Prop Trading vs BB Trading

Okay, so you are just graduating and have a FT job offer from a top prop trading firm and top BB bank on a trading desk. Which do you choose and why?

Just interested as to which of the two people would go for in the current financial climate considering it is your first role out of college. What factors would influence your decision? (Pay, training, particular firms, turnover rate, location, etc.)

 

What if you specify those factors?

[quote]The HBS guys have MAD SWAGGER. They frequently wear their class jackets to boston bars, strutting and acting like they own the joint. They just ooze success, confidence, swagger, basically attributes of alpha males.[/quote]
 

I don't have any factors to specify. Unfortunately I am not in the position of having both such offers. The intent of the thread was to get a feel of which side of the industry is more in favor at the present time. I was asking everyone from a person perspective, which they would choose and how they weigh different factors in this choice including maybe specific firms eg. 'f it was with firm X, Y or Z, I would take prop, if not I'd take the BB because. . . '

 

You said "Top Prop Firm". This in a heartbeat over any BB trading desk anywhere, no questions asked.

Right now in these conditions I have contacts at banks telling me to go anywhere but the banks. Also a top prop shop will train you as good a bank, you will get a lot more pay (if you're good), and you don't have to deal with the end speculation and prop trading that will eventually happen at the banks (not completely but new guys won't be doing any prop).

A year or two ago this would not be so simple for me.

 

i agree with the person above. the prop trading done internally at BBs are not going to be in existence for much longer due to the increased regulation. Plus prop trading will pay you bonuses more correlated with your p/l

 

I know some prop trader firms (albeit probably not the "top") require some capital contribution of your own so I'd avoid that if possible (just so you aren't putting your own money at risk to start, before you really know anything).

That being said, if you have an opportunity at a BB, I'd personally take it just for the solid experience and presumably good pay that comes with it, but either way you're looking good.

 
TerpStreeter:
I know some prop trader firms (albeit probably not the "top") require some capital contribution of your own so I'd avoid that if possible (just so you aren't putting your own money at risk to start, before you really know anything).

That being said, if you have an opportunity at a BB, I'd personally take it just for the solid experience and presumably good pay that comes with it, but either way you're looking good.

People on this site call places that require capital contributions arcades. Everyone says to avoid them at all costs.

 
SamuelClemens:
TerpStreeter:
I know some prop trader firms (albeit probably not the "top") require some capital contribution of your own so I'd avoid that if possible (just so you aren't putting your own money at risk to start, before you really know anything).

That being said, if you have an opportunity at a BB, I'd personally take it just for the solid experience and presumably good pay that comes with it, but either way you're looking good.

People on this site call places that require capital contributions arcades. Everyone says to avoid them at all costs.

Good to know. Thanks, Sam. Yeah I wouldn't even consider it I think thats ridiculous I just didn't want the OP to fall into it.

 

Most prop shops don't increase your salary much, if at all, unless you are at a partner sort-of level. Even then, the majority of your comp is coming from PnL bonus, not salary, whether that is from your own account, your desk, or you're a partner and it is from the whole firm. Example--a friend of mine graduated in '07 and worked in S&T for a BB, but quit after a few months. My friend later joined a prop shop with a salary about ~$15k lower, albeit in a cheaper city. First year bonus wasn't anything outrageous (all in comp was $200k. Still, friend's salary is

 

Also, I know of a number of prop places that pay below $40k for your first year 'salary', but you are expected to earn more than that in your first year bonus anyway.

If you're expecting guaranteed income, most of the prop places probably are not the place for you because even the better ones aren't going to keep you around if you aren't making them a good amount of $$ to justify what they are giving you. It is more clear cut than being at a very large bank with extensive hierarchy and bureaucracy.

 

I'm making a similar decision...have the opportunity to get on a desk that trades more "exotic" products at a BB or go to a top NYC prop firm.

I'm honestly leaning BB for the resume building aspect, and because I feel like I might have a better shot at trading for a global macro fund from a BB desk than even with a track record from a top prop firm. On the other hand, the ability to really control my comp is appealing.

I also figure that I could potentially make the switch from bank -> prop considerably easier than the other way around.

 

if you're worried about the exit opps then go for the BB. if you're sure about trading as a career, then go to the prop shop. def less hierarchy, don't have to deal with management, just focus on trading

most people from prop shops do not look for exit opps because if they can make it then the pay is much better (why switch jobs for a lower pay). and the ones who do leave voluntarily usually start trading with their own capital or are sponsored by people to trade for a higher % of PnL

 

A couple of good friends have been in this situation this year and last year. They all choose the prop trading firms. I think they saw it as a means of cutting to the chase--people probably go the BB route so they can get a job at a prop trading type firm so why not skip a step. The downside from my perspective is just that its easier to get fired if you aren't good.

 

Haven't read the second one, but everyone should look at the advanced trading article above. Its a pretty good look at how everyone at the BBs felt about decimilzation - funny they think their clients were upset....

Anyway, its useful to look at because we'll see how the other markets go through the same process

 

I'm leaning more and more towards prop now. i don't see the business going away anytime soon; there is so much commitment to technology at jump and Getco, and so at best the BBs get equal technology and equally smart/determined people. But even that seems like a stretch.

I read that Getco is responsible for 10-15% of the trading volume on a number of US stocks. A couple of interesting articles: http://www.forbes.com/forbes/2009/0921/revolutionaries-stocks-Getco-new… http://online.wsj.com/article/SB125133123046162191.html

http://seekingalpha.com/article/158984-with-Getco-and-company-why-do-th…

As for the pros of going to a BB and doing a more traditional trading role? I mean, they are still there, but they are things that are more important for when you're in that system. Networking ops are more important on wall street because you are expected to move around a lot more. Exit ops are sort of limited in S&T anyway; less options to move to PE like in investment banking. And I hear that banks are trying to poach prop traders from the top shops too...they're just failing.

And as for traditional being more "fast-paced"... I mean, click trading is literally louder, more shouting, etc. Not necessarily more fast-paced though in terms of learning. I think I would learn faster at a top prop shop.

Other reactions? Other guys who are making this decision, what are you thinking?

 

The problem with a prop shop is that if you don't cut it there, you're SOL. Having FNYS or Trillium or even Jane Street on your resume won't mean a thing to anyone outside of trading, and to those in trading, why would they want someone who was bad at their job?

On the other hand, if you work at a BB, you get a great name on your resume that can carry you a lot further in a lot of different paths. I don't see what you gain by going straight to a prop shop, aside from having to put up with less BS for a couple years.

 

I'm not worried about not cutting it, although I guess I could see myself getting tired of it after a while in which case exit ops would be kind of important. However, my understanding is that trading in general doesn't provide a whole lot of exit ops though (aside from other trading jobs) so your argument is strictly based on prestige/name recognition of the firm...? I feel like I can always go back to b-school if absolutely necessary, and prestige is going to only open doors, not get me hired.

 

How hard is it to transition from BB to prop? I have an offer from a good BB GS/MS/Citi/JPM/BoA for their trading program, but I think it would be fulfilling (and more monetarily rewarding) to work at a top prop shop like Getco/drw/Jane Street/jump/SIG.

Could anyone comment about making such a transition 2-3 years after working at the BB? It seems as if most prop shops don't hire new traders, just fresh grads.

Thanks!

 

I would take BofA over SIG. You can trade at BofA for a few years and then move around the street if you're good. You can also switch to a different desk within BofA after a few years. Its keeps options open.

SIG I feel doesn't really allow too much room to move to other BB firms. Also, from what I hear, SIG has a tough non-compete in their contract, which makes it even harder to move. Not sure if it's a non-compete or just that they make you sign a 3-year contract and you can't work for a competitor until that 3 years is up.

Not 100% sure on everything I've said, but that is what I have picked up speaking with others.

 

OK thanks. Does any of what you say change considering this is for summer not full-time? More specifically, can he just take SIG for the summer then do full-time recruiting at BofA or another BB?

How do the BBs look upon SIG vs. BofA for full time?

 

SIG is a great firm, but the nature of prop trading firms doesn't seem conducive to a first job (unless you are just amazing at trading). Most firms (idk about SIG in particular) have low assistant --> trader conversion rates as well as the fact that if you fail after becoming a trader you have a name that is famous in trading (but not everywhere like the BBs). While I woud doubt you would have a hard time finding a job in finance after a job at SIG, it would be exponentially harder than if you were at GS. Especially if you find out trading "is not for you", it would be easier to move internally or laterally from a BB than Susquehanna. If you like trading you can always move to SIG later if you want to prop trade.

Reality hits you hard, bro...
 

I think BofA looks better on resume than SIG. I would without question take BofA over SIG. BofA will expose you to more products/securities, and will also allow you to start building a network. I think it would definitely look better for other BB's during full-time recruiting.

 

I think people who go to SIG aren't worried about "keeping options open". Prop trading is more of an end goal rather than a stepping stone like all of the BB analyst programs. If you know you really want to trade, going to a place like SIG is a great choice. SIG also has reasonably high conversion rates--if you get an assistant trader offer there and really want to become a trader, I'm sure you'd be successful. Most of the people who don't make it probably decided trading wasn't for them.

SIG does have a 3 year non-compete. Definitely something to think about. Also, as always thinking about things like company culture and such will be important.

At the end of the day, as an AT at a top prop trading firm you will focus a lot more on the actual trading early on, and as a result, learn a lot more about it faster than your BB analyst counterparts. SIG specifically has a pretty drawn out training program, so you will definitely get a strong baseline education there if you go. If you are good, you also have significantly more upside (money) potential much much sooner than your BB counterparts. At the same time, you should consider the possibility that 1. you don't like trading or 2. you are not good at it.

So, if you are "worried" about "exit opportunities", prop trading as a first job probably isn't the best choice. But if you know trading is it, and really want to dive into it right after college, then maybe prop trading is.

 

To put it bluntly, if you think there's a good chance you might suck at trading, you should absolutely 100% do BB. If you are pretty confident about your ability to become a good trader or you're feeling frisky, then you should seriously consider SIG.

 

Everyone I know who has started at SIG left due to various issues with rev shares and advancement (think 5yrs in). That being said, they are employed elsewhere on sell side and buy side, so the name is worth something if you have the ability to back it up. I know many people that weren't happy and left. Kind of like the exodus from Getco recently.

 

dont u mean BSD?

BB prop, only for superstars. HF is for very good traders who want a chance to make more money and have the same lifestyle, unless they are leaving to start their own HF in which case there is going to be MUCH more work.

Prop firms is a good job for undergrads, but ONLY if you get into somewhere that isn't a chop shop and is reputable. Susquehanna, Trillium and First New York come to mind.

 

FNY only pays a salary for the analysts in the two-year training program out of undergrad. After that, until partner level it's 40% P&L (with some deviations depending on negotiations, your trading method , etc. Someone who never does overnight trades receives 50% P&L for example)

At partner-level you get paid a percentage of firm profits that's subject to revision each year in addition to your personal P&L.

 

after you learn to trade at trillium there is no salary, just 400k to trade and 25% P&L to start. In terms of prestige, I'm not sure, but who cares as long as you get rich. Do you need to work at a BB to make 2mm+ per year? nope, so who cares.

FNY pays $55k to undergrads then you get no salary, just P&L.

 

trillium pays a salary at first, so does FNY. i dont know any places that allow you to trade your own book, while training you, give you a salary AND let you share in profits. doesnt seem like a fair trade.

 

x13, where exactly are you getting your information from.

i have a friend that received an offer from DRW but didnt take it and another who took his SIG offer. they both offer in the 60's for base for an undergrad.

not that it has direct relevance, but i interviewed with both companies

------ "its the running joke now, we now have fair trade with china so they send us poisoned sea food and we send them fraudulent securities."
 

I guess I should clarify, those are the numbers my friend is getting (as a trader) from one of the 3 firms mentioned straight out of undergrad (you can now probably deduce which). Those numbers are also in line (6 figure base) with what some of my other friends are getting from HFs in Chi and also quant HFs in Greenwich, again all out of undergrad. To clarify, this is not just something I "heard" about, this is what my friends are getting.

 

DRW (for undergrad): 65k base, bonuses comparable with those of BB's for first year. Subsequent years you tend to rise up must faster salary-wise.

Jane Street and SIG should be similar.

 

I think that this is the one where you have to go with your gut, and you'll get a different answer from everyone you talked to. I'm in a similar situation, and I know I have gotten a mix of opinions. If you are more confident in your love for trading and ability to "make it" do that. If you want to have the security of the BB do that, you'll make HF connections and it would also be better for bschool.

It was tough for me to decide, but in the end a trading floor was the only place I could truly see myself happy

 

I think you are best positioned at your current position. With exprience you should be able to get closer and closer to the PM position on you desk, or lateral into a PM position at another bank. Working at a bank, you could get the start up capital as well as systems when you do decide to start your own HF. While in the short term you might make more at a prop firm, if you want to be autonomous, id stay at the bank.

If you dont mind me asking, which prop desk?

 

Most trading shops you will find will be very specialized. Prop shops might even be more specialized than a BB but it heavily depends on the specific strategy. And most prop shops are geared towards market making. Your best bet as said above is an EM desk, as there it is usually the case that a trader covers a specific region and then trades the debt and currency of that region. If you want to be able to trade multiple products your best bet is a hedge fund that allows you to do that.

However Id say that focusing on a product is not a bad thing, I wouldnt want to start as a junior trading multiple prodcuts, I think that you just wouldnt learn as much.

 

1.- I think you actually become more specialized, and pigeonholed, because many prop shops only do one kind of asset, whereas in banks it´s not that uncommon to change product.

2.- Many prop shops let you/require you to put some of your money in the trades you do for the shops. Otherwise I don´t know, but I guess you would´t be allowed.

3.- Many of the major shops actually do market making, and many of the small ones do too.

 

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