Boutique prop trading firm?
Currently working at a FICC desk in a BB. I have been interviewing with a boutique prop shop (around 50 employees), that doesn’t specialize in my markets.
I thought they wanted to hire me to trade their markets, but what they want is someone to set up a desk that trades what I have been trading at the BB.
I would have to set it up from scratch. Their expertise in this is very limited. I have around 5-7 years of experience but have always worked at places that already have expertise in what they are hiring me to trade (so i have been part of teams and already established structures).
They will match base pay and the bonuses on prop can be much higher (basically offering 5-10% of book), but obviously the risk is higher if I don’t perform after a few years. They seem chill about that, but IDK if I am setting up myself for failure or if this is a crazy move.
Thoughts? Thanks
bump
Sounds like an exciting opportunity. Some things to consider:
How is your performance in your current role? How much of that performance would you be able to maintain without all the infrastructure or connections in your current seat? Are there a lot of internal models and software you currently rely on, or can you get it done with just a Bloomberg and Excel?
I'm unfamiliar with FICC, but I work as a MM in options for a prop firm, and so much of the edge comes rooted in the broker network my firm has established, and the tech hurdle to get even remotely competitive is massive. I would have to develop or hire developers for a whole new tech stack to even get something remotely close to what I'm doing now. Possibly more similar to your BB FICC work, setting up connections to see flow in the broker network would also be a laborious legal process, assuming it's even possible to replicate.
What does your trajectory look like in your current role if you stay?
So, given that I am a sales trader (I deal directly with the corporates) the most relevant part for me to make this work is to be able to take clients with me. The operational side scares me a bit, but they are willing to allocate a couple of ops people to help me with the admin/back office.
Feel like it’s a high risk high reward situation. I don’t know if the package being offered is fair enough.
The CEO seems chill, and told me that I would have up to 2 years to make it a profitable desk. They want to invest in a new venture to expand basically.
Bonus isn’t a formula, but discretionary. He did tell me that multi million dollar bonuses have been given in the past (if traders make big bucks). Also zero dollar bonuses have been given.
High risk yes, where’s the high reward? Are you becoming an equity owner in the prop shop for building out a new business line?
discretionary bonus is a great way to get fucked too, and I would never hinge on “the ceo seems chill” as basis for any decision whatsoever
Never join a 50 people prop firm to set up a new desk with discretionary bonuses. You will get fucked. You either get a cut with a formula from your desk result or nothing.
Have worked at firms similar to this and in sell side S&T. It's hard to give you specific advice cause how stuff works is VERY product specific. What I can say is that working at a bank a lot of complexity (especially in FICC) is abstracted away for you as a trader. You don't have to worry about funding positions or settlement or building pricing models. Or dealing with sales and the flow they bring in on certain desks.
The upside can be higher for you as a trader at prop shops. And generally there's less political bullshit. That said, if they're asking you to build out a business for them, you need to make sure you have legally binding guarantees that you'll benefit from the upside. Very much depends on the culture, and some firms can be very chill and benevolent, but a lot aren't so you need to be careful.
Can you expand more on these guarantees?
Senior traders/pms usually have contracts that guarantee them x% of revenue or y% of profits. I'm not 100% sure what you'd be doing though so it's a bit hard to say. Some firms are partnerships, so that can be different.
In any case, I would strongly advise you to have a good lawyer review any contract you sign. Unless this is Jane Street, do not assume they'll treat you fairly if they don't have to.
They are offering me discretionary bonuses. But they have a reputation for paying well
Are they offering you a guarantee? Most of my experience with this is in pure risk taking roles. And you seem a bit different than that so it's harder for me to say. I can only say that I would not consider this an attractive offer from most firms for what I do. A 5% to 10% payout is on the lower end for high sharpe strategies. With that said, I'm not sure what product line you're in exactly?
I’ll DM you if you’re fine with that
Am I missing smt? Sounds like a shit deal.
you leave a relatively stable BB seat for same base pay and % of book bonus (which is industry standard), benefits probably worse than at the BB, in exchange you build a new desk for them and start from scratch?
i’d need a hell of a sweeter deal to make that jump
I don't think you are judging it fairly, but all i am here for is to get feedback. Initially, BBs are not as stable as they were a few years ago. FICC S&T units are down, bonuses have been shit (1x base at best) and the hours are heavy. Culture is a piece of shit, I hate 80% of my coworkers, as they are out there to screw me and making moves constantly.
The things i'd be getting by making this move:
1) Full autonomy of my schedule. They don't care when I'm in or out of the office.
2) Maintaining my base and verbally guaranteeing that I have a 2 year grace period to become profitable.
3) A much better work culture, from what I see. You can sense it in the way they talk. I see very low rotation, long tenured traders, smart individuals coming from very large shops. They have to be doing something right.
4) If what they are saying is true, a 10% of PnL bonus will be significant, even if I am able to build a book generating a few bucks, i'll end up with 150-300K bonuses without risking my own money starting my own firm. If I hit a home run, bonuses can get to the 7 figure domain.
5) A solid platform. This company is not shitty. They are a known name in their sectors and generate solid returns. These guys might not trade my specific markets but they understand the trading biz. They have been doing it for decades.
6) Two employees to handle all the admin stuff and ops for my pod.
7) Independency on my biz (nobody does what I do) and therefore nobody constantly trying to backstab me or come after me.
I haven't accepted anything. I can ask them about guaranteeing stuff or leaving X o Y on paper. I just want to understand what would be a reasonable ask. But I completely disagree with you about it all being risk and no reward.
I am going off the two paragraphs you gave me in the OP, so this is all new info to me. Sounds like you hate where you are and have a negative view on prospects there which changes things and makes the new gig look better
Still of the view that a lot of the “upsides” you mentioned above are common in the industry and you may be selling urself short by not shopping around and talking to other firms
Don't think this is a bad offer IF you can get guaranteed % of your pod
Would say that you should 100% shop around and not rush into this offer
Feel free to PM if you'd like to shoot any ideas off of me
Could be a pretty awesome opp if you are confident that you can get P&L. Also depends on what they are willing to offer you in terms of comp, capital and resources?
I would echo some of the comments here and highly encourage you to get absolutely everything that's promised, indicated, or implied in writing. Discretionary is zero guarantee whatsoever, and you are taking a risk in moving..
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