Selectivity of Top Prop. shops vs. BB S&T

Just how do these two different trading gigs compare in terms of selectivity?

I know the top proprietary shops like Optiver, Jane Street Capital, First New York, and Susquehanna mostly recruit at Ivy League schools and other top/target schools. A few non-targets manage to find themselves with offers from the top prop. shops each year though.

At the BBs for Sales & Trading I feel it is very similar, but the recruiting process maybe a bit more political and personality-based than some of the prop. shops which have been known to give straight technical interviews (absolutely no fit questions)

I have heard of people turning down Goldman Sachs S&T offers for Jane Street Capital and DRW. Jane also provides a $100K salary which makes things pretty nice.

So how do you think the selectivity compares?

Comments (25)

Best Response
Apr 24, 2009 - 2:25am
LouisWinthorpe3, what's your opinion? Comment below:

People have different preferences which is a great thing in general, but I would be surprised if anyone turns down a BB S&T position to work for one of these prop shops.

1) high turnover rate without any applicable training or skills for other lines of work (not talking about the quant developers who work at these places, they are marketable)... no one goes from Jane Street to Goldman Sachs.

2) Outside of WSO, hiring managers are not familiar with any of these companies, hence give them much less prestige than BB.

3) eat what you kill, which sounds good, but all the prop firms have limited partner capital and no sources of permanent funding

4) transparency issues- top hedge fund performance is audited, these trading firms are a complete mystery. Post-Madoff, shadowy financial firms are viewed with inherent suspicion.

Apr 24, 2009 - 10:25am
aachimp, what's your opinion? Comment below:
MichaelHutchens:
People have different preferences which is a great thing in general, but I would be surprised if anyone turns down a BB S&T position to work for one of these prop shops.

1) high turnover rate without any applicable training or skills for other lines of work (not talking about the quant developers who work at these places, they are marketable)... no one goes from Jane Street to Goldman Sachs.

2) Outside of WSO, hiring managers are not familiar with any of these companies, hence give them much less prestige than BB.

3) eat what you kill, which sounds good, but all the prop firms have limited partner capital and no sources of permanent funding

4) transparency issues- top hedge fund performance is audited, these trading firms are a complete mystery. Post-Madoff, shadowy financial firms are viewed with inherent suspicion.

1) are you sure about that? as far as i know, jane street has a turnover rate well below that of GS or any bank. most reputable prop firms are like this.

2) outside of WSO? i think you mean outside of trading. but in any case, the prestige of BBs is not what it used to be.

3) limited partner capital and no sources of permanent funding? partner capital is almost always not the limiting factor at these firms. permanent funding? how much more permanent can you get?

4) people in the industry have a fairly good idea how other firms are faring because they keep track of each others' trades. "shadowy financial firms?" sorry, this is isn't the Boiler Room.

Apr 24, 2009 - 1:08pm
indian-banker, what's your opinion? Comment below:
MichaelHutchens:
People have different preferences which is a great thing in general, but I would be surprised if anyone turns down a BB S&T position to work for one of these prop shops.

1) high turnover rate without any applicable training or skills for other lines of work (not talking about the quant developers who work at these places, they are marketable)... no one goes from Jane Street to Goldman Sachs.

2) Outside of WSO, hiring managers are not familiar with any of these companies, hence give them much less prestige than BB.

3) eat what you kill, which sounds good, but all the prop firms have limited partner capital and no sources of permanent funding

4) transparency issues- top hedge fund performance is audited, these trading firms are a complete mystery. Post-Madoff, shadowy financial firms are viewed with inherent suspicion.

I can tell you for a fact that people have rejected Citadel and DE Shaw for Jane Street. Rejecting a BB is common for these shops. As far as people knowing about these places, HR is well aware of the caliber present in these shops and this sort of a stint is a great resume booster (BB HR's own words).
Apr 24, 2009 - 11:22am
marcellus_wallace, what's your opinion? Comment below:

DRW is not known? Ask any floor trader in Chicago where they get some of their biggest orders from....

You want shadowy financial firms, read the Goldman Sachs Q1 results, look at how they changed their year-end to fudge earnings. You want turnover look at the BBs who rescinded offers and or straight made people goto the middle-office when they had front-office offers.

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Apr 24, 2009 - 1:23pm
Investor1, what's your opinion? Comment below:

How about Trillium and First New York??

Although not at the level of Jane Street, they are still pretty highly thought of and certainly reputed prop. shops. Would solid trading experience at either FNYS or Trillium be looked at favorably when applying for other jobs (such at S&T at BBs)

Trillium hires a bunch of kids from Cornell, Dartmouth, Brown, and other top schools so I would imagine that at least some of these kids had S&T offers from Bulge Bracket banks, but turned the BBs down to accept the Trillium offers.

Apr 24, 2009 - 2:45pm
AlgorithMIT Trader, what's your opinion? Comment below:

The main misconception here is that there is a fundamental difference between running a prop firm that is almost solely taking directional trades and an actual prop business that makes most of their money from market neutrality and providing liquidity. All of the props listed by the OP are legitimate businesses.Anyone who knows the industry does not consider firms that have heavy exposure to directional trades to be actual businesses. Their business model is destined to fail; that's simple probability though.

I can also tell you that the most intelligent students from MIT consistently reject prop at BB for top prop firms and quant funds. I can also say that those who go to prop at GS from MIT are not the most qualified or the most intelligent but rather the most 'normal' that reach a certain level of intellect.

Apr 24, 2009 - 2:53pm
trade4size, what's your opinion? Comment below:

Algo- Your post has the connotation that directional trading is inferior to market neutral trading. There is an elite group of institutions that excel at market neutral trading best they have the best.... people, software, hardware etc. Outside of that I would argue that an individual trading a 20mm prop book has the advantage of being nimble enough to get in out and out of trades as opportunities exist. How are small exploitable directional moves any different than say stat arb.

My bias is towards directional trading but I do find stat arb to be a very interesting strategy but ultimately your still trading something. When your wrong you still have a point where you get out.... or you average the loser ala LTCM. If you want to talk more about this PM me.

"Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.

"Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.
  • 2
Apr 24, 2009 - 3:04pm
AlgorithMIT Trader, what's your opinion? Comment below:

I agree completely, there is a HUGE curve to succeeding at market neutrality, which does not exist with most directional strategies.

This is why I say it is not fair to lump the top elite prop firms who have the resources to succeed at market neutrality in with prop at BB.

As far as inferiority, I do believe that on the proper scale market neutrality is a much higher probability bet than a directional trade.

Apr 24, 2009 - 3:15pm
trade4size, what's your opinion? Comment below:

I agree 100%. When you are trading massive size directionally you have significant influence in the market. Market neutral strategies you are able to take on much bigger size with less impact on the spread.

If I had 10mm I would be trading directionally. I think the level where sheer size sttarts to significantly erode your returns starts 50mm. If you were trading S&P futures that number might be 100-300mm. Really depends on the size of the underlying market. Some stocks that number is under 1mm.

"Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.

"Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.
  • 2
Apr 24, 2009 - 6:39pm
cooperman, what's your opinion? Comment below:

The sheer amount of false information in these treads is ridiculous.

People, if you're in college, have never met with these firms, and don't know anyone there -- DO NOT post information. People go here looking for sound advice that they don't know themselves. Why post a reply if you don't know what you're talking about?

For the OP's question, i can tell you empirically that the most intelligent people in my school are going to prop firms - jane, jump trading, hrt, etc. The problems they solve at these places is incomparable to what they do at banks. Period. That is why you see the correlation in the rigorousness of the interview process.

Apr 25, 2009 - 1:12pm
AlgorithMIT Trader, what's your opinion? Comment below:

Why is that surprising? If you ranked the prop shops, Trillium wouldn't even be in the top 10. I believe they're still paying 500/week in guaranteed income. Why would anyone great want to work there when they can go to a Jane, DRW, Optiver, SIG, etc and make much more?

Apr 25, 2009 - 7:43pm
trade4size, what's your opinion? Comment below:

Preference to equity/directional plays opposed to options market making and market neutral strategies.

"Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.

"Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.
Apr 26, 2009 - 1:06pm
guimion11, what's your opinion? Comment below:

The draw is set up to keep people afloat in case they have a bad month or two.. it shouldn't be looked at as a "salary"..

the prestige factor is obvious, trillium isn't highly regarded on the street.. but people who are inherently good at trading will succeed regardless of how "prestigious" their firm is..

in the end, it's just a higher risk/reward career.. if it works out, great.. if not, try b-school or open your own business..

Apr 26, 2009 - 3:01pm
TradeOff, what's your opinion? Comment below:

as a college junior who interviewed for Bulge Bracket S&T roles and for a top prop/market making shop (and speaking with friends who interviewed at other prop shops). I can tell you that selectivity is comparable, as in number of resume drop/ number of positions open; or number of first rounds / number of positions open. The edge here might go to prop shops because they have fewer positions open.

The difference in interviews was stark, BB divisions were much more fit oriented, tell me about yourself / do you take risks / what do you do in your free time / tell me an analytical problem or class you've enjoyed. The prop shops were more Darwinian, solve this probability questions, solve this mental math problem, it weeded people out and it was abundantly clear what you were being evaluated on, it was pure ability. There were also personality tests like betting games, but they were definitely tests not "an exploration of your personality". Looking at applicant to admit ratio (assuming equal quality of applicant) it isn't really easier to get a job at BB S&T division. But there seems to be far less randomness or ambiguity in the prop shop process. This is for summer internships, my guess is that fit matters less at both places for full time hires, I imagine interviews get more technical because they can.

Apr 27, 2009 - 5:53pm
Investor1, what's your opinion? Comment below:

I take these top prop. shops you are talking about, Tradeoff, are the Jane Street, DRW, Optiver level (another words the absolute top proprietary shops around) .

If I could geet a $100K base salary right out of school with a place like Jane I would take it in a heartbeat. It is not difficult to see why Citadel, and D.E. Shaw lose new graduates to a place like Jane or DRW.

May 31, 2009 - 6:07pm
MasterBlaster01, what's your opinion? Comment below:

if you start off at these top prop shops, is it possible/easy to move into BBs, PEs?

i know that you'll probably be making more money at a prop shop, but just curious IF someone wants to make a movie how easy it is.

and it doesn't have to be S&T at a BB, even IBD or PE.

also, do traders bother to get an MBA after a stint at a prop shop?

Jun 1, 2009 - 12:04am
yesman, what's your opinion? Comment below:

BB S&T includes salespeople, and not all programs recruit people directly into sales or trading (i know barclays and goldman do), so you're not comparing apples to apples because prop shops only hire traders. An arguement could be made that's it's more difficult to land in a bb trading role.

Nonetheless, as long as prop shops are run as partnerships, they're going to be tougher because they don't have room for dead weight (ie - they're not going to take someone unless they're absolutely sure).

Even if prop shops hire the same number of people in good times as in bad, it's going to be tougher now because more people are trying to get in as they're turned away/fired from BBs.

  • 2
Apr 22, 2014 - 7:03pm
PeterMullersKeyboard, what's your opinion? Comment below:

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Apr 22, 2014 - 10:15pm
mastertrader89, what's your opinion? Comment below:

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