Prop Trading/HF (Citadel, JS, DE Shaw) vs BB Sales and Trading Out of College
Always been a fundamentals guy, currently have a SA 24 S&T offer for BB S&T but I just can't thinking of the massive bases that firms like Jane Street, DE Shaw and Citadel are offering. Whilst BB S&T starts out with 110k base, these firms are slashing out 200k+ in bases! and Jane Street even 300k. For 1st year Analyst! Can't help but feel a lil greedy here.
So I want to ask you all, what's the catch? Is the job security low? Is it a lot tougher to move higher up? Does the comp not progress as much as S&T (where I believe in your 30s you can clear close to or above a mil)? Just trying to evaluate if I want to recruit full time for these firms
The only real catch is that it's hard to break in. Your quantitative skills matter way more than knowledge of fundamentals (I'm pretty sure some of my very successful coworkers have never looked at a 10-K). Sales trading at a bank is very different than the work traders at Jane Street & similar are doing. So if you're really someone that values fundamentals, being in an equity research or macro trading role might be better for exits to a buy-side seat. Attrition and cuts happen based on performance, but wlb is probably better than most banks. Comp starts higher in top prop than in S&T and stays higher too. They're great companies and jobs, but unless you are very good at math, and the kind of math seen in trading interviews, it would be very risky to turn down a BB S&T return offer to try and recruit for the high-paying prop roles.
Appreciate the detailed insight. I am a double major in math and econ with a finance concentration, taking some math heavy classes such as lin alg, probability, financial math, data science, econometrics etc so the quanty part shouldn't be an issue. I like those classes too. Do you know if someone starts with say a 250k base at one of these prop shops right out of college, what the comp progression looks like from analyst to assoc to vp to above? And is it relatively more difficult to get promoted than at BB S&T? And if we were to take job security on a spectrum from S&T to HF, would prop shops like these be closer to S&T or HF?
Prop shops won't have defined titles like analyst, associate, vp, etc. They'll usually go jr. or associate trader -> trader -> some management level. And even the management level is optional depending on what the person actually wants to do. At least at my place, someone with 1 YoE and someone with 20 YoE can both be traders in their job title, but the more experienced person will have a more valuable book and more relaxed risk limits. Because there is no defined career progression in titles, the compensation is harder to project because there is a lot of variance. A place that can pay 250k (excl. signing bonus) for first year traders should probably be paying 500k by year 5. Base salaries tend to only receive marginal increases. Your comp becomes dominated more and more by the discretionary bonus as you progress further. "Promotion" is getting assigned more and more lucrative symbols or strategies. Bonuses are usually a combination of firm and individual performance. Outlier blowout years by top traders can see 7-figure paydays in just a few years, and there are some people who plateau in the mid/high 6-figure range after more than a decade. Hidden in this discussion is of course the survivorship bias of not getting cut and having your pay be zero. I've never worked at S&T BB or a HF, so it would be blind speculation to try and make a relative comparison, but I'd estimate about 1/4th of new traders at my place get cut within their first year for performance, but firings after that are uncommon.
have you looked at the types of problems asked? do you know who you're competing against for these kind of roles?
I think you're underestimating the quickness and competition-math mindset needed to break into most of these firms. Shaw has some somewhat more fundamental roles, where they see if you're a critical thinker, but if you're trying to join a market maker, most of the people you're competing against have at least AIME level of math ability. The classes you listed are also things anyone at a top 20 school would take in any sort of quantitative major - they're not a standout qualification for these firms.
To answer your question - first I think you're being a bit naive and greedy in your assessment/motivations. The first question you should understand is what you want to do with your life, but it sounds more like you see the higher number and just want in. Even if you were capable at quant, you may not like it, and it may not align with your goals. If the only thing you're thinking about is money, you will not do too well in either industry, and constantly be seeking alternatives.
Secondly, the simple reason why quant is paid better is because it's more selective. There is no free lunch, and firms like Jane Street offer what they do because their candidates are some of the brightest in terms of raw problem solving ability. The questions you ask about why the salary is higher makes me feel you're being a bit presumptuous about how difficult it is to get an offer at such places.
These math classes are the type of stuff quant people take their freshman/sophomore year
Its not just the math, you also will be expected to contribute to the coding process, so basic developer skills are necessary.
Also a basic understanding of all sorts of intricacies of market microstructure will be expected
Linear algebra, probability, and financial math are really the bare basic of the math required. My friends working at prop shops took these courses during their first semester freshmen year, and then supplemented them with courses like real and complex analysis, stochastic calculus, machine learning theory, combinatorics, and number theory. If you work hard you definitely have a shot at it, but don't underestimate the work needed to get in these places. From my personal experience, I was never asked a single finance question when interviewing at these places. The only questions they asked me were probability and stats (lots of expected value and PDF/CDF questions), combinatorics (they like burnside lemma for some reason), and linear algebra. But a very heavy focus on really understanding the fundamentals behind probability theory. They emphasize a lot on critical thinking and logic. As for job security and promotion, one thing that is certain is that competition is for sure rough over there, you are competing with top math/cs students from MIT, Harvard, and Princeton, Putnam and IMO winners, on a daily basis.
Depends on the BB desk as well. Desks are definitely not created equally. Mind me asking which product this is?
It will be a rotational program, so I'll get to rotate across 3 desks, dont know which yet. I'm interested in EM equities/credit, commodities, international equities and distressed credit.
This was posted somewhere else recently. Almost down to the same exact, "Why doesn't everyone do it?" and it sounds mega troll I'm NGL. The reason not everyone does it is because 99.9% are not intellectually capable of passing Jane Street or Citadel Securities' interview process. Similarly with several other OMMs.
Similar to what the other poster says, fundamentals/pure markets are not what they're looking for. They're looking for the same kind of candidates who are probably equally qualified to be at FAANG (most are CS majors) or who won math competitions and competitive programming when they were younger.
Other strong OMMs paying more base and higher upside than S&T might have different interview processes but if you suck you're going to be gone within a year or two. At most of these shops there is no "higher-up" everyone has the title quantitative trader and sure some people are more senior with different risk limits, but after your training wheel period you will be expected to perform.
My roommate from college now works at Optiver - from what I understand, traders with 6YOE are on 400 marbles (Optiver's equity unit) + $150k base. Last year marbles were valued at just over $4k, and at $6k before that. So we're talking $1.75M and $2.55M for the median trader. Marbles I believe scale 100/200/400/900 (desk head) /1800 (partner). So partners we're talking about an $11M payday + equity. It's a high margin, lean business - which explains why its founder is Holland's 17th richest person ($2.2B).
Do you have any insight into how pay scales for people on the sales side?
I don't believe these firms have sales-traders. Could be wrong.
I can certainly believe a number of traders at Optiver and similar firms with 6 YOE got 2+ million the past few years with the market volatility. It is possible although I am less sure if that is actually the median (also depends if median is among the class who started 6 years or median among those who remain at Optiver after 6 years). I also don't think this amount of compensation was a reasonable expectation joining 6 years ago though as trading firms did not consistently made that amount of profit before 2020 and I think Optiver marbles were closer to half the quoted values in most earlier years. My personal guess is that compensation will mostly revert over the long term to something closer to pre 2020 values especially given headcount growth at most large firms. At top/generous firms like Optiver where comp scales with company profits if the median outcome after 6 years is something close to getting high six figures/1 million in average years and ~2 million in exceptional years prop trading is still pretty attractive though.
Yes, certainly true. I believe marbles were closer to $2.5K pre-COVID. 400 marbles would then represent a "relatively modest bonus of $1M." Though I haven't accounted for the performance multiplier, which could double the marble allocation (a trader rated 5/5 with 400 marbles would've received close to $5M in 2021!).
If you know, can you share a bit about what proportion of traders get cut every year? And do you have any advice on how someone might succeed at a place like Optiver (beyond just "making money")?
Turnover is far lower than it was 10 years ago. Around 20% of new traders will be cut after the first year. Thereafter most last to the 5-6 year mark.
Unfortunately, I have never worked in the space myself - so can't give you any specific advice.
Can I ask your knowledge of S&T progression (of age/title/progression/salary)?
Would be great to hear as I'm not sure on this.
My knowledge of S&T comp is exhaustive within the walls of this forum.
https://www.wallstreetoasis.com/forum/trading/updated-2022-st-compensat… (as far as i understand it, the higher ends are harder to break out to in S&T relative to IB)
https://www.wallstreetoasis.com/resources/careers/salary/sales-and-trad…;
ime they’re not that into s&t types
Does anyone have insight on how opportunities at smaller prop shops (comparatively to JS, Optiver etc.) like Belvedere, CTC, Transmarket, Akuna would be vs interning in a markets role at a top BB?
All great, will get compensated well. Tmg will have same comp as BB. If you want to go macro route prolly better to go bb tho
Not even about level of math. I got rejected from a t1/2 company because my answers weren’t fast enough compared to competition. Have to be right and fast.
Oh yeah i see. I was getting a bit discouraged lol cuz I've bee taking quite a few math classes and was thinking, wait there's more? That makes sense, they want the sharpest people
It's a very different career path.
In a bank you progress within a business, you work with sales, structuring, research, clients etc...
Your book is a reflection of all of this on top of risk taking. You progress through the organisation and start getting more power/ownership etc...
It's overall less Darwinian, you can be around mid 6 figures without being that good, especially in sales, plenty of mediocre ones copy pasting client requests with very low value added.
In trading you can often hide behind franchise Pnl and have a decent year despite minimal alpha.
If you have "ownership" of a big book with decent business, which tends to happen at some point after 8-10 years, you can clear 7 figures while not having that much market risk. When a bad year happens you just bounce back at a lower bank or go gamble in a hedge fund.
Overall banks are probably the best risk/reward for good performers, but not for exceptional ones.
Fair enough!
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