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Trading is starting to look like a bad career move

In a fit of political correctness, banks are eschewing prop traders. First it was JPMorgan. Now it’s Goldman Sachs.

There are not places for all these prop traders in hedge funds. As we have noted previously, hedge funds are fussy about the prop traders they take on. They only want the very best.

Does this mean most prop traders will be relegated to the oblivion of the spare room?

Apparently not. We have spoken to two and they are both weighed down with offers to join banks’ flow desks.

“There are opportunities popping up all over the place,” says one junior trader on the verge of redundancy. “I’m planning to move back to the flow business and am very confident there’s stuff out there.”

“I’m talking to about four different banks about customer facing roles at the moment,” says another senior credit trader who’s been working in prop. “There’s been a massive merry-go-round in credit and a lot of banks have holes to fill.”

A trading career is not what it was

Nevertheless, trading isn’t quite the career it once was.

“Markets used to be a lot looser – it was easier to make money by arbitraging between related contracts. 60% of trading is algo now, which is making it much more difficult to achieve that,” says William de Lucy, head of proprietary trading firm Amplify Trading. “These days, you either need to have a view on the market based on an understanding of fundamentals and macroeconomics, or you need to be able to work with algos.

“There are probably half the number of jobs, and half of those that remain are going to quantitative people,” he adds.

Headhunters working with traders claim opportunities are drying up.

“It’s definitely become more tricky to place traders over the past 18 months,” says Tej Dhindsa at recruitment firm Ingram Mayet. “Once banks/funds have cut traders they are not necessarily replacing them and are farming out roles internally instead so that existing staff take on more responsibility.”

Dhindsa says there are numerous traders who’ve been out of the market since 2008, many of whom took voluntary redundancy in the belief they’d be able to get back in and are now stuck in spare rooms trading their own money.

“There are guys out there who were on 95-100k base and who are willing to accept 50-60k just so that they can get back onto a trading floor,” he ponders.

Despite this, the prop people we spoke to had no regrets whatsoever about their choice of career. “Trading is absolutely not a bad job,” said the senior one. “It can pay more money in a few years than most of us idiots are supposed to earn in a whole lifetime.”

Comments (13)

  1. in my small provincial town, i have come across many traders especially on market day on Friday when cattle auctions take place. many traders that used to be on 100-120k now make many multiples of that trading the dead spread. some even have little or no regrets about this as they say “it can pay more money in a few years than most of us geniuses are supposed to earn in a week and we dont need to be macro or algo oriented.”

  2. Revenge of the nerds.

  3. well, go algo or… perish :)

  4. Long live algo-trading :-)

  5. deflation comes to trading floors eh? perhaps prop trading coming to canada/oz??

  6. Kind of agree with the article….!

  7. Absolutely right

  8. Trading is only marginally for banks anyway. That is if you correctly allocate the cost of risk capital supporting that trade against it as well as all other support costs. it is different for hedge funds though.

  9. ..Adapt or Die. Excuses are for Losers.

  10. Prop traders are usually the best traders from within a bank or trading house. This does not mean that because they have traded on a prop basis that they are pigeon-holed for the rest of their careers. Some do move into the world of HF’s, but most remain within banks / funds / prop trading houses. The fact that prop desks are downsizing does not mean these people will not have jobs but they will work under a different silo or desk, still trading.

    I am a head hunter specifically within derivatives, a number of strong traders that once worked on global prop desks are moving due to bank strategy, but prop trading will never die.

  11. How much does the average (non econ educated) trader know about macro? Hmmm

  12. @thierry – in the small provincial town where I work, I have met a few economists. lets just say that the best conversations I have had is with one handed ones. Anyway, its not about what you know its more about how big your cojones are.

  13. I think I have had enough of this “small provincial town” nonsense!! one more comment from any residence of this town and I will return to the town and disconnect all the PCs!!

    Mayor Small Provincial Town Reply

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