Investment Bank S&T - Ability to prop trade
We all know that regulation has put a stranglehold on a lot of prop trading activity at banks. Is prop trading on the S&T division completely dead? Are there ways of taking directional risk in various asset classes, or is this reserved only for holding illiquid contracts? What proportion of P&L comes from market making, and what proportion from prop trades?
If anything, it's the other way around. Regulation has made it tougher to hold positions for a long period of time and justifying it. So credit / equity / structured products prop trading is much tougher as those trades tend to take a much longer time to materialize.
Prop trading in macro related desks (fx, rates, commodities) is very much alive / necessary and is what separates the best traders from your generic franchise trader. The swings in these market are very much day to day, week to week, or month to month. Basically its impossible to define what is prop trading and hedging client flow. Anticipating and being positioned for these swings along with managing client activity is the job. However, like the above, you're not going to be able to be long your amount of USDJPY for the entire year and just sit on it.
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