Ending Prop Trading: Offers Rescinded?

Let's say you have an offer at one of the large commercial banking giants in their S&T division. Is there a risk that your offer could be rescinded w/ this garbage legislation that the Obama Admin is proposing? Surely if this thing gets passed, headcount will be scaled back drastically....

Comments (15)

Jan 21, 2010

anything is possible but i wouldn't be worried

Jan 21, 2010

haven't most banks already cut back on their prop trading. Banks are more focused on flow right now.

Jan 21, 2010

still a good amount of prop activities.

my bank even hires first year analysts onto specific prop desks, we got a whole floor of them ranging from equity to corp credit to mortages...

dont think BBs will rescind offers...always an option to put analysts in MO/BO roles or very client driven groups like prime brokerage.

Jan 21, 2010
WegmansTuna:

Let's say you have an offer at one of the large commercial banking giants in their S&T division. Is there a risk that your offer could be rescinded w/ this garbage legislation that the Obama Admin is proposing? Surely if this thing gets passed, headcount will be scaled back drastically....

I'm not saying there's no risk, but first prop trading is generally a different group than S&T. Second, the groups won't just disappear; they'll be spun out.

Jan 21, 2010

If you read the legislation, it really focuses on proprietary activities that have absolutely no client interests involved. Something like the Global Macro Prop Desk at Goldman would be hurt. I'm not so sure the hedge fund components of GSAM/JPMAM/etc. will be impacted. And I don't think 'principal investments' will be brutalized by this either.

In fact, even if this legislation goes through, the firms will simply call their prop traders something else. Put them on a market-making book, but have someone else quote prices. Who's to say which trades are needed to hedge the book and which trades are pure punts? Surely not the regulators--how the fuck would they know?

I doubt this will pass, but even if it does, I don't see anyone getting fired from it.

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Jan 21, 2010

I guess "Equities in Dallas" isn't so bad after all...lol.

Sincerely,
BroadStreetBully

"Everybody needs money. That's why they call it money."-Heist 2001

Jan 21, 2010

There is no risk to your offer. Sales and Trading is a sell-side job...it is market-making, not prop trading. The vast majority of banks have already stopped prop trading anyway. Except for the signal it sends about the Administartion's general stance toward wall st., I dont think specifically banning banks from prop trading is that big of a deal.

Jan 21, 2010

I'm interested in hearing more intel about the fallout for prop hiring at these banks ...

Jan 22, 2010
MarginCalling:

I'm interested in hearing more intel about the fallout for prop hiring at these banks ...

Honestly, I don't know if anyone has an idea. This is new territory that might (should) not come to fruition, so the results of it would be hard to predict, other than the business would be scaled back (even more) or spun-off entirely from the IB.

Jan 26, 2010

I knew several analysts in a somewhat similar situation where some groups had overhired for the '07 analyst class. Typically, they WILL find a spot for you, but it might not be in prop trading.

If it's not too late for you to apply to be in another group, I'd recommend talking with your manager, seeing if he thinks there's going to be a spot for you, and if not, applying for a different position that you want.

Jan 26, 2010

Firstly, there is no idea of whether the legislation will actually go through in its current form.

The other question is where you draw the line. There are market making desks that make a lot of money from taking proprietary risk...it's "incidental" to their core business, but it's definitely prop risk. Do they change it so that flow desks can't make more than x% from prop risk? How do they even quantify that? I think this will be harder to implement than you think. There is no pure riskless business, unless you want to turn the banks into brokers. And even that isn't really possible, b/c for a dealer to just intermediate risklessly, you need someone on either side to wear the risk.

Feb 2, 2010

From Volcker's testimony:

Given strong legislative direction, bank supervisors should be able to appraise the nature of those trading activities and contain excesses. An analysis of volume relative to customer relationships and of the relative volatility of gains and losses would go a long way toward informing such judgments. For instance, patterns of exceptionally large gains and losses over a period of time in the "trading book" should raise an examiner's eyebrows. Persisting over time, the result should be not just raised eyebrows but substantially raised capital requirements.

Does anyone understand how the last line in that paragraph would be enforced?

Feb 2, 2010

if this becomes the law, a bank's compliance department will enforce it.

Feb 2, 2010

i dont think the banks are too worried at this point. They are even still giving out interviews for prop trading desks - they didnt cancel them which i was sort of expecting in light of uncertainty.

Feb 2, 2010
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