Exit opps from top prop firms/market makers

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Bump

Similar situation as OP, except I'm graduating this year. But love to hear a bit about this industry and it's opportunities, especially relating to how sustainable the strategy is and how transferable the skills are. And, maybe an overly simplistic question, but how good do you think an arb based strategy really is? Also, and this is a dumb question but I just don't get it, why do these firms bother doing market making if they have the opportunity to just do proprietary based trades?

I'll be honest, the only answer I've seen other than going to another prop firm is b-school.

Almost all of these market making firms take prop risk too. CTC is the only firm I know of that has a negative stance towards discretionary trades.

Prop trading has few exit opps because it's the end of the line for a lot of people. Seeking further education (technical or professional) is probably one's best bet to transition to another field if someone leaves prop for one reason or another.

I think you are approaching this the wrong way. You should decide what you want to do, what you like, and then see how to get there. Not see what the most common path is and go down that one, that will only put you into the same position you are now 3 years down the line. Get control of your life. If you are in that seat you must be a smart bloke, so with hard work the world is your oyster. I know traders who have moved to other roles in finance or to the most random things like sailing instructors, doctors, lawyers, engineers, programmers, consultants.... Hell, there was an article in BBG about a DB FX trader who sings opera now.

Came here searching for something else. Its a rather funny argument. Career progression is a buzz word of industries that don't pay well, cheap labor from irrational people who value their emotions more than their true worth. There is only one objective on the street - make your own fcuk you money and get lost to your own private retirement haven. Btw once a trader (and successful) is always a trader, has been like this at least since the days of silk route. Ask your question to traders at major oil companies, and also ask them if they would hire you if your an HBS or Wharton alum. That will be the true worth of those pieces of paper.

I did BB trading for 4 years on an exotic rates derivatives desk. I learned a ton and made great money, but it was time to move on. Aside from being less than optimistic about the nature of the industry, I think the skills you gain in trading is simply too narrow, thus restricting you to a very specific product/strategy. Of course, the obvious question is: "If you're making a ton of money in trading, why would you want to ever leave?" Fair point, but for many even successful traders, the job becomes an unbearable grind; the stress and monotony of the work makes one wonder whether he can apply his talents to do something far more interesting, even within finance. This is where a top MBA comes into play. It essentially allows you to transition into a different industry or say switch from trading into investment management because of the pedigree, network, and on-campus recruiting. Ultimately, it's about having options in your professional life; the more options you have the better off you will be. I arrived at the conclusion that I did not want to be a trader for the rest of my career. This is also why I'm doing an MBA rather than an MFin since the latter would have pigeonholed me into a quant.

mbavsmfin:

This is also why I'm doing an MBA rather than an MFin since the latter would have pigeonholed me into a quant.

career progression for any top/good trader should be a house on a private island..fuck careers!!!

mbavsmfin:

he can apply his talents to do something far more interesting, even within finance. This is where a top MBA comes into play.

If only Nathan Rothschild had thought this way, the world would have been such a great place, just like they show in the movies.

Sorry for the sarcasm, but this is the irrationality that a lot of these MBA programs cash in. The concept of MBA is not bad, its useful for people to take a break and think where they want their life to head. But the underlying ground reality is that a lot of these people never made it big in their first careers and so they want to start afresh. It does not require a Freudian genius to understand it. And please stop following the mass propaganda of PR folks who show ever green paradises to sell their stuff (boy they are really good at it).

Think simply! At best, an MBA would help you seek funding for your very own startup (funded by Venture Investors). If you are good at trading and make money with your own understanding of the market microstructure and creative ideas, then why not start your own fund? Or be an individual trader and start trading several assets (or classes of assets) simultaneously. Trading is not bad, just like any other profession. Its the people who are stuck in the wrong place. Nonetheless, your exit options are unlimited if you have enough money.

mbavsmfin:

... First, it's become extremely difficult to make consistent good money in trading, ...

Is this because of Algo trading and it being more computer programs than the discretion of the traders?

I just noticed your signature. A discussion on de/merits of MBA is therefore biased and subjective.

mbavsmfin:

First, it's become extremely difficult to make consistent good money in trading, whether you're at a top bank, hedge fund, or prop shop. I don't think this is going to change but will only get worse. Second, do you have any freaking idea how hard it is to start your own fund or the ridiculous amount of stress involved in managing your own money? It's not a great lifestyle.

First, while I do agree that exotics will die down slowly as the bourgeois now know that the higher dimensional math of those derivatives will only make IBs richer, an open market is the corner stone of democratic governance which is not going to disappear any time soon. Trading as a profession has been there for centuries and will stay for several to come. Needless to say it will keep attracting smartest minds of the time.

Second, I do. After a career in prop trading with a major global market maker, I too moved on. I started managing my own capital trading in the equities and debt market. Sure it gets boring sometimes as we as traders feed on volatility and market inefficiencies which are not always present, so I started dealing in exchange traded and physical commodities. This to me is a career progression for a trader. Next is international procurement and sales. Think business, rest is all puff!

I did not dismiss that notion completely, what I argued was that going to an MBA (ranked or not) might not serve one's purpose of career advancement in all cases. All it does is emphasize the fact that something is wrong with your own self that you feel a need to keep switching careers. An MBA is materially helpful only in some cases (I have mostly seen so in services and consulting sectors), but then a crap MBA should suffice. An ex boss of mine at a major ICT firm (Fortune 500) was required an MBA certificate to move onto an executive management position, but it was a subjective need and so he went for a crap course which did not even require his attendance. He was a rational being.

While I do come from a scientific background, and worked on developing and implementing order book based HFT strategies, I do not think that HFT is the only side of modern finance that attracts intellect. On the contrary, often it crushes all that you have got. Ever heard of John Paulson, he wasn't a quant. While Scholes and Merton were involved in that all famous crash of LTCM trading debt stat arb.

where do ex traders hope to end up after mba? banking? consulting? i don't think mba is for people who are 'exploring' different careers. it's primarily for people who are trying to do career switch, into finance or consulting

Getting a Ph.D. after I'm done with trading (in the far future) to go into academia and have summer vacations :D

dude...any kind of trading IS THE EXIT OPP

I think s/he has fallen to the advertising propaganda on several fronts, not limited to the MBA as an "entrepreneurial career" notion. I guess some people just do not understand that becoming an efficient "administrator" of a business does not necessarily make them entrepreneurs. Every generation has several examples of people who sustainably become rich by mastering the art of their trade, and then there are countless unverifiable legends of those who got lucky on a treasure hunt.

How much does a Stanford MBA costs these days, like 150k? If you are not comfortable with trading, you could build a decent technology business with that amount of money and little help from VCs/angels (citing here the founder of Delicious who was a quant). Entrepreneurship is not administration, and a good trader is an entrepreneur.

Nut up or shut up. If you're a trader, you have to live with uncertainty. If you can't, then shut up. You shouldn't be trading. Go do something else. You can push the risk premium curve higher, and I'll collect.

On a more serious note, it depends on what type of trading you're doing. Some guys exit to do start ups, other guys exit to do software engineering. Other guys start their own funds or do something else entirely like a real estate business. Life is rife with uncertainty. You have to deal with it.

qqq111:

yes, the pay for owners/partners is going to be higher than BB MDs, but you are never going to become a partner at getco/jump. the pay for the traders is definitely going to have a lower ceiling than at GS, though the median may be higher.

sounds like you've already made up your mind. why'd you even ask the question? if you're mediocre, it doesn't matter where you land.

is this to go into BB prop trading? that business is getting scaled back big time.

Doesn't necessarily need to be BB prop trading only...BB market making as well. Just wondering if I start off at a prop trading firm, what's the chance I'll move into BB S&T and what's the timeline like.

I think lots of the people in prop trading firms tend to stay as the work environment is less hierachical + the pay is good. In BB S&T there are more structural problems and headaches...

I'd defer to Bondarb and others on this, but I don't think it's common to make the switch from prop firms to BBs. For some reason, that path is viewed with suspicion among hiring managers- probably because they themselves got their start in a bank training program and either rose through the ranks where they are now or jumped from one global bank to another... seems unfair because if you graduated in a shi$%y recruiting year, it's incredibly tough to break into S&T later on.

I think prop firms teach you to be entrepreneurial and have confidence in yourself, which would be great skills when starting a business. I've also read of some prop guys starting hedge funds, but this is really tough. Balyasny Asset Management, the Chicago-based fund with $1.9B AUM, was founded by Schonfeld Securities trader Dmitry Balyasny.

I would go with the Fed- universally respected, will be supporting really bright economists- leaves the door open for grad school in econ (Fed is one of the few jobs respected by econ faculty)... and the experience is good for thematic research at a bank or macro consulting firm (large data sets/programming in Stata or SAS).

though i believe it is difficult to go to a bank, what are peoples thoughts on working at a broker like an icap if u dont cut in in prop i would think that it would make a lot of sense as ur building up relationships with traders and would make it easier to start as a broker ( i know this happens regularly from trading at banks but was less certain from prop shops in chicago?)

exit opps are start over again. Making the switch from prop trading to consulting at the moment. You could have pulled in serious money, your transferable skillset is limited to start anywhere but the bottom of the ladder. Go for it, have a blast, live the trader life, and then decide if its for you. it wasnt for me, i could predict lines going up and down, but felt very unfulfilled after a while, depending on what you trade, i may be able to lend you my strategies ;)

wukong123:

Hi, I was wondering what a career path would be like for someone at a top prop shop. I've heard getting into a good MBA from prop trading is very hard, as you don't develop leadership, is this true? I was also curious about GPA cutoffs for prop shops, as I my GPA is slightly below 3.5 in a quantitative major, yet I was still able to score interviews with top prop trading firms, but unable to do so for any IB firms.

If you are at a top prop shop, there are no exit opps really; maybe founding your own prop shop is the only one, if you are really that good. The usual answer when somebody asks about the exit opps for prop trading is "if you were making a lot of money already why would you want to leave?".

I'm not sure about the MBA part but I guess it would make some sense to say that generally you are going to have a harder time making it into a top MBA program as the skillset you'll learn is very narrow. As far as developing leadership skills at a prop firm goes, unless you are very-very high up on the food chain, you won't develop any of it.

I think it is because prop firms are getting many less applicants than BBs, therefore they can afford to interview more people. From what I have read also they don't really care about side things (unless it is very relevant like being a top poker or chess player for instance), only your brainpower; and your GPA is not necessarily an indicator for your brainpower. For that matter they could just give you a short, first round interview, and in like ten minutes they will know whether you are going to have any chance at proving you are enough smart for their firm later on.

HFs?

hedge funds. based on your networking

So how does pay structure work out at top prop shops. Also, why are HFs a possible exit opp?

What are the main differences between BB S&T and a top prop firm. Why would someone choose one over the other?

wukong123:

What are the main differences between BB S&T and a top prop firm. Why would someone choose one over the other?

I guess it goes something like

top prop + much better compensation starting from early on + meritocratic environment + very smart people to work with

BB s&t + prestige + gaining a wide network in the industry + much? better exit opps, provided you have the brand name on your CV + relatively a more secure job?

Not sure about the MBA part. I saw some people in top prop shops heading to MBA business schools ">M7 MBAs, so I guess its just up to your story.

qqq111:

it's not a question of being mediocre - even if you are a star trader at getco or jump, they are not going to make you a partner, that is for the few people who started the firm, and that is the way it will stay. whereas, at a bank, you can continue to be promoted if you are a star. i think these prop firms are better if you are not a star, but banks are better if you are. in any case, the original question was about exit opps. if you feel like you have topped out at getco/jsc, is a bank or HF going to be interested in you?

This is an accurate assessment of the smaller prop shops. You are definitely thinking correctly. Very hard to get to partner level. Very difficult to get into 7 figures. 95% of the people don't make it there, and we recruit very bright people from top tier. Just because you are a brain and have a lot of potential doesn't mean it will get realized or recognized, despite there being less corporate BS at the smaller firms as compared to BB. If you go to JSC or Getco, you are not guaranteed to make tons of money. Good chance you will make 6 figures quickly, but a lot of people plateau in low to mid 6's. I am talking from experience at a prop shop similar to those mentioned, not sure if these other guys are. qqq, feel free to PM me for more details.

great question, also interested

You morph into another prop trading job or start likely from ground up(different job and likely different field). Likely the latter as not many prop firms will want to hire you after a series of bad trades(bad enough that a firm would want to fire you)

look at resumes, they usually hop from firm to firm taking as many trade secrets in their head with them as possible. oh i've heard the, when I was at company X this is how we did it, we had so many problems at company Y when we did it this way, countless times by now.

So you either stay in trading or start from the ground up in an entirely different field? I was assuming there would be some overlap into some other kind of investing. More of maybe, well if you get fired or your firm cuts back, such and such industry likes the skill set of traders. Plus, what if 15 years down the road I don't want to do trading anymore? I understand a lot of this boils down to your individual ability and connections. I am asking about a general overview of typical options.

I want to better understand the nature of the risks of prop trading. I have found a ton of information on how great it can be but nothing on if it doesn't work out. Kind of like being a professional athlete. You're on top of the world but if you get cut early in your career, you can find yourself doing used car commercials for awhile.

I guess my next question is, how bad do you have to screw up before you get canned? I know there isn't an exact number and it depends on a lot. What I am asking is out of a group that may get hired, is there a trend of how many get sent packing? As a new trader going up against very experienced traders, it's logical to assume you're going to get burned a few times early on. How much learning space do they give you?

Thanks again, you guys are a big help!

It's an incredibly narrow skill set. You bounce from prop shop to prop shop or maybe a very fast money fund like millennium if you're great. Otherwise your likely looking at an MBA. There just aren't many useful skills you learn for use outside prop trading.

Prop trading is a broad catch all. There's a huge difference between a trader at a high-end prop shop (e.g. Getco / Jane Street) and a trader at an arcade or mediocre firm. The latter has few exit opps, but the former has a lot of options.

one phrase is all you need... "you want fries with that?"

BoomerSooner, I work as a prop trader for an investment bank boutique (Europe).

I'd say most shops/bank are willing to work with you for at least six months (if you haven't worked as a trader before) as long as you don't lose too much money because of stupidtiy and demonstrate some willingness to suffer/learn. Also you're not expected to outperform your more senior peers.. however, this job really sucks if you don't make any profits.. so from my experience, it's usually the junior trader who quits before he gets fired.

I share your concerns about exit ops. mbavsmfin nailed it, though I'm note sure about an MBA - my guess is that prop traders do have a hard time applying to MBA programs too, because you cant demonstrate any leadership abilities and so on.

i knew 3 people that didn't get mba's. they all started their own start ups without spending 200K+ on a two year circle jerk of rationalization.

Sales.

You need to stop acting like the expert on all things trading and MBA's. When 1) you aren't a trader and 2) you don't have an MBA.

1) you are not a former trader(your posts insinuating that you were are laughable) and you sure weren't a trader at a prop firm(which is what this thread was about) 2) you do not learn how businesses "work" getting your cutesy little MBA 3) you are just some geek that thinks the world will finally give them respect once they have 3 letters. You need to take a few pills of humility before you start applying for internships.