Bio: I've been lurking WSO since I was in college in order to figure out what I wanted to do, but didn't really participate that much in discussion until after I graduated. Now that my career is at a more stable point, I've decided to get more involved in WSO and help out the community in any way I can.
I went to a target and studied financial engineering and computer science. Despite my mediocre grades and having only three interviews in all, I somehow got an internship at a BB in fixed income S&T in NYC and took a full time offer to go back to work in equities as an execution algo trader in cash equities. After that, I moved to a prop shop in Chicago where I am now trading derivatives. So fortunately, I've had pretty broad exposure to different products in trading and I'm happy with how my path has taken me to where I am.
I'm still pretty young, but I guess I've had diverse experiences so hopefully you'll take my unsolicited advice. I could definitely answer a lot of questions related to NYC vs. Chicago, BB S&T vs. prop trading, fixed income vs. equities, etc.
Feel free to ask any question you like and I'll try my best to answer/direct you to an answer.
How long were you with the BB before you switched to the prop shop in Chicago? Also, what were the main reasons for the switch?
Thanks!
How much programming do you do and in what languages?
Thank you for sharing this.
Hi! just a few background of myself. Graduated from Carnegie Mellon with Master in Computer Science.
previously worked on Electronic Trading and currently working in Microsoft.
how is it likely for me to make the move to prop/algo trading industry?
I have applied for a couple of positions.. all negative so far.
Thanks!
Could you talk about some of the pros and cons of living in Chicago vs NY? How can someone from the East coast, such as me, convince people that he/she wants to work in Chicago? I really do, but know many people interview in Chicago as backup plans, which Chicago bankers, traders, etc. obviously hate.
I was there for less than a year after I started (lost relocation bonus and all). It became apparent to me very quickly that the job wasn't right for me when I realized that outside of equity derivatives, there is not much market making anymore on the sell side from all the regulation. And the groups I wanted to work in (some desks in fixed income and equity derivatives) had headcount problems so "they couldn't hire" me even though they liked me. I could do my job without caring a bit about what's going on in the markets because our algo execution desk made money purely on commission. It was a sales role even though I was developing some of our algos, and that was, frankly put, boring for me.
Also, I quickly realized I wasn't gonna get any savings out of my analyst salary in NYC without making a lot more. Our stub bonuses were low and prospects for future bonuses didn't look too bright. Not only that, they paid everyone the same amount. This was more insulting to me than the actual number itself because in my opinion, if they can hire someone off a handful of interviews, they can make decisions in S&T about who's useful and who's not in half a year.
My new job paid a higher base and was in a cheaper city by a LOT and encompassed work I would enjoy more. It was a no brainer. :)
Most of the latency-sensitive stuff is going to be in C++ no matter what firm you work for. That said, Python is becoming very important for all the miscellaneous things you want to do as a trader. I told a friend today: "You're probably never going to be directly asked to code something up in Python, but you can use it to make things a lot more efficient or perform analysis when you're sick of SQL and Excel/VBA. Also it's really impressive when you get a nice script you can share with other traders."
I didn't do very much programming when I was trading our vol book, but there are definitely ways people contribute, mainly through scripting languages like Python, on that kind of trading desk. However, now in algo trading, the majority of my work is coding in order to improve our trading models/algos.
Haha my first question for you is: Why do you want to do prop trading? I actually know a lot of ex-prop traders who are now at Google/Microsoft/Facebook and are definitely enjoying themselves. The lifestyle is better (not that my hours are that bad, but still, you can be a little lazier from what I hear), the base salary is extremely solid, and the job security is much better.
But if you're set on moving into a trading firm, you should figure out whether you want to be a developer or an algo trader. The line between the two is definitely getting blurrier since they require similar skill sets. In my opinion, if the pay isn't an issue/isn't that different, the software developer role is more chill than an algo trading position. They still work on a lot of important pieces that make an algo work, such as framework, data, latency, etc.
For what it's worth, I think a CS master's from CMU is pretty solid in this industry, especially if you're coming from a place like Microsoft.
thanks so much for the insights. Peyo.
Regarding your question:Why do I want to do prop trading? My first full-time job is on the Electronic Trading where I have improve the trading speed to be 10 times faster and redesign the whole trading platform. Now, after 1+ years in Bing, Microsoft, I still feel really interested with electronic/algorithmic trading and the combination of Computer Science and Financial industry in general. Furthermore, I could use statistical and mathematical approaches and develop new models to leverage trading capabilities and could innovate the trading system and architect to improve the trading efficiency and reliability. I think there are more potential lying behind the passions.
You are absolutely right about the job security, especially Microsoft is the current GreenCard sponsor.. :-). However, we all face the the uncertainty of the markets. Don't we? who knows how Microsoft/Google/Facebook will be in the next 3 years.. Why don't I purse my interests and enjoy the work!
Well. To be a Algo\Quant Trader or Developer definitely makes differences. My strategy is starting as a Developer since I have more experience; then shift to a Quant Trader role later.
Unfortunately, I haven't heard positive news from the applied firms.. Citadel once got back to me on March/2013; then phone interview has never been set up.. I don't know what could be the issues with my background..
Any valuable inputs? Thanks so much!!!!
What types of strategies do some Chicago prop shops use? I've heard market-making thrown around a lot and I was curious as to what it actually entails
Ok so I'm sure this is a popular question so here's my answer in two sections: money and lifestyle.
1. Money
http://www.bestplaces.net/cost-of-living/chicago-il/new-york-ny/70000
For those of you who are lazy and don't want to click links: "A salary of $70,000 in Chicago, Illinois should increase to $112,493 in New York, New York."
I've heard the opposing argument that many material things cost the same no matter where you live. While I agree with this, the fact of the matter is, when you're young and living in a city, the majority of your expenses come from things like rent and food, both of which are absurdly expensive in NYC. Also, a life of financial stability is important for me (ironic, right? Since I'm a trader), and there was no way I could get any savings working for a BB without relying on bonus. I understand that bonuses are high in our industry and I'm thankful for that, but it just feels lot better to be able to say: "I can save for the important things in life like car, marriage, house, etc. with just my salary, and any bonus is a luxury."
For those who are wondering, I live in a 900 sq ft one bedroom on my own in a luxury high rise in one of the most expensive neighborhoods in Chicago with incredible convenience to public transportation, groceries, gym, etc. and it costs me ~$1600/month. I was too spoiled when I moved from NYC and I'm considering moving somewhere cheaper/smaller because the place is "too" nice.
2. Lifestyle
My hours now are actually a little bit worse than they were in NYC since markets start earlier here. But no matter how you look at it, I definitely had enough time for a work-life balance. In NYC, even though I had all that free time on weekday evenings and weekends, it was very difficult for me to do anything productive/fun outside of work. Maybe it was the fact that (see above) every social interaction was so damned expensive and I was living almost paycheck by paycheck. Or maybe it was just the New York mentality of stress + busyness + more stress that weighed down on me and paralyzed me from actually doing anything. Either way, that has changed drastically in Chicago.
I'm pretty introverted, but I still find time and energy now to go out and do things I'm genuinely interested in. I'm about to pick up an instrument again that I haven't touched in over 5 years. I spend a lot of time decorating my apartment. I go to the gym more consistently. All of these things are easier in a city where the culture clearly favors a work-life balance more than that of NYC. The Loop (our downtown), where most businesses are, is basically empty in the evenings and on the weekends because Chicagoans leave their work at work and don't constantly stress about the "next best thing." That said, if you want to have that attitude that here, you'll probably do just fine. :)
tl;dr I doubled my income by moving to Chicago. Chicagoans are chill and so is the life here.
EDIT: Oh I just saw that you wanted cons too. Um...the one legitimate reason I hear about why NYC > Chicago is something we all already know. New York is New York. There's something about the city that attracts a really diverse and talented group of individuals to be in a city that's in the middle of the world. Yes, you pay (literally and figuratively) to enjoy this luxury, but it's not for everyone. That said, I think there are a lot of people who are indeed a great fit for NYC. But I also think that too many people go to NYC without really thinking about the reasons and whether or not it's a good city for them.
i see they changed the sb count...
Do OTC Derivatives (IRS/CDS/TRS) trading desks exist? Are there good opportunities on these desks or would you try to get on a FICC desk?
Do you believe in quantity or quality when it comes to women? Have you made any mistakes at work yet that have caused a monetary loss? If so, how much? If you could erase your memory of a video game and replay it again what would it be? What's your favorite Queen song?
I'm grduating this fall and interned in PE + fundamentals L/S investing. However, in college I studied pure math (algebra & analysis, but no statistics or even probability theory) and took an intro Java programming class (which I finished a semester's worth of work in 1 week).
I think algo trading would be a neat way to combine my interests in finance + math. Is it too late for me to join an algo trading firm especially since i don't have a trading, applied math, or CS background? I'm an introvert and honestly think the trading/nerdy culture is better for me. It's just I studied completely theoretical math so I can't actually apply much of what I learned.
This is a hard question for me to answer for two related reasons. Because prop shops are very secretive about their strategies, it's hard for me to speak about what other firms do. And likewise, I can't reveal too much about what my firm does either. But I'll try my best to answer in a general sense.
Prop shops in general employ strategies that are short-term in nature because the lack of outside investors = less capital = can't hold too many things overnight. Market making is the most popular form of short-term trading since you just collect small amounts of edge all day and close out your position at the end. The gist of market making is to be on both the bid and offer of a product and collect the spread in between.
While there are a lot of prop trading firms in Chicago and a general statement like this might not be accurate, I do feel like the majority of them focus on trading derivative products. In my opinion, this is because vanilla products, especially equities, are oversaturated by the buy side and actually pretty much everyone else. I mean, just think about how many people/firms want to be in the stock picking business. Therefore, proprietary trading firms have to use their expertise and talent in ways that are less popular (and unfortunately, less liquid) so they can have that real edge. But that is not to say that options market making can't be as crazy as trading single name stocks. It is still very much a speed game, and for listed options for companies like Apple, there is a ton of money to be made if you have a good algorithm and are fast.
I'm not sure about this in the proprietary trading world. I do know for sure that there are many OTC desks at banks that market make such products to clients and manage the risk that comes with that. I know people who work on these desks and they tend to be very quantitative in nature, and being on the sell side also very stressful and fast-paced even though it takes a long time to price up one of these derivatives (because you have so many to do). Read my first comment above about working on the sell side though, and maybe that will help you.
From what I've seen about fixed income traders on the sell side though, the top ones get poached by firms like Brevan Howard anyway, and many of them know that the buy side is their end goal. But if you want to trade and you must work on the sell side, I definitely recommend fixed income over equities because the latter is become more and more about agency trading (except for equity derivatives) since volumes are low and banks can't afford to pay people when algorithms do their jobs just as well, if not better.
Somewhat along the lines of what @nontargeted was saying, I also don't have too much CS experience except for intro programming classes. That being said, I'm going to be a junior at Lehigh studying industrial engineering, which focuses a lot on probability and statistics/stochastic modeling so I've done some simple stat models in Excel/Minitab/SAS so far. Is stat/IE a decent background for algo trading (at least initially) or is the programming knowledge crucial?
can you describe a stat arb strategy that isnt the commonly mentioned co-integrated pairs trade, triplet, etc? is purchasing/ rates parity considered stat arb?
why are many quant strategies long vol
Do you guys buy structured products as well? In general do you think it is typical nowadays for prop trading shops to trade structured products?
Quality. It's more meaningful and harder to find.
Yes. Half a million dollars. You didn't ask why so I won't explain (and probably couldn't even if you did haha).
So easy. Kingdom Hearts, probably the whole series. The storyline is a solid mix of touching, complex, and deep.
"Doo doo doo, another one bites the dust"
do you think a prop firm would take someone on with a super high interest in trading in general and had pretty good excel/R/python skill with no education??
Honestly, I think you’re in great shape to join the industry. Many of my friends working at top algo trading firms do not have finance backgrounds; in fact, the more common majors are computer science and mathematics.
Here’s what I think about learning theoretical subjects in college. Even though I studied “financial engineering,” most of the work was theoretical and as I discovered, not very applicable to my work. But in the end, even though I started out behind in knowledge, I quickly caught up and eventually performed better than most of my peers who had finance or econ backgrounds from other top schools because going through this kind of theoretical work (in my opinion) makes you a better problem solver/faster learner in general. The good firms can recognize this and that they can teach you everything on the job anyway, so having an “industry-applicable” background is not necessary.
I can’t say for sure about how well your major is received in this industry because my sample size isn't big enough. But I can tell you that I know algo traders who do not have programming knowledge (or at least, don’t actively code) but are very involved in the tweaking of the parameters in the algo as well as the initial design of trading models. If you've ever heard of program managers (PMs) at tech companies, I imagine it’s similar to that kind of role.
And yeah see my response to @nontargeted for other relevant stuff.
Just to make sure - you don't think his lack of stats/ probability/ programming will hurt him? It seems those are the most common interview questions.
Programming is easy to learn on the job/in your spare time. There are many ways to see if someone is smart and creative in a way that will make him a successful trader in today's industry. Most of these hard skills are teachable so it's not what firms are looking for. Note I'm speaking for the good firms. It may be true that lower-tier firms don't have the resources/don't understand the importance of cultivating intelligent individuals who don't have a relevant background.
Also, they'll only ask you programming stuff if you claim to know it unless you're going to a place like Tower or HRT. Every firm does interviews differently but another common denominator is mental math, which can be easily practiced beforehand.
what in your mind shows someone has the smarts to be a trader? did you ever take math competitions (putnam) and score well?
I'm not sure about this because I've only recently begun working on a stat arb trading strategy. But I'm pretty sure the concept of "stat arb" has a pretty broad definition (basically anything mean-reverting) so I'm sure it counts.
I don't know what you mean by this, especially because selling vol traditionally is the way to make money in a rising market (which is the case most of the time).
FYI i think the answer why many quant strats are long vol because most are basically mean reversion strats, which generate trade opportunities when vol is higher (think bollinger bands).
I dunno man, whenever markets are rising (which is most of the time), selling vol has traditionally done pretty well.
Again, I'm not sure because I don't know what other shops do. But my intuition says no, because they require more capital to manage and they are not usually things you can get rid of before the end of the trading day (see comment above).
I'm a rising senior at at a top cs school without any internship experience. Will this hurt me in the recruiting process? Also, what skills are sought after by your firm?
Wait, define no education. No college degree? If so, it depends. Maybe some arcades (you have to contribute your own capital) would give you a chance. More established firms that pay a salary on top of bonus from PnL probably wouldn't take you.
I'm not sure what you mean, but in the end, if you're smart enough and motivated, you can get hired if you have a bit of luck no matter your situation. It's less necessary to go through the "usual steps" (top college, econ major, athlete, networking, etc.) to get into prop trading because in the end, all they care about is whether you can make alpha for them. And believe me (I don't know how they do it), there are people in the industry who can tell that someone will be a good trader without even having them try it out.
Having a CS background from a top CS school sounds pretty legit to me. Any internship experience at all? Or just finance-related ones. I know a guy who interned at Facebook, Microsoft, and Google during his three summers and ended up at one of the best algo trading shops.
It's hard to describe what skills are needed for trading firms, especially for applicants out of college. It's more about potential. You know how sometimes a college freshman athlete will be drafted by a professional team even though he wasn't even the best on his team? It's because the professional team sees the potential of the player. The same applies in entry-level trading positions, though skills and experience definitely matter if you're a lateral hire.
I don't have any internship experience at all, as I'm graduating early, and in previous summers I was doing research/summer classes.
How to they evaluate talent? Also is GPA important, or is there just some minimum?
Salary wise, how are software developers compensated vs. the actual traders? I've been looking at places such as DRW and Jump, and was wondering if the devs. get paid more than they would working at a traditional tech. firm such as google.
Also, I'm a rising sophomore at a top 5 Comp Sci. program. If I wanted to do software dev. / algo trading, what are some good areas to focus on to prepare?
Thanks in advance.
Hey peyo, thanks for answering these questions,
You mentioned during college not knowing what you wanted to do... What made you decide on trading? Why not IB or something else? Do you plan on staying in this field long term?
I'm attending a target school this coming fall and I'm majoring in Finance. I'm not sure what route I want to take but I want to leave S&T as an option. Math is definitely my strong point but I'm unsure if I want to continue pursuing in college - would you recommend it?
I am graduating this yr from a non-target with a finance and minor in CS. What sort of opportunities and jobs would you recommend I look into with this combination? Would I need more CS experience to enter the algo trading world?
yes, no college...well i dropped out.
do you think its personality more so than skills?? (When you say someone will know when someone will be a good trader??
im super interested in trading forex, commodities and equities to some extent (too many rules) and try to get as much chart time as possible everyday
Got you. You replied in an earlier post that " proprietary trading firms have to use their expertise and talent in ways that are less popular (and unfortunately, less liquid) so they can have that real edge". I see that even by less liquid you still prefer to be able to exit the position within the same day.
It's not a big deal if you look at firms that are very academic in nature (look for rooms where all the walls are whiteboards and they're full of equations/diagrams).
I wish I knew how they evaluated talent, but a lot of the senior people can just tell during the interview process by the way you answer questions (not necessarily the answer itself). GPA is kind of important, I guess? As long as you don't have something horrendous, you should be fine. Although going to better schools gives you more leeway on how low it can be. I think I had about a 3.1 when I got my initial offers junior summer.
I don't actually know the answer to the first question (maybe look at Glassdoor?), so anyone else who can shed light on the topic should feel free to jump in. My guess though is that base salary is lower at the beginning compared to entry-level at a tech company, but it'll probably catch up after a few years. Bonus is probably also more variable (can be higher) and job security a little worse.
With your background, I don't think there's as much to prepare for this career path except to really know why you want to do it. That'll be the most important question during your interview assuming you get all the technical ones right. Everyone has different answers and as long as you're convincing (and your reason isn't "I couldn't get a job at Google/Microsoft/Facebook"), you should have a good shot.
looks like the ama is going great peyo, thanks again for doing it!
It's still pretty early for you. Honestly for me, I didn't really consider finance but since everyone in my major was looking into it, I thought I'd give it a shot. I didn't want to go to grad school so that was another reason. I didn't just apply for finance jobs though, one of my interviews junior summer was also at Microsoft but in the end my computer science skills weren't strong enough.
I definitely considered IB strongly, mainly because everyone at my school wanted it too. I had no idea what it is, and I had heard about the tough hours, but I had a low GPA and beggars can't be choosers. It wasn't until I had my only interview for an IB role (at a boutique that no longer exists) that I realized how terribly it would fit my skill set. I had taken a corporate finance class and it was one of my least favorite classes in all four years, and I made the connection during this interview that this would be the kind of work I was doing. Needless to say, I did not get past the first round.
I also disregarded consulting (even though a lot of people in my department did very well in consulting because we had strong analysis skills) because I didn't really know what it was, and it seemed like a lot of BS to me at the time. I didn't like the idea that you could put in all that work for a company and they can still choose not to take your advice. I wanted my job to be have definite impact. Now I realize that I was wrong and consulting is definitely something I wish I had given more of a chance to (I didn't even apply).
I think I can stay in my current job for a decently long time because my particular company seems to be pretty stable and the work-life balance is good. I can't say whether that security necessarily exists at other prop shops, but at my old role on the sell-side, the same would apply (although again, my group's culture was very unique/non-toxic and there were a lot of people with families even in that group at a BB).
As you've probably heard, math in college is very different than in high school. Math was also my "strong point" before college (I did well in MathCounts, ARML, AMC, AIME, etc.) but man did I suck in college. If you like it though, you should definitely pursue it. Like I mentioned above, there are many different ways to enter this industry and in the end, most people care about your potential, not your skill set, especially in an age where a lot of the top target schools are leaning more toward liberal arts.
I think you have a pretty broad academic background so just about anything goes. If you're interested in algo trading though, see my above comment about how CS knowledge is important but not 100% necessary for a career in algo trading. I'd recommend that if you have the time to take some CS classes on Coursera or other similar sites.
I'd say it's a combination of both personality and skill set. In my opinion, it would be important to finish a college degree though because a lot of the good trading firms are becoming more academic in nature. Less academic trading desks may exist on the sell side, but they also won't hire you if you don't have a degree.
Yes some trading firms have good websites through which you can tell what the culture is like. Other things that are correlated (not always true, so take with a grain of salt) with an academic culture at trading firms: relaxed dress code, software developers and traders working together (instead of the former working FOR the latter), lots of surfaces to write on, better hours, strong focus on internal training/development.
Can you describe what a normal day would be like?
Websites are pretty misleading. The best thing to do is to browse the linkedin profiles of the employees and see how strong their backgrounds are. If you see a lot of STEM grads from top schools, then you will be in good company.
I recently talked to multiple friends at top prop firms, and they're all pretty gloomy about the future of the industry and are looking for exit opportunities. Tech, startups, buyside, MBA, are all on their minds. Is this true at your firm as well?
Can you talk more about your compensation?
I get paid more than a first year analyst at a BB. :P
That sounds good for my firm then, because we don't feel anything like that haha. I imagine firms who have been running similar successful strategies for the past decade are the ones who are suffering in this new market environment.
Curious about this - could you elaborate a bit on this "doom-and-gloom" outlook?
The high frequency market making space is totally oversaturated. You combine that with very low volume and vol, ongoing regulations, and very high operational expenses, and they're feeling gloomy. They recognize that the glory years are gone, hence whey firms such as KCG(formerly getco), allston, infinium, etc., are turning to mergers and looking into more client focused businesses. Moreover, trading gets old pretty quickly, and if you want to develop transferable skills that you can apply to more interesting areas, an MBA makes perfect sense.
Aah!
Would it be possible for you to give a range of your compensation?
Base salary * x, where x = 0 (if you're fired), or 1
x2
I've read this on here before from other prop traders but it seemed that they almost always equity traders..all the quant type firms focus on dervitives it seems. i remember one kid here said his friend cleared a million one year then made 800 or 900K the next year, quit then went back to business school because he said the industry was dying. i dont follow the stock market but ive heard people say that equities aren't moving like used too...
I know several guys who actually fit this description. I wonder if it's the same person this person was talking about. Lol.
and what are these units (1, 5)? How are these determined? Would you mind if I ask you how much these units are in dollars?
Thank you for coming here to help people like me and sorry for shooting so many questions at once.
I meant them as a multiplier. If your base salary is $100, your bonus in this scenario would range from $0 to $400 (or $100 to $500 total).
Got it! Thanks!
I think you've thought it out pretty well, so definitely talk about that in your cover letters and interviews.
Yeah Citadel can be a little flaky sometimes about their recruitment process so I wouldn't worry too much about it. You should keep applying to other firms!
Again, thanks for the prompt response!!!!!
The reality is that: I applied for several.. Getco, DRW, Two Sigma, D.E.Shaw, PDT Partners, Jane Street.. Didn't get chances to interview...
Wondering is it about my Visa? H1B is required for my case and GreenCard later.
Or the whole industry is experiencing some uncertainties (more strict regulations and e.g)?
If you would prefer, I will PM you my personal email address and we can chat over there..
what are typical returns like for prop traders? I'm sure that the bar is set much higher than l/s hedge funds etc. due to the lower capital base
Thanks for doing this AMA peyo212,
I have several questions:
1- Did your firm made you close your brokerage accounts, move the funds with them, etc?
2- By derivatives trader you mean Options, futures, swaps? What kind of derivatives are the most common in the prop. trading world?
3- What kind of profit sharing does your company uses? Do you get a % of your profits? Can you negotiate this after you have proven yourself? I imagine at the beginning you can't ask for much, but once you become an asset, you can negotiate a different pay structure.
4- Could you add your own personal funds to make your trading capital bigger?
5- I am a mechanical engineer with a Masters in Eng., also in ME. I have 6 years of experience practicing engineering, but would like to switch to trading. Do firms like you have employees with similar backgrounds as me, or they just hire out of college undergraduates for entry level trading positions?
Thanks for the help in answering this questions, particularly the last one.
Yeah dude, I don't actually know what happened (why I used quotes) and honestly they probably just didn't actually like me enough to hire me ;) But who knows what they really meant hahaha. I guess I'll never know.
Every firm is different, but the most common scenario is to have a 30 day holding period on stock and stock option trades.
All of the above.
This again is greatly dependent on firm. I can't reveal what my company specifically does, but know that every color in the spectrum exists (from no profit sharing until you're a partner to profit sharing immediately with lower salary). I have no idea about personal funds.
From my experience, it's much easier to get into trading right out of undergraduate because they can teach you better and don't have to pay you as much initially. Most of the traders at my firm are from this background.
There is no clear cut answer to this. It's highly dependent on what strategy you use and how much capital you employ. It also depends on how you define return. Some shops will lever up by borrowing money with what capital they have (especially in today's low interest rate environment) so they can use strategies that require more capital. I'm sure their return on that borrowed capital is not that high, but if you calculate it according to the initial capital, it'd be a different story.
I'm not sure if the bar is necessarily set higher, because you have to remember that prop shops have no clients. Therefore the returns don't have to go to anyone else. You don't need to make that much for a lot of people to get paid well if your firm is small.
I don't quite agree with your last sentence. At the "top" prop shops the overhead expenses are massive: in addition to base salaries, benefits, etc., you have the technological expenses such as co-locates, data feed, infrastructure, etc. I think GETCO spent around several million dollars PER month just to keep the lights on. Also, bonuses at most of these shops are based on a combination of individual, group, AND firm performance. The exception would be if someone came onboard with their own strategy ready to plug in, and they sign a deal with the firm that they would get a specific % of net pnl as their annual bonus. But this type of deal is less common at the top prop firms.
It's a brutal environment. Not too many prop traders are killing it right now, one reason why so many are looking for an exit.
GETCO is not small lol, especially now that they're a publicly traded company
How are you defining "small?" By capital, # of employees, something else?
Most of the top prop shops are fairly large operations. My basic point is that gettigng big bonuses in prop trading is very rare nowadays, regardless of the firm. There still seems to be a myth among naive students that prop trading at a top firm is somehow a road to riches.
Was your target school's career services helpful in getting you interviews for your job?
Yeah students at my school are heavily recruited by all kinds of firms. But when I was switching jobs after college, I mainly just resume dropped on firms' websites and/or sent HR emails.
Yeah too many definitions here. By small I mean # of employees because that has a pretty big impact on how profit is split.
But you also need to define: "big bonuses", "rare", "top firm", "riches"
I have friends at a lot of top prop shops: jane street, hudson, tower, getco, jump, drw, wolverine, optiver, peak 6, teza, spot, etc. And we have had some frank discussions on our bonuses. To put it bluntly, there are VERY few non-partners at these firms who are now making bonuses in excess of say $400K+/year.
Hey, I was wondering if it was your undergrad that was in financial engineering or if you had done an MFE?
Undergrad. Narrows it down, doesn't it? :P
That's a sweet degree ;)
What would you say people working at these firms are making, including salary + bonus, on average? Can you break it down in number of years of experience? I know not everyone is a star, that's why I'm interest on average compensation. Thanks for any help.
Varies too wildly to say. The guys I personally know graduated college between 2006 and 2011 and their earnings have been all over the map. One guy who did optiver made a KILLING in 2008 (his bonus that year was somewhere around $800K; he was 24 years old). Another friend at Jump made a total of low seven-figures during his time there but left for b-school.
Suffice it to say, those days are over.
I have worked in fixed income derivatives for 3years, with the current rate and regulatory environment esp. the Great Rotation, I started to think of expanding my competence to equity derives, or FX derives; what’s your option? .
I graduated with an undergrad degree in CS and have been working as a PM at Microsoft for about 1.5 years now with not much hands-on development work involved besides prototyping in C#/.NET. Is it still possible to break into trading as a developer at this point or would you recommend pursuing a MSc or MFE as a door opener? Would studying/coding C++ on my own suffice as an alternative and if so what specific C++ concepts are critical for working at a firm?
Also, what's the job market like for dev positions at trading firms on the west coast in comparison to those on the east? Are there any differences in qualifications or expectations for getting hired, ie. more stringent technical expectations on the west coast vs east coast?
Appreciate the insight.
STL & BOOST for C++
Thanks for doing this! I went to a non-target liberal arts school and now thinking of dropping PhD in econ in a target school. I did math(pure, proof based) in college, but also only had one java class. I am still a first year in my PhD, and knew much prob/stats(much of the first year in the phd is about), programming in matlab and other stats programming. If leave will need h1b sponsor in the future. Does my background hurt my chance(no finance internship in college, foreign, no CS, drop from a pure academic background)?
As for breaking into trading as a developer, ask yourself this: would you be able to clear the SDE interview process at Microsoft or other top tech companies? The answer to that will the same as the answer to your original question.
I'm in tech right now but have friends at other top tech companies (GOOG/FB/MSFT), and top prop shops (Citadel, DRW, Optiver, ... ). The answer is that developers at tech companies and trading firms receive roughly the same starting base salary ~100K, which is typically higher than that of a trader. Of course the upper bound for bonuses for devs will be lower than that of traders. For devs it's usually trading firms is, but at tech companies it is generally pretty slow unless you are a star performer, and even then expect to put in ~10 years before you clear 200K.
I have heard a view that the demand of non-quant traders is decreasing, how do you look at it? Would it be inevitable for people trying to break into a trading career to learn programming skills or at least, that would make it easier? Thanks!
I think it's never a bad thing to expand your options, no pun intended, and like you said, markets go up and down in terms of volume and edge and you never know what will happen.
The hedge fund analyst position seems very different from trading equity derivatives (depending on the type of hedge fund). I don't know much about working in middle office roles on the buy side but intuitively it seems like a bad idea to take that job and want to move the sell side later. Also, moving to prop trading from that also doesn't really make sense because prop trading is looking for an entirely different skill set (especially in derivatives) from analysts on the buy side.
From what I can tell, and MSc or an MFE might be a door opener to a prop trading firm, but not in a trading role. Most of the traders I meet/know just have bachelors or if they have advanced degrees, they picked them up at night classes while trading. The ones with MSc or MFE tend to be quantitative analysts, and I'm not sure if that's something you're interested in. C++ in the industry is mainly used in latency sensitive scenarios, so the concepts that relate to speed are definitely important. That said, other scripting languages such as Python are more important outside of the nitty-gritty algorithmic coding (which is more than you might think).
Any reason you're working as a PM at Microsoft instead of a dev when you have a CS degree? The only reason I ask is that I interviewed for a dev position without a CS degree haha (but didn't get it).
[quote=gul2u]
Also, what's the job market like for dev positions at trading firms on the west coast in comparison to those on the east? Are there any differences in qualifications or expectations for getting hired, ie. more stringent technical expectations on the west coast vs east coast?
trading firms in general. The only thing I know is that the hours tend to be really early so I never considered it. Maybe someone else can answer?
Hmm I'm not sure about all your scenarios, but not having work experience might hurt you a bit. Most importantly though, from what I can tell, needing sponsorship of your visa might be the biggest disadvantage in this industry today. I don't have that many observations about that though, so anyone can feel free to correct me if I'm wrong about the sponsorship thing.
I hear this a lot actually, but here's what it comes down to:
Let's be real, learning some programming skills should not be difficult, especially given the amazing online resources we have today (Coursera, Code Academy, etc.), so first and foremost, if you can do it, just do it. It will never hurt you.
If you are lazy, however, the answer to your question is dependent both on the type of firm and the product being traded. These are generalizations, so they are not always true: 1. Sell side firms tend to require coding skills less than buy side firms/prop shops. 2. Fixed income is less HFT than equities right now so maybe you can still get by without knowing how to code (however, I know for sure that this will change and is in fact changing already).
Very frank reply, thanks! :)
This seems to be consistent with the curriculum quantnet includes in their MFE online prep course for C++. I'll have to set some time aside to look into these, thanks.
I can't say for certain that I'm a 'rockstar' alg candidate like many of my peers who work on the dev side however I have been practicing for a couple months now and am competent enough to work through the problems provided during such interviews. If what you suggest is true across the board then that's comforting to know.
I've been digging into Python lately namely because of Quantopian(worth checking out if anyone's interested in alg-trading) so perhaps there's more of a reason why they opted to support it. I'll definitely consider breaking in to trading firms from the dev side considering there aren't as many barriers to entry as I imagined.
I actually applied to both an SDE role and a PM role at the time but fared out better through the PM rounds. I've heard mixed results at least on the PM side as far as technical screening goes so it may be a hit or miss when applying but for me at least, half the rounds were technical. The decision to accept the offer came down to the fact that what I enjoyed most about CS or coding was learning the latest and greatest and understanding the broader scope of things from an infra/system perspective so I figured I would get much more exposure to a wider range of tech over the same period of time as a PM than say as a dev focused on one to a few features on an existing legacy product ie Office.
Having been around the block, much of it turned out to be correct however there's a lot of managerial aspects to being a PM at MSFT as well as the fact that I miss coding as being a main function of my job, both of which are reasons for swaying me in the other direction towards pursuing a dev role in the finance sector. Namely, I'm interested in dealing with derivatives as I spend a lot of free-time paper trading on option combos/strats and am interested in applying CS concepts to smarter/faster trading if such opportunities still exist in the derivatives market(not sure where to find out whether this is true or not).
Thanks again for the insight included in this thread. I think you and a few others have given enough for me to run with. Best of luck to you.
Do you live in ENV in River North?
A trader friend of mine lives in that building. Lot of hot chicks supposedly.
Nope a little further north.
Could you please give some introduction to various roles in a prop trading firm and what's their main duty? Which kind of jobs do foreign students with MFE degrees usually got? Thanks in advance!
Just looked at pictures and reviews. It looks absurdly overpiced/comparable to NYC prices
What type of attitude/personality do you think is required for trading? I read in another post on here, someone said that an INTJ personality (from the Meyers-Briggs test) works best with trading. Probably hard to say what is the “best” personality for it, but what do you think of that statement?
In terms of getting hired, how important is wanting it really badly versus having the right background (prob/stats and CS knowledge, trading related internships, etc.)? I am guessing this factors into the “potential” you mentioned earlier that firms look for. Any tips on how to show that you do in fact want it really bad (studying up on the markets and technical knowledge, opening own account, etc.)?
I don't really buy into Myers-Briggs that much because people change personalities throughout their lives (especially in young adulthood). That said, the most important thing in any team work setting is to have a mix of different personalities to incorporate different strengths.
What I actually meant by potential is just raw intelligence/talent. Yes, showing that you care helps but there are some people who are just really smart, and even without a relevant background, you know they'll do well because they'll learn everything on the spot. Why do freshman college basketball stars get picked so early in the NBA draft even though they were outshined by some other upperclassmen in college? Because the NBA scouts see talent and potential while they're still young.
How much did you know going into your current position? And, did any or a lot of what you learned at school in Financial Engineeering help you out in terms of the knowledge portion?
I'm in a situation where my major in no way shape or form is related to what I imagine myself, or would like the chance to do. So, automatically, i feel like I'm not even going to get looked up bc of that. Add into that mix: grades, school, international status..odds aren't stacked on my side, thats for sure!
I knew very little of this going into my career. I wish I had known more and that's why I'm sharing my stories here! I would say 90% of what I learned in school was not directly applicable to either of my jobs even though I studied financial engineering. If anything, it helped me be a better problem solver (i.e. be smarter) and learn more quickly. Most roles in finance are not intellectually challenging, and most of the ones that are do not require much previous knowledge.
Hey peyo212, thanks so much for the information you are sharing here. I have a bit of a situation of my own and was hoping you could shed some light. I am currently working at a non-algo non-quantitative proprietary trading firm with a few successful strategies of my own. I learned programming on my own and do not have a quantitative background. I want to make the transition to a algo trading firm and share my strategies in exchange for higher knowledge. Do you think algo trading shops are open to this type of hires? Or do they only hire PhDs or Quant traders when it comes to experienced hires? Thanks very much for your input
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