What you wrote is NOT exactly all correct. Top ibanks/prop desks do NOT(I repeat DO NOT) have "thousands of prop traders"!! Most prop trading desk on Wall St are really smart. For example, at Bear Stearns , the group is only 15 people! The tons of other "traders" you talked about that has MBA from harvard, or wharton, sloan, stanford,etc. are NOT(NOT!!) prop traders. They are more appropriately should be called "market-makers". I don't consider a guy making bids/asks a "prop trader". Prop traders, as defined on wall st. , is a far far more selective smaller groups. Most of them DON'T have MBAs, but instead have phds in math,physics, finance, etc. from like MIT,Harvard,etc. They build complex models and risk the firm's capital and get a cut. Most market makers don't get a cut of profits. just a nice base salary + bonus. just to clarify things... trader99
In the last few months I checked out most Prop trading firms (doesn't include banks, brokerage houses, etc.). The only one that I know of is FSNY. They seem to want top grads with no experience in trading. I heard (or maybe I saw it on their website, not sure) they paid aprox. 50,000 and then you got a percentage of profits. No, I don't recall the percentage. I had actually spoken to someone at the company and he verified that, but told me he wasn't interested in me because I wasn't virgin trader. Oh well......a food cart on Wall Street is looking better each day.
is it that they seem to want is people to push buttons on a black box? shades of ltcm...derivatives portfolios going up in smoke... Princeton whachamacallit evaporating...it's all good.
Don't know and/or understand their reasoning. But if they make money that way, good for them. I am wondering if should go for a hot dog stand or maybe just pretzels and soda. Decisions decisions, what is a trader to do. I bet if I had my Harvard degree I would know what to do.
thanks for all the responses. I didn't understand why some firms would give salary when trading is all dependant on personality. I am starting trading for heartland in august. just hoping to survuve.... jc
i'm not too familiar with this first sec. new york or whatever. I'm sure they are a solid operation with good traders,etc. but like i said before, fsny, worldco,bright,etc. are not the same proprietary trading business model as most institutional prop trading. and yes, ltcm was a disaster. an old college buddy of mine worked there before it blew up and now works at goldman. haha. but the thing is people continue to do fixed income type arbitrage strategies that ltcm used. The problem isn't that their strategy didn't work. The real problem is that they used too MUCH LEVERAGE especially when markets were going crazy during 98. and they also did things that weren't their areas of expertise - going to equities and risk arb. stick to what u know. so, not all quant strategies will result in blow ups. it's just they thought too highly of themselves and didn't follow sound risk mgmt. trader99
Worldco does not pay a draw. Broadway paid $1600/mo until last fall, now they pay no draw. The business model of paying draws to proprietary traders is no longer as sound as it used to be.
having come from blue collar roots, whenever (and it's a regular occurance) some arrogant blueblood who struts around with his quant magic hits the wall, a sense of justice is satisfied. But I still pity him. I think it's partly due to my dislike of imposing mechanical systems on social aggregates, like markets (or societies).
Isn't that just blue collar arrogance? I used to feel the same way as you. But then, I remembered my college term paper on LTCM. Merriweather did not come from a fantastically wealthy family. Neither did Neiderhoffer or Soros. Soros came from an immigrant family much like mine. They made it big (and some lost it) in the institutional world. Anybody can make it to that level in this country, Europe and some asian economies. That's what's great about capitalist countries. Reading Neiderhoffer's story only motivates me. The only thing that pisses me off about LTCM is how it came close to causing a market collapse.
Yeah, I would agree totally. The concept of "blueblood" arrogance is totally wrong. I went to an Ivy League school and my parents were dirt poor immigrants. So, did many of my colleagues. I mean most of them are either just middle class or even low class. But they work their asses off in high school to get the opportunity to get a good higher education. Of course, there's always the occassional trust fund babies and wealthy, but they are very very small part of the total student body. Maybe less than 1-2% I would say. And it's also true that Neiderhoffer was not well off. His dad was a policeman. Soros came to the US with practically nothing. And a lot of institutional fund managers/traders came from rather average families. It might SOUND arrogant when they say they are throwing around a few hundred millions ot billions in the market. But that's just the very nature of institutions with large sums of money to put in the market. Most of the time they are just stating a fact and not being arrogant. trader99