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.”