Thoughts on VCMT (Dare) and Onyx

Hey all,

Was wondering if I could get some thoughts on getting offers from either of the two firms up top.

I understand that both firms are mainly market makers in the energy derivatives trading but with little to no physical presence. Would this be considered a disadvantage especially at the start of your career out of undergrad, and also what are some exit opps I'd be looking at in the next 5-10 years.

The idea of being able to be trading extremely quickly and promoted to head of desk within 1-2 years is a huge aappeal to me.

 

from one friend at a supermajor and another at a big energy prop firm, I've heard a decent amount of bad rep regarding VCMT - apparently a very unpleasant culture, less learning opportunity and run by one guy with a very large ego which is not a combo you'd want. Take them if you have no alternatives, but make sure you suss things out properly if you have other offers! Gl :)

 

Well, that's the decision you have to make. Personally I thought it wasn't worth it and took an offer at an IB in S&T. But if you are set on being a energy trader + have thick skin to thrive in that environment, I expect you will learn a lot and have way more exposure to markets compared to someone who goes to a regular oil firm who won't really make any trades/PnL until 2-3 years in. Again, I've never worked there so just my 2cents and may be worth asking others before deciding too.

 
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Appreciate am probably late to the party here, but wanted to add my two cents

  1. Neither firm has any physical presence whatsoever - the entirety of their trading operations are concentrated on paper (i.e. derivatives) trading
  2. Neither are especially well placed at this point in time to offer exit opps over 5-10yrs - indeed, I don't think either have even been in business for 10yrs and aren't especially well regarded by their peers
  3. Be wary of firms offering "head of desk" opportunities after 1-2yrs; this will be dependent on desk availability (e.g. they want to start a new desk, you're given the go-ahead to try and launch it / a senior trader currently running the desk leaves, providing an opening for whoever the second in command is [could well just be a two-man desk]), meaning you may well end up "stuck" as a so-called "senior trader"

Onyx, at this point in time, seem to be doing better - they've just opened an office in Singapore, I'm lead to believe

Dare (formerly Vercer, or VCMT) has the reputation of a brutal culture, however I understand the two co-founders have stepped away from running desks themselves (likely because, as Bloomberg reports, they're allegedly being investigated by the DoJ for market manipulation)

The skills you learn at either firm won't be scaleable in the sense of transitioning after 5yrs or so to a bank / fund / major / trading house

The reason for this is that, as market makers, their primary means of providing liquidity is arbing across curve structures in order to exploit small, 25-50 cent inefficiencies in order to attain profit - you'll likely learn little about interpreting physical flows, understanding premia dynamics, or the impact of the underlying macroeconomic landscape

 

Not to seem so pessimistic about the whole situation, but unlikely

The market making of Dare, Onyx, Mandara, and the like are solely focused on delta-one products: namely, timespreads and arbs (incl. cracks, EW, etc.)

Optiver, TwoSigma, and Jane Street are: i) Much more quantitative (the specialties of Dare, etc. lie in OTC, voice-traded markets, whereas Op / TS / JS will to a larger extent be exchange traded [read: on screen] and algorithmically driven); and ii) Will also involve more nuanced derivative products (such as options)

 

Not to seem so pessimistic about the whole situation, but unlikely

The market making of Dare, Onyx, Mandara, and the like are solely focused on delta-one products: namely, timespreads and arbs (incl. cracks, EW, etc.)

Optiver, TwoSigma, and Jane Street are: i) Much more quantitative (the specialties of Dare, etc. lie in OTC, voice-traded markets, whereas Op / TS / JS will to a larger extent be exchange traded [read: on screen] and algorithmically driven); and ii) Will also involve more nuanced derivative products (such as options)

 

Mind linking me to their EoY results, please?

I don't doubt it's impressive, and a few people have undoubtedly done very well indeed

My question, however, pertains to new joiners: what do they have to gain?

Perhaps I'm being ignorant, but a firm that's captured the market share it seemingly has from market-making, with the personnel it already has on board, is now playing a defensive game

It's a competitive space, and you'd rather keep someone that makes $20m per year,and pay them $2m of that in that current role, than shunt said book-head into a new field in the hopes they can apply their alleged talent while leaving a formerly revenue-reliable business unit to an understudy, who could perhaps be a better (and more hungry?) guinea pig 

This, I think, explains a lot of this sort of shop's expansion into other business areas - consultancy (i.e. hedging advice), broking (i.e. using flow to inform views / leverage as a hedge against in-house positions), money management (i.e. using the capital of other firms to either affirm leverage [perhaps affiliated with the broking business], else apply the same scalping strategy in larger size, and eek a given percentage of performance-related return excl. drawdown), etc. 

The game plan now is to keep the competent desk leaders onboard, remunerate them commensurately with performance, and use new hires to test fresh markets

In the event they (the new hires) fail, it's a relatively low expenditure for an exercise that reaps huge informational feedback; in the event they succeed, it's a savvy investment, providing an "in" to new, inefficient (read: exploitable) markets

You can see this already from DV - a historically hydrocarbon focused firm 

They've hired metals traders, albeit with management (perhaps) lacking the understanding that most metals (bar, arguably, copper and [to a much lesser extent] aluminium) are prohibitive in nature to arb across forward curves in the same manner as you do refined energy products... They're gonna have to take a lot more spec risk (either directionally [whether through flatprice or options] or via spreads and arb [such as LME vs SHFE]), which I'm not entirely sure they're fully comfortable doing

It will be interesting to see how it develops, but: i) The approach will need reforming / tolerance; and ii) Risk tolerance / spec appetite will need to be increased

 

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