Proprietary traders are firmly out of fashion, as confirmed by JPMorgan’s decision to close its prop desk and eliminate some of the occupants.
What does a former prop trader do? Away from financial services, the options seem limited. Corporate financiers can reinvent themselves as strategy consultants, in-house M&A advisors, and accountants. But prop traders’ skills are arguably more suited to hanging out at William Hill.
In the downturn of 2001-03, redundant traders were able to take solace in ‘Mark2Market’, an outplacement provider run by a former trader purporting to cater for their very specific needs. In reality, it was rumoured to be a prop shop where traders disenfranchised from the large banks were reunited with Bloomberg and could trade their own accounts.
This time around, Mark2Market appears to have exited from the scene (at least we can’t find any trace of it). In its absence, it seems that traders from investment banks are still targeting proprietary trading houses. Danny Kessler, managing director of Met Traders, says he receives 1,500 CVs a month.
“The incentive for proprietary traders to stay at institutions has gone,” says Kessler. “Even if they make money, they won’t get a bonus. And if they lose money, they might get culled at the end of the year.”
Unfortunately, prop houses are no magic bullet: Met Traders employs 50 people and has taken on only 12 in the past three months.
The other obvious options are the trading desks of utilities (assuming you’re a commodities trader), or hedge funds. Citadel stripped at least six (and probably a lot more) traders from JPMorgan’s 75-person team. But with hedge funds predicted to make as many as 10,000 redundancies themselves, opportunities on the buy side aren’t likely to be huge, either.
Failing that, there’s trading from home, retiring, or waiting for things to come back. Kessler says people are going for the two latter options: “Most people have quit the City for good and are not even trading their own books.”
For traders who’ve made their money, Kessler says getting out can be a relief. For the rest, he says it’s a question of patience: “People are waiting to see if there are opportunities in distressed debt hedge funds in a year’s time.”