Prop trading vs Flow/Market Making
I assume most traders at banks are engaged in flow trading rather than prop trading (although I guess all traders must have some proprietary component to their work). Do most flow traders aspire to become prop traders? Or do people stick to flow trading their entire career? Are exit opportunities for prop traders much better?
Rody
...is an exit opportunity, once you are doing it your goal is to get very rich not to move on to someting else. "Flow trader" is a somewhat generic term for a sell-side trader who uses his firms customer flow to make money. Guys who trade on the sell-side take risk and have balance sheet just like prop traders (who are seperate from the sell-side desks and are more like internal hedge funds) except sell-side guys also have to trade for customers to facilitate the selling of the firms products. Seeing this "flow" can be a large trading edge. So why would you want to be a prop trader and forego seeing the firm's customer flow...mostly because you can take more risk, get a better deal on the money you make trading, and you don't have to worry about/waste time on customers and selling bonds.
Prop v. Flow Trading (Originally Posted: 12/01/2009)
For those on here who are traders, if you could go back to the end of undergrad and could take a position as either a prop trader or a market maker, what would you do and why? Keep things like firm and product out of the discussion.
think about it...prop. you are given the opportunity to risk the firm's own capital
marketing making is also prop, using a firm's own capital to make markets. many market makers nowadays take markets too
Exactly, that's one of the reasons I prefer market making right now. Also, I like the OTC derivative products, which are less often traded in prop firms.
stupid question. it completely depends on the product, if you trade something illiquid as a market maker you are pretty much taking a prop position in it.
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