• Sharebar

I'm curious to hear how everyone would rank the top prop trading firms. I've focused the post on firms in Chicago because that is where most of them are. Here is how I've ranked them:

1. Spot Trading
2. Jump Trading
3. DRW Trading
4. Optiver
5. TransMarket Group
6. Peak6 Investments
7. Chicago Trading Company
8. Infinium Capital Management
9. Wolverine Trading
10. Tower Hill Trading

Honorable mention for firms outside of Chicago:

1. Jane Street Capital – NYC (considered to be the best)
2. Susquehanna International Group – Philadelphia (on par with CTC)
3. First New York Securities – NYC (on par with THT)

Feel free to change them around or offer any overall feedback or firm specific feedback.

Trader Joe's List with explanation further in the post.
1. Jane Street
2. DRW
3. SIG
4. Optiver
5. Spot
6. Transmarket
7. Wolverine
8. Peak6
9. Jump Trading
10. First New York

Comments (165)

  • trade4size's picture

    well my vote for most monitors/trader goes to spot trading for sure. Impressive that you have like 13 offers rossgellar. That might be a wso record pinochio

    "Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.

  • trade4size's picture

    Most of these firms are not even prop firms but rather they are mostly options market makers. As far as ranking them, how is that even possible when your not comparing apples to apples. Not only that to rank them you need some sort of transparency which is nearly impossible with prop trading. I think you need to include the following

    Trillium
    Group 1
    Liquid Trading
    Gelber Group

    "Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.

  • trade4size's picture

    well i disagree rossgellar, you know why.

    "Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.

  • RossGellar's picture

    actually I'm not sure why? I interviewed there and wasn't impressed at all. Additionally, I have spoken to several traders that work there and aren't too happy with their operations. Why do you think they're good?

  • RossGellar's picture

    What I did is I looked at the overall competitiveness of the firm, in terms of getting a job there.

    I also talked to many people in the industry, as well as at hedge funds and investment banks - I asked them about which firms were most reputable in terms of order of operations, compensation, and training. I talked to traders at many of the firms to get a sense of their own personal thoughts on the culture, technology, management, and past/future success of the firms.

    In addition, I've interviewed with most of the firms on that list and I ranked them based off of my own judgment to some degree.

    It also depends on what you want to trade- equities, options, futures, rates, f/x, ect. Many of those firms focus on a specific product area and a specific style (whether it be market making or discretionary trading).

    When you're picking which firm to go with though - the key, in my opinion, is to pick a firm with a winning business model and winning strategies. Firms look for talented and bright candidates that they feel will be able to execute their strategies well.... so I basically tried to judge which firms have the winning-est business models and strategies.

    Obviously the list is just my opinion... and any comments or thoughts would be great.

  • traderpimp111's picture

    your list is pretty surprising to me.

    could you please share what the people you spoke with had to say in general about prop trading?
    overall "order of operations, compensation, and training" for top prop shops in general versus their bank or hedge fund. is average compensation/upside as great? what about starting salaries?

    and how can you determine winning business model/strategies with absolutely 0 experience? sounds sketchy

    I personally interviewed at two of your top 10 after my sophomore year (though no offer, did not practice mental math) and neither seemed too impressive versus a bank. Getting the interview was not difficult seeing as how I was a Sophomore with an OK resume. The interviews were easy with some lame brainteasers, fit, and some basic math anyone could get with proper prep. And they did recruiting for traders at some schools in the USnews 40-60 range, which is not too impressive.

  • RossGellar's picture

    In general, compensation/upside potential over the long run if you're successful is going to be better at a prop firm vs a bank, and I would say it is difficult to compare it to a hedge fund... here is why: The plus side to prop trading firms are that they aren't necessarily affected by downturns in the economy because they don't have client dependent business models (such as hedge funds, private equity, and investment banks do)... they are also very meritocratic for the most part. The downside is that if you aren't good and can't generate profit or add value to the firm, they will be quick to get rid of you which makes for a higher attrition rate. During economic downturns like the one we're in, I've noticed that most firms tend to hire more experienced traders and will cut down on their undergraduate recruitment.

    Now the reason it is difficult to compare them to hedge funds is because you aren't just comparing performance... if you're at a HF on a team of 20 people that runs 10 billion in AUM, compensation is going to be stellar if you have positive returns. If you're at a hedge fund that is running 500 million, not so much.

    It is difficult to determine which firms have that winning model though, because so many of them are secretive. That is why it is best to ask plenty of questions.

    Prop firms tend to interview many people, but they bring on few, and weed out the weak individuals that can't cut it in their first 12-18 months. Because of this, starting salaries at prop firms tend to be below the street. At the best firms, however, starting compensation is on par if not better than the street.

  • traderpimp111's picture

    "The plus side to prop trading firms are that they aren't necessarily affected by downturns in the economy because they don't have client dependent business models"

    this is what makes me think prop shops are inferior. they do not have as much capital as the hedge funds with 10 billion for 20 traders and never will. and there are a lot of hedge funds with a crazy amount of capital per trader. I tend to think of prop shops as closer to the lesser hedge fund that is running 500 million. (I think the actual prop shop aum is much lower)

    also I would think that many prop traders at banks would in fact eventually make the move to a hedge fund. you cannot really do so from a prop shop.

    that being said i have heard people take DRW over Citadel and Jane Street over Goldman S/T. which is why i am still a bit confused about compensation potential.

  • In reply to traderpimp111
    cdw38's picture

    traderpimp111 wrote:
    "The plus side to prop trading firms are that they aren't necessarily affected by downturns in the economy because they don't have client dependent business models"

    this is what makes me think prop shops are inferior. they do not have as much capital as the hedge funds with 10 billion for 20 traders and never will. and there are a lot of hedge funds with a crazy amount of capital per trader. I tend to think of prop shops as closer to the lesser hedge fund that is running 500 million. (I think the actual prop shop aum is much lower)

    also I would think that many prop traders at banks would in fact eventually make the move to a hedge fund. you cannot really do so from a prop shop.

    that being said i have heard people take DRW over Citadel and Jane Street over Goldman S/T. which is why i am still a bit confused about compensation potential.


    But (1) prop shops keep 100% of their profits and (2) there are soooo many more strategies you use with $150M versus $10B.

    And why would it be easier to go from a bank to a HF? It would seem as though prop trading is much more similar to trading at a hedge fund than market-making at a big bank would be. Anyone?

  • In reply to traderpimp111
    RossGellar's picture

    traderpimp111 wrote:
    "The plus side to prop trading firms are that they aren't necessarily affected by downturns in the economy because they don't have client dependent business models"

    this is what makes me think prop shops are inferior. they do not have as much capital as the hedge funds with 10 billion for 20 traders and never will. and there are a lot of hedge funds with a crazy amount of capital per trader. I tend to think of prop shops as closer to the lesser hedge fund that is running 500 million. (I think the actual prop shop aum is much lower)

    also I would think that many prop traders at banks would in fact eventually make the move to a hedge fund. you cannot really do so from a prop shop.

    that being said i have heard people take DRW over Citadel and Jane Street over Goldman S/T. which is why i am still a bit confused about compensation potential.

    Let's analyze the hedge fund industry for a moment.

    8 years ago the industry was in a boom. Everyone and their mom was starting a hedge fund. It was easy to do and easy to raise capital. Everyone wanted in.. and the industry peaked at about 12,000 hedge funds globally. Today, we are at the other end of the spectrum. Investors are pulling out of the industry. Funds under 2 billion in assets can't survive the turmoil and are shutting down. Even successful funds such as SAC are going to cash and still some of the best funds in the game are down in excess of 20%. In addition, hedge funds have high water marks, which means many funds won't be able to collect a performance fee next year until they make back all of their losses. So a lot of these funds that are down in excess of 20% could potentially have a 30%+ return next year and still not be able to take any performance fees. So that 2 and 20 is essentially just 2% management fee now. It doesn't make sense for many of these funds to stay in business so you're going to see many of them shut down over the next 2 years. Additionally, it is going to get so much more difficult to raise capital in the hedge fund industry that many funds will have to bring down fees to 1 and 10, rather than 2 and 20, just to appeal more to the institutional investors. There has been widespread speculation that the standard of the industry (as well as private equity) will be 1 and 10 going forward. It is going to be very difficult for smaller funds to survive which means only the elite massive hedge funds that have been around a long time with veteran managers will be able to stick around. Also, how many $10 billion funds do you think there are? You make it seem as if it is pretty common... it isn't. There are perhaps a few handful. And these places only recruit the best of the best - from both banks and prop firms, by the way. Not just banks. Also, you are definitely much more flexible when you run a smaller amount of money. That is why a lot of funds close themselves to capital raising from investors. Don't get me wrong - if Chase Coleman at Tiger Global asked me to join his crew as a trader, I would take that gig over a prop firm any day. But that doesn't happen as easily as you make it seem. It is very difficult to break into those funds coming from a bank/prop firm, or even less - coming straight out of undergrad.

  • RossGellar's picture

    Couple more points:

    If you take a look at the investment banks, they have been run for years on a compensation model paying about 50% of revenue to the employees, while hedge funds get 20% of profits. so as anyone would expect, the sales and trading businesses were typically run to maximize revenues by using ridiculous amounts of leverage... 30 to 40x. Now that all of the banks are going through this de-leveraging, revenues and compensations are going to be slashed substantially as well. Not to mention, the client dependent businesses will go through a slowdown as I mentioned happens with most downturns in the economy.

    In addition to this, why would hedge funds that survive - the 10 billion dollar AUM funds - want to hire from banks when there are plenty of talented experienced professionals that went out of work through this massive consolidation in the industry?

    Also, since proprietary trading firms aren't government regulated, they don't have to publicize their size or profits (of which they get to keep 100%, as cdw mentioned). This is why they tend to stay private and secretive. Since hedge funds are government regulated, they have to disclose long and short positions, size, and returns to investors, which usually leak. And prop firm returns are generally higher.

  • traderpimp111's picture

    I mean if these places pay same as BB banks who gives a shit about anything else count me in.

    but its just so hard to verify numbers. plus so many chop shops and idiots on places like elite trader who couldnt graduate high school and are now putting down 5k to scalp and churn commissions.

  • cunninglinguists's picture

    Doesn't the CFTC have some authority over these prop firms, at least if they trade on exchanges like the CME and NYMEX. In fact, I believe the CFTC started some investigations on some prop firms amid the spike in oil prices.

  • ihavenomoneynow's picture

    i do agree with trade4size that there is a huge difference between prop shops and market makers.

    Jane St. and SIG are some of the top market makers. They take prop positions but their primary revenues come from hedging.

    FNY and Trillium are pure prop shops.

    In my opinion, market makers are MUCH more legit than prop shops, though I'm sure some will disagree

  • trade4size's picture

    I do not have enough hours in the day to argue with the uninformed schnooks on this thread so I will hit the points that are relevant to me. Rossgellar brings up some very good points. I do not agree with his ranking necessarily but he is credible.

    Second, prop shops and BB trading are totally different so you should not try comparing them. At a BB you start off as an analyst (traders bitch) and you essentially work for the trader. This is where you earn your salary. Once you become a trader you will eventually switch to a primarily performance based compensation. Prop guys at banks bonus' tend to be multiples of their base salary.

    As far as performance based compensation a prop trader at a prop shop will see much higher payouts than a prop trader at a bank. At a bank a trader might see 8-10% of his pnl as his bonus for performance based compensation. A top prop trader is closer to 75% of his pnl. Most banks charge their traders a desk fee also. This number is VERY LARGE. (1mm+ typically) which comes out of your pnl. Most prop shops do not charge a desk fee at all.

    There is a huge fundamental difference in a prop shop and and a leveraged retail prop shop (aka a trading "arcade"). Arcades are the modern day bucket shops which basically are making their money based on the commission they charge you to trade in addition to any % of profits that they take. They want a trader to be as active as possible without blowing out his account entirely. This creates a steady revenue stream for them.

    The retail prop arcade is much different from a legitimate prop shop that seeds traders. These places pay out less as a % in the beginning but in return a trader gets mentoring and better training. The management makes their money based on the long term revenue stream from a sucessful trader. Places are willing to take chances on people because when you have 7 figure producers this more than offsets the small losses that a beginning trader will take.

    If anyone has any other questions please feel free to ask me.

    "Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.

  • In reply to trade4size
    newbie2banking's picture

    trade4size wrote:
    a prop shop will see much higher payouts than a prop trader at a bank

    Trade4size,

    Firstly, thank you for your valued input. Secondly, why would a prop trader trade at a bank, when he could trade at a prop, and get a better payout? Would access to capital come into it?

    I remember reading an article a while ago about Driss at GS... Apparently, not that many people actually understood what he did - apart from print $$$. Can one trade exotics and structured products at a prop?

  • trade4size's picture

    prop guys at banks manage very large books. I worked at a broker this summer where we had every single prop equity desk as a client. They tend to act more like a portfolio manager than a trader at a bank. They are doing much less daytrading at a bank. I dont know of any prop shops that trade exotics or structured products.

    A prop guy at a bank might have the following deal:

    150k base salary
    Performance based bonus on a 100mm book 50mm long/50mm short. Might see 10% of total profits.

    Typical prop shop deal would be

    no base salary
    assuming the same level of experience as the bank trader 10mm book to actively manage. 50-75% payout.

    "Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.

  • In reply to newbie2banking
    b4f's picture

    newbie2banking wrote:
    trade4size wrote:
    a prop shop will see much higher payouts than a prop trader at a bank

    Trade4size,

    Firstly, thank you for your valued input. Secondly, why would a prop trader trade at a bank, when he could trade at a prop, and get a better payout? Would access to capital come into it?

    I remember reading an article a while ago about Driss at GS... Apparently, not that many people actually understood what he did - apart from print $$$. Can one trade exotics and structured products at a prop?

    exotics and structured products are difficult to price and relatively illiquid so you won't see them very often in pure prop.

    i think it's also important to note that one should take trade4size's comments with a grain of salt as his perspective is a bit skewed and I don't know that he's actually worked at a prop shop or any trading desk at a bank. being a broker is a totally different world

    but with respect to the whole idea that pure prop shops that pay no salary but have huge upside is true in a sense but ultimately inaccurate because risk isnt priced in. this is also why many of the top shops like jsc and sig are market makers so they can consistently profit over the long run based on their view of the market, ability to assess, price, and hedge risk, and take advantage of market dislocations. they don't make outright directional prop bets!.

    compare this to a firm handing out capital to individuals and telling them to run with it compounded with an every man for themselves culture (why would u you care or want to help your coworkers if you make all your profit from y our personal performance?).

    top shops and banks also have better access to information, counterparties, and capital. be wary of any firm that pays no salary or a salary significantly less than the street. yes your upside is a lot bigger but so is your risk.

  • praeses's picture

    I could go on all night about why the way you are looking at these firms is silly. What you can gauge from a good prop firm in an interview is and should be almost nothing when it comes to what really drives revenue. Sure market making firms make money thru bid/offer spreads, prop firms trade pairs, but who is gambling and who is not? Doesn't matter who has the more impressive office space. I also don't think you guys have really talked to traders at these firms you'd get a different perspective and a different list. Let me give you an example I know a young guy who graduated from a top school and went right to work at Jump Trading, your number 2 pick. They recruited him by telling him they did a lot of black box trading and index arb and when he got there they put him in front of a CPU and said make money. He got long size in oil futures oil went down 6 bucks and he was fired that took all of six weeks. He is now at Infinium, also on your list, making markets in wheat futures. They make a nice margin there but they do not trade the kind of size to make big bucks the better traders there are taking home low six figures. Meanwhile the ones you've knocked have million dollar players; like I said you are not talking to the right people.

    CTC also: they take 25 guys a year and maybe 10 of them will actually one day be traders. I know another guy there (also from a top school) who has been there 3 years and doesn't do more than hedge deltas. He's pissed they've given him the run around.

    BTW Susquehanna is HEADQUARTED in Philly but there operation is huge (bigger than most of the firms on your list) in Chicago. Jane Street the same. Also SIG is NOT on par w/ CTC they are much more aggressive their software is ridiculous. CTC is great but their money comes mostly from the indexes and the ETFs SIG is the DPM in most names on the CBOE.

    Don't try to rank these guys in such a fashion as some have said already, it is apples to oranges in terms of strategy, setup, etc. And just because you've interviewed doesn't mean you know where the firm's alpha is derived (Jump doesn't have any).

  • trade4size's picture

    To clear up and I never hide this information. I am not at a prop shop or bank. You can take my comments with a grain of salt all you want but I dont give out wrong information. I have nothing against the JSC or SIG at all I just dont consider market making prop trading. I know too many traders that are making retarded amounts of money right now to argue with the children on wso. I offer my perspective and the truth, nothing less.

    Your comments seem to conclude you do not believe directional bets work, you are wrong and I wont bother to explain why. Markets are not efficient there are so many inefficiencies out there and you only need one to make money.

    But seriously, all the prop guys I know are having record years, and the banks are going to reduce bonus' substantially... Yeah, sorry im a bit biased.

    "Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.

  • In reply to trade4size
    b4f's picture

    first off, who the hell said directional bets dont work? secondly, your argument for anything is well i know a person who is making money! i dont see how you can be a serious trader and have no concept of risk exposure. So this is your thesis for successful prop?

    Quote:
    Markets are not efficient there are so many inefficiencies out there and you only need one to make money.

    instead of getting ultra defensive and shooting from the hip, y dont u chill out a realize im just trying to provide a more balanced perspective. the fact that banks are losing money and there are people out there making money justifies nothing. I know just as many people who are making money as those who are blowing up. the fact that you rely on this consistently as evidence just brings me to believe u really have no idea waht u are talking about which falls in line with the fact that you limited exposure to the actual industry. day trading at home and calling people on WSO "children" does not apply

  • Trig's picture

    PWN3D! Seriously though, I've found that people on this site get so worked up over these methodological pissing contests. Although I disagree with trying to rank prop firms, I think it at least provides a decent starting point for people looking to apply to a more reputable shop (especially since many posters dreams of having a BB S/T business card have been dashed w/ the recent meltdown). In my opinion, the glory days of trading at public companies or increasingly handicapped HFs (banned short selling, less than accommodating prime brokerage, increased government scrutiny, investors fed up with exorbitant fees) are behind us. Buzzy Schwartz has always maintained that the bank trading model was fatally flawed and running money for others is a huge pain, thus he went on his own. Judging from the resume's my shop has been receiving over the past few weeks, I'd say that even those with a coveted analyst spot at a BB are looking for a more meritocratic compensation system moving forward.

    Why do most people want to be traders? Because we all fancy ourselves as having the special sauce that will lead us to unlimited earnings power. In reality, this is clearly naive, thus people look for shops that have proven strategies that make it easier to succeed (thus this list is helpful).

    As an aside, I'm not sure of Infinium's wheat strategy, but I'm pretty sure that since the CME changed the grain allocation rules, the glory days of that trade might be fading away as well.

  • In reply to praeses
    RossGellar's picture

    dr_sean wrote:
    I could go on all night about why the way you are looking at these firms is silly. What you can gauge from a good prop firm in an interview is and should be almost nothing when it comes to what really drives revenue. Sure market making firms make money thru bid/offer spreads, prop firms trade pairs, but who is gambling and who is not? Doesn't matter who has the more impressive office space. I also don't think you guys have really talked to traders at these firms you'd get a different perspective and a different list. Let me give you an example I know a young guy who graduated from a top school and went right to work at Jump Trading, your number 2 pick. They recruited him by telling him they did a lot of black box trading and index arb and when he got there they put him in front of a CPU and said make money. He got long size in oil futures oil went down 6 bucks and he was fired that took all of six weeks. He is now at Infinium, also on your list, making markets in wheat futures. They make a nice margin there but they do not trade the kind of size to make big bucks the better traders there are taking home low six figures. Meanwhile the ones you've knocked have million dollar players; like I said you are not talking to the right people.

    CTC also: they take 25 guys a year and maybe 10 of them will actually one day be traders. I know another guy there (also from a top school) who has been there 3 years and doesn't do more than hedge deltas. He's pissed they've given him the run around.

    BTW Susquehanna is HEADQUARTED in Philly but there operation is huge (bigger than most of the firms on your list) in Chicago. Jane Street the same. Also SIG is NOT on par w/ CTC they are much more aggressive their software is ridiculous. CTC is great but their money comes mostly from the indexes and the ETFs SIG is the DPM in most names on the CBOE.

    Don't try to rank these guys in such a fashion as some have said already, it is apples to oranges in terms of strategy, setup, etc. And just because you've interviewed doesn't mean you know where the firm's alpha is derived (Jump doesn't have any).

    Good points - I realize my perceptions may be wrong and I stand corrected.

    Great discussion so far though.

  • In reply to praeses
    traderpimp111's picture

    dr_sean wrote:
    They make a nice margin there but they do not trade the kind of size to make big bucks the better traders there are taking home low six figures. Meanwhile the ones you've knocked have million dollar players; like I said you are not talking to the right people.

    so how can a prospective employee find out which shops have the capital for their best traders to trade serious size? There are just so many shops and no info.

    So with respect to compensation, the capital that banks have access to offsets the prop shops payout of %75? I have learned a lot about prop shops in the past few days but STILL have not found any answers to compensation. Do the top prop shops have higher paid traders than traders at banks on average? Which has greater upside? And is it common for these shops to pay a wallstreet salary + bonus during training before trading.

    trade4size wrote:

    A prop guy at a bank might have the following deal:

    150k base salary
    Performance based bonus on a 100mm book 50mm long/50mm short. Might see 10% of total profits.

    Typical prop shop deal would be

    no base salary
    assuming the same level of experience as the bank trader 10mm book to actively manage. 50-75% payout.


    So the bank guy has a better deal?

    Also, is it correct to say that hedge funds do not pick up market makers? So if you start work at SIG you will always be a market maker at a prop shop? if you work for a bank you can move to prop at a bank and then a hedge fund? speaking in general of course

  • trade4size's picture

    guys I just want to be clear that I do not have all the answers. My area of interest is prop equity trading. I am able to compare prop equity at banks to prop equity at a prop shop. Outside of that I really dont know nearly as much about how things work.

    "Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.

  • Trig's picture

    The simple answer to comp is this: the more reputable shops pay a salary that is slightly below what the street is paying now (you should factor in cost of living too because $42k in Chicago equates to $80k in Manhattan apparently). People do not start out at these firms for the starting salary. Over the short run for average to above average traders at a firm with winning strategies, prop trading wins hands down. The lifecycle of a prop trader is probably around 10 years...the average age at most of the shops is probably mid to upper 20s.

    I have heard that several guys at Ronin had million dollar days last Friday (although this could just be rumor). Another group exercised their Dow 10,000 puts on Friday morning and were at the bar (Ceres at the CBOT) by 11:30am.

    What I have found is that most WSO posters are either a) still in college and base their opinions on corporate recruiting events or b) thinking about BB banks in the context of 2005-7 payouts. Perceived prestige is still in the front of many minds and their eyes are off the prize. Good luck ripping that sweet bonus at the HF that is 30% below their watermark.

  • In reply to Trig
    RossGellar's picture

    Trig wrote:
    The simple answer to comp is this: the more reputable shops pay a salary that is slightly below what the street is paying now (you should factor in cost of living too because $42k in Chicago equates to $80k in Manhattan apparently). People do not start out at these firms for the starting salary. Over the short run for average to above average traders at a firm with winning strategies, prop trading wins hands down. The lifecycle of a prop trader is probably around 10 years...the average age at most of the shops is probably mid to upper 20s.

    I have heard that several guys at Ronin had million dollar days last Friday (although this could just be rumor). Another group exercised their Dow 10,000 puts on Friday morning and were at the bar (Ceres at the CBOT) by 11:30am.

    What I have found is that most WSO posters are either a) still in college and base their opinions on corporate recruiting events or b) thinking about BB banks in the context of 2005-7 payouts. Perceived prestige is still in the front of many minds and their eyes are off the prize. Good luck ripping that sweet bonus at the HF that is 30% below their watermark.

    Why is the average life of a trader only 10 years? Do they leave because of stress? Or do they pretty much meet all of their financial goals by 10 years and decide to walk away? Or is there a particular component (like dealing with stress) that younger traders have - which makes them better traders - that older traders don't have?

  • Trader Joes's picture

    RossGellar wrote:
    I'm curious to hear how everyone would rank the top prop trading firms. I've focused the post on firms in Chicago because that is where most of them are. Here is how I've ranked them:

    1. Spot Trading
    2. Jump Trading
    3. DRW Trading
    4. Optiver
    5. TransMarket Group
    6. Peak6 Investments
    7. Chicago Trading Company
    8. Infinium Capital Management
    9. Wolverine Trading
    10. Tower Hill Trading

    Honorable mention for firms outside of Chicago:

    1. Jane Street Capital – NYC (considered to be the best)
    2. Susquehanna International Group – Philadelphia (on par with CTC)
    3. First New York Securities – NYC (on par with THT)

    Feel free to change them around or offer any overall feedback or firm specific feedback.

    I'm currently a trader at one of the firms you mentioned and since I've been working in the industry for 5+ years, I've met and become friends with traders from just about every firm that you mentioned. I'm having issues understanding the following-

    A) How did Spot make it to the top of your list?
    B) How did SIG NOT make it to the top of your list?
    C) How did Infinium make it on your list period?
    D) First New York is 1000 times better than Tower Hill. Read about them in the September issue of Trader Monthly. Tower Hill doesn't even pay a salary - why are they on here?

    You must still be in college because I don't get how you can say that you've interviewed at all of these places yet rationalize those rankings. Spot is good, but #1?? SIG is incredibly good, and Infinium doesn't do anything special at all.

    Here is how I would shape up a top 10 list, and I did this based off of firms globally, since the best firm is in NYC, not Chicago.

    1. Jane Street
    2. DRW
    3. SIG
    4. Optiver
    5. Spot
    6. Transmarket
    7. Wolverine
    8. Peak6
    9. Jump Trading
    10. First New York

  • Trig's picture

    Pure spec on my part: It is what it is. I'd say that very few people have the stamina to stay fully committed to this industry over longer time horizons. The weaker performers get eliminated, the stronger performers reach a limit of diminishing satisfaction, and the truly addicted make a career out of it. At some point, people have to make a decision what is best for their particular situation. In my mind, trading is a young person's game. Unlimited upside with "only" the fear of getting canned doesn't seem like much of a trade off at 23. When you're 35 and have other people depending on you to provide, your priorities inevitably change. At some point, the question ultimately get's raised, how much is enough OR is this job really for me? If you're running money for others, these questions get raised alot sooner. I remember reading somewhere someone comparing this industry to professional sports. Very few ever attain the highest level of performance and those that do can only stay on top for short periods of time. People accustomed to winning all the time simply choose not to play when their luck changes.

  • trade4size's picture

    what an epic thread. This is the prop trading equivalent of the ibanking rank the bank threads.

    I really think you need to separate the rankings by product because you cant compare equities to equity options. I am very pleased to see the prop traders on wso starting to come forward and contribute more.

    "Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.

  • In reply to Trader Joes
    RossGellar's picture

    Trader Joes wrote:
    RossGellar wrote:
    I'm curious to hear how everyone would rank the top prop trading firms. I've focused the post on firms in Chicago because that is where most of them are. Here is how I've ranked them:

    1. Spot Trading
    2. Jump Trading
    3. DRW Trading
    4. Optiver
    5. TransMarket Group
    6. Peak6 Investments
    7. Chicago Trading Company
    8. Infinium Capital Management
    9. Wolverine Trading
    10. Tower Hill Trading

    Honorable mention for firms outside of Chicago:

    1. Jane Street Capital – NYC (considered to be the best)
    2. Susquehanna International Group – Philadelphia (on par with CTC)
    3. First New York Securities – NYC (on par with THT)

    Feel free to change them around or offer any overall feedback or firm specific feedback.

    I'm currently a trader at one of the firms you mentioned and since I've been working in the industry for 5+ years, I've met and become friends with traders from just about every firm that you mentioned. I'm having issues understanding the following-

    A) How did Spot make it to the top of your list?
    B) How did SIG NOT make it to the top of your list?
    C) How did Infinium make it on your list period?
    D) First New York is 1000 times better than Tower Hill. Read about them in the September issue of Trader Monthly. Tower Hill doesn't even pay a salary - why are they on here?

    You must still be in college because I don't get how you can say that you've interviewed at all of these places yet rationalize those rankings. Spot is good, but #1?? SIG is incredibly good, and Infinium doesn't do anything special at all.

    Here is how I would shape up a top 10 list, and I did this based off of firms globally, since the best firm is in NYC, not Chicago.

    1. Jane Street
    2. DRW
    3. SIG
    4. Optiver
    5. Spot
    6. Transmarket
    7. Wolverine
    8. Peak6
    9. Jump Trading
    10. First New York

    thanks for your reply.... just wanted to say that i did NOT interview at all of those firms and i never said i did. i have interviewed at many of them and my rankings were based off of my own judgment as well as the points i described in my above post... obviously there is a lot of room for error and i didn't expect for my originally posted list to be right on target. i am, however, very pleased that there have been a few real traders that have responded to this thread to give their input on a list (like you did) and also the industry as a whole. like trade4size said, this has been a pretty educational thread thus far.

  • aachimp's picture

    Trader Joe: I didn't realize people consider Optiver to be such a strong firm. The turnover at the firm is insane. I'd equate it to dig a hole, fill it with water, add sharks, and throw in new hires, promote those who survive, repeat until you have a senior trader. But then again, if you are a good enough, quick enough trader (and lucky to some extent, of course) it is the right firm for you.

  • Trader Joes's picture

    I received multiple PM’s and I want to address all of the questions, but if you have a generic question, I ask that you post it on this thread so it can be answered for everyone to see.

    “1) I am wondering what you think about Group One Trading. How is G1 regarded among traders? Is it a good firm to start a trading career?”

    Group One is a legitimate firm. They are mediocre in comparison to the rest on my list (which is why they aren’t on the list), and they aren’t the best at what they do in comparison to their rivals. Given the market environment, I believe they would be a good place to start. I believe they still operate on the floor and I’m uncertain of any plans for them to move upstairs.

    “2) Generally speaking, is it ever possible to start off in one of these firms and later trade in either an IB or a hedge fund?”

    Yes, it is possible to start off at one of these firms and later trade at either an IB or a HF. Traders that start at prop firms generally don’t go to IB’s, because if they are successful, wouldn’t make sense to do so. Traders at IB’s are generally different types of people and different personalities than traders at prop firms. This whole mentality that IB’s are the best place to work will soon change after people realize that compensation at IB’s has dramatically decreased.

    Traders at HF’s will generally have their MBA’s. I know many traders (including myself) who are currently trading at prop firms while getting their MBA’s and being recruited by HF’s. Trading at a HF doesn’t guarantee more money by any means. I decided to pursue higher education for the sheer learning aspect of it, to make me a better trader and to broaden my understanding of quantitative financial concepts. It was also convenient for me since I’m doing it part time. Many traders tend to want to NOT jump to HF’s because of the added stress and uncertain future of the industry. I would say that if you are a trader RUNNING a hedge fund, such as a Steve Cohen or Paul Tudor, compensation will be substantially greater than in any other field.

    “3) I am very into trading and I want to trade for the next 30 years or so. Why is everyone saying a trader can only last about 10 years?”

    You won’t know if this is something you want to do for 30 years or not until you actually start doing it. You will need lasting commitment and passion for your work – two very rare qualities that may fade over time. See Trig’s response to this as well. I agree with him 100%.

    “4) Finally, if you start off at one of these good trading firms, what's your expected all-in compensation during first year? What about, say, after 3 years?”

    Compensation is modest in the early years. I wouldn’t focus on this though, as it is more important to focus on being successful so that you’re still trading in 5 or 10 years down the road, where your compensation will literally be unlimited. Senior traders at my firm make 8 figures a year easily.

    “5) If there was one of these places in Chicago that you guys would say stands out, what would it be and why?”

    Depends on what you want to trade. You really can’t go wrong with any of the firms on that list. The only thing that will perhaps knock you off the path of being successful is if you are trading a product which doesn’t interest you. It is important to be happy where you’re working too, so make sure you like the people at the firm.

    “6) Pure spec on my part: It is what it is. I'd say that very few people have the stamina to stay fully committed to this industry over longer time horizons. The weaker performers get eliminated, the stronger performers reach a limit of diminishing satisfaction, and the truly addicted make a career out of it. At some point, people have to make a decision what is best for their particular situation. In my mind, trading is a young person's game. Unlimited upside with "only" the fear of getting canned doesn't seem like much of a trade off at 23. When you're 35 and have other people depending on you to provide, your priorities inevitably change. At some point, the question ultimately get's raised, how much is enough OR is this job really for me? If you're running money for others, these questions get raised alot sooner. I remember reading somewhere someone comparing this industry to professional sports. Very few ever attain the highest level of performance and those that do can only stay on top for short periods of time. People accustomed to winning all the time simply choose not to play when their luck changes.”

    Agree 100% with this. Very few have the stamina to stay fully committed. You need to have a passion for whatever it is that you do in life in order to be successful at it.

    “7) I really think you need to separate the rankings by product because you cant compare equities to equity options. I am very pleased to see the prop traders on wso starting to come forward and contribute more.”

    The best firms are market makers. Market making is much much much more legitimate than directional trading, because the market making firms have proprietary strategies that have an edge. You are right in saying you can’t compare equities to equity options. The intellect it requires to day trade equities is minimal. Firms that are successful trading equities are firm that know how to correctly hedge as well, meaning fundamentally driven hedge funds. With the exception of First New York Securites (since they use derivatives to hedge, and also trade options, fx, rates, commodities, and equities, which essentially makes them a multi-strat hedge fund), I don’t think equity day trading is a good long term career move. Most of these equity trading firms are also the same firms that offer minimal salary or no salary at all, and it is best to pursue careers at firms that are willing to train you and offer a reasonable base salary. Obviously, given market conditions, many will have to end up at these firms as a last resort, so I would say it is certainly a completely different ball game. If you are interested in equities, it is best to start at an IB, HF, or a firm like FNY.

    “8) thanks for your reply.... just wanted to say that i did NOT interview at all of those firms and i never said i did. i have interviewed at many of them and my rankings were based off of my own judgement as well as the points i described in my above post... obviously there is a lot of room for error and i didn't expect for my originally posted list to be right on target. i am, however, very pleased that there have been a few real traders that have responded to this thread to give their input on a list (like you did) and also the industry as a whole. like trade4size said, this has been a pretty educational thread thus far.”

    I didn’t mean to pick on you, and as it was stated above, it is good to get a list of names down on paper to assess many of the best firms. But there is no sense in ranking these firms when you don’t know much about them, or whatever little you may know based off of an interview or competitiveness.

    Firms are judged by 1 thing only, and this includes prop firms, HF’s and IB’s. That 1 thing is performance, plain and simple. The best performing firms have a global presence and have been around for a long time (in my opinion above 10 years). These firms will produce the best returns most consistently. Since prop firms don’t disclose returns, it is tough to rank them unless you know a lot about them or have worked at multiple firms.

    “9) Trader Joe: I didn't realize people consider Optiver to be such a strong firm. The turnover at the firm is insane. I'd equate it to dig a hole, fill it with water, add sharks, and throw in new hires, promote those who survive, repeat until you have a senior trader. But then again, if you are a good enough, quick enough trader (and lucky to some extent, of course) it is the right firm for you.”

    Optiver is a very good firm. Every firm on the list is a very good firm but just trades slightly different strategies or slightly different areas and products. Also keep in mind that every firm on that list has a high turnover rate, meaning many new people are dropped after about a year or so into the job. This is in part due to poor performance by the new traders or perhaps some sort of realization that trading isn’t for everyone. Firms will only keep the best of the best. The only attrition rate that you should be worried about is your own attrition rate. If you are someone that can’t make it in the industry, then you will get cut.

    “10) I would rank them like this:
    1. Jump Trading
    2. Infinium Capital Management
    3. Spot Trading
    3. DRW Trading
    4. TransMarket Group
    5. Optiver
    6. Chicago Trading Company
    7. Peak6 Investments
    9. Wolverine Trading
    10. Tower Hill Trading

    And this is based off of what? Your interviews? Like most on this website, I think you are a college student and don’t know what you’re talking about. You also have two number 3’s and no number 8. Once again, I don't mean to pick on you and I just don't think it makes sense to rank the firms based off of the little knowledge you have about the industry.

  • trade4size's picture

    Thank you trader joe, this is by far the best prop trading post on wso. I have a question for you of my own.

    Why is it that these prop shops are dominantly equity options. As far as regular equity ranking First New York and Trillium are the standouts with few if any peers. The rest are mostly chop shops. Within equity there are a lot of small prop shops which are closer to small hedge funds. I know of a couple that do not recruit, and are virtually unknown to the public. For those of you that speak with me you know which firms I am talking about.

    "Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.

  • Trader Joes's picture

    I wouldn't say these shops are dominantly equity options. Some trade commodities options. Some trade eurodollar options. Some trade rates. Some trade ag. Some trade volatility. Some deploy quantitative models to trade statistical arbitrage. And some trade equities.

    I wouldn't call Trillium a stand out firm or put it in the same peer level as First New York. If you want to trade equities, there are many routes you can take... I would be targeting technical analyst or strategist positions at IB's. Firms that "scalp" (which is very very short term trading) are usually day trading firms and not very good long term career choices.

Pages