai]

At least you won't lose more money than you have

Lol very true ... I guess this is why one is better off trading OPM.

 

[jonahern]

Is employment by a proprietary trading firm or similar workplace typically compatible with becoming a self-employed trader?

I have a BS in CompSci, and have recently realized my fascination with financial markets. I am currently educating myself in finance, as well as the math prerequisite to dabbling in machine learning. I have been considering applying for a job in the trading space, as in addition to building capital, this seems like a great opportunity to surround myself with experienced mentors and team members, without having to wander through the maze of advertised mentoring services that may be of questionable value. However, I would not want to bar myself contractually from building a self-employed trading business, and I'm not sure if this type of prohibition is common.

I realize that definitive clarity is only possible by reading a specific company's employment contract; I merely want to know whether this is a concern in general. Is it usually permissible for a proprietary trader to manage a personal trading business as well, or at least to start one if and when their employment ends? Is this a path that a significant number of eventually-self-employed traders take?

I worked at what was called a "prop shop" - it was a partnership and I recieved a K-1 and was self-employed trader. Some firms such as this allow trading as an entity, some don't. Side accounts were allowed, but required reporting.

 

[bone]

Depends what you mean by prop firm....If you're talking about Optiver, Jump, etc....you wont be able to trade anything outside of your retirement account and even then are required to hold positions for a minimum period of time (30 days is what I recall). Smaller firms may have different policies, but any big firm will have restrictions in place to eliminate conflicts of interest.

Great point. The firms you mentioned are regulated futures proprietary trading firms and they have a much different business model than the equity shares prop trading model. By CME regulation, these firms are registered with CME and are required to risk only the firm's capital, the trader must be considered an employee of the firm and the trader is paid on a W-2 at the regular tax rate (no blended capital gains tax treatment).

 

[bone]

I have a BS in CompSci, and have recently realized my fascination with financial markets. I am currently educating myself in finance, as well as the math prerequisite to dabbling in machine learning.

You are actually set up really well in terms of entry. But NOT as a trader. Go to DRW's website and apply to become a programmer. In due time you will gain exposure to trading models and strategies. You can at that point in time ask to become a trader, or if they offer no satisfactory path start to interview for trading positions at probably a hundred different firms in Chicago, NYC, or London.

 

[JSOP]

You are actually set up really well in terms of entry. But NOT as a trader. Go to DRW's website and apply to become a programmer. In due time you will gain exposure to trading models and strategies. You can at that point in time ask to become a trader, or if they offer no satisfactory path start to interview for trading positions at probably a hundred different firms in Chicago, NYC, or London.

This would be a better career path for the OP. That way he can still put his acquired skills and knowledge to use and earn income from it and learn about the market and finance at the same time. And in case the financial market is not as rewarding, he/she can still fall back on his/her experience as a software engineer. To me I always find IT jobs to be more secure than financial gigs despite its potential financial rewards. Hedge fund managers and traders can come and go (and a lot of them have gone) but you always need programmers.