What types of trading are there?

I know there is prop trading, and S&T in BBs. Are there any other kinds of trading open to undergrads right out of college, and what would you say the main differences/exit opps for each are?

 
Best Response

First off, basically there is no prop at banks since '09. If it were like 90% prop and 10% flow back then it's now reversed. It's a quite general question you asked but in a nutshell

straight out of college you could go into: the sellside aka - BB S&T, which is the most viable option probably (as the entry level job); exit opps as it has been mentioned several times on the forum (search bar right corner) is trading only, no wonder because of the narrow skillset you gain here (but the options you could choose from if you decide to leave the sellside depends on your product as well). Pay is "relatively shitty", bonus is discretionary so they will just come up with a number and say that's your bonus, also obviously office politics is present. Gives you a great training, you get a much wider network, and obviously you got the "prestige".

the buyside aka - Hedgefunds and the brand-name prop trading firms (not the arcade ones obviously, I mean the quant heavy firms), and these are the ones which would be the exit opps for you; pay is obviously much better, especially at the above mentioned prop firms (but you got to be enough smart to land a position there after your S&T gig, even so straight out of college..). Meritocratic environment and there's a LOT of money to make if you are good.

Learn programming. VBA will definitely come in handy, Python will be a big plus if you are looking more into quantitative trading.

 

Would the brand name prop firms include firms like Jane Street, DRW, SIG, Optiver, and a few others? I thought you didn't need S&T experience to join these firms and could join out of college, or is it much harder? Can you exit to buy side easily from the top prop trading firms, or is it much easier after you do IB?

 

Also, what kind of salary is expected for a trader at a top prop trading firm, and what career path do the top traders at these firms follow? MBA is not an option right, as you will be making too much money to need one if you are successful and you don't get leadership training anyways?

 

Yes, those are the ones. In fact, you don't need S&T experience at all they just want to know you got the brainpower. Even with sell-side experience breaking in would take hard work, I'm just saying that some of these shops do take experienced hires, for instance one of them were hiring FX options trader some time ago.

Can you exit to buy side easily from the top prop trading firms, or is it much easier after you do IB? Props are buyside themselves; why would you want to exit from those firms? If you want a career change or something new sure, otherwise you really wouldn't want to leave trust me on that. Buy side is still probably just as competitive (I'm no expert though), but at least you'll have no problem landing interviews since you got the brand name and some experience under your belt.

Again, top right corner, use it. In short you could retire before 30 if you are (really) good, then do something else or found your own firm.

 

There are three threes of trading 1) Prop- trade your own positions with no regard for anything else but profit 2) Flow- when you have market exposure but your ultimate goal is to buy and sell to realised the bid/offer between clients 3) Dealer- that is a trader that does no have a book to hold overnight exposure and simply tried to sell what some else offers and visa versa (i.e. institutional broker, that can be long or short intraday). Prop trading at an IB level is dead, flow trading is still present in less liquid markers e.g. HY bonds but is slowly being moved out and dealing has become the norm. Historically, banks provided a large part of the short term liquidity to markets by holding trading books, since capital requirements have changed, this is no longer the case.

Most IB's are simply trying to leverage their larger client base without providing much liquidity (front-running), but mid market firms such as jefferies etc are actually starting to do alot better in intermidiation. If I was to guess, the future of IB in markets is going to be more focused on collaterized lending, which implies a grow in CVA and treasury activities.

 
WilsonP:

There are three threes of trading 1) Prop- trade your own positions with no regard for anything else but profit 2) Flow- when you have market exposure but your ultimate goal is to buy and sell to realised the bid/offer between clients 3) Dealer- that is a trader that does no have a book to hold overnight exposure and simply tried to sell what some else offers and visa versa (i.e. institutional broker, that can be long or short intraday). Prop trading at an IB level is dead, flow trading is still present in less liquid markers e.g. HY bonds but is slowly being moved out and dealing has become the norm. Historically, banks provided a large part of the short term liquidity to markets by holding trading books, since capital requirements have changed, this is no longer the case.

Most IB's are simply trying to leverage their larger client base without providing much liquidity (front-running), but mid market firms such as jefferies etc are actually starting to do alot better in intermidiation. If I was to guess, the future of IB in markets is going to be more focused on collaterized lending, which implies a grow in CVA and treasury activities.

Agency trading (your third type of trading) is NOT the norm. Nearly all IBs make markets with decent overnight exposure. So flow trading is the norm.

 

If agency trading isn't the norm, it will be soon. The good market making traders are IBs are getting poached by the buy side, and with all the regulations cracking down on their business, it's much safer (and less capital-intensive) for banks to engage in agency trading. This is especially true for equities; fixed income is still very market maker-heavy.

 
peyo212:

If agency trading isn't the norm, it will be soon. The good market making traders are IBs are getting poached by the buy side, and with all the regulations cracking down on their business, it's much safer (and less capital-intensive) for banks to engage in agency trading. This is especially true for equities; fixed income is still very market maker-heavy.

That is true for cash eq, which represents about 1% of an investment banks trading floor.

 
peyo212:

If agency trading isn't the norm, it will be soon. The good market making traders are IBs are getting poached by the buy side, and with all the regulations cracking down on their business, it's much safer (and less capital-intensive) for banks to engage in agency trading. This is especially true for equities; fixed income is still very market maker-heavy.

Try telling any sellside equity derivs trader that its an agency model. Flow trading, or market making is most of the trading activity.

 

i agree...that advisor sounds like an idiot...want advice about wall street /trading...ask a trader...anybody else has no idea what they are talking about

I am a proprietary Govt Bond Trader...i post my comments on the mkt intraday at twitter...and longer articles on my blog. I've accumulated a lot of educational info in these blogs..so i highly recommend checking them out http://govttrader.blogspot.com
 

Options = more quantitative, math heavy.

  • Capt K
- Capt K - "Prestige is like a powerful magnet that warps even your beliefs about what you enjoy. If you want to make ambitious people waste their time on errands, bait the hook with prestige." - Paul Graham
 

The fact is that I can not say what interests me most at the moment. I like complex products but for me it doesn't matter at the moment whether if it's a lookback option on a stock or a swap.

I just want to stay as flexible as possible, so that I would have an opportunity to move on to other companys, if I am really good, later... especially prop shops and hedge funds.

 

Ut ipsum aut nulla at ut. Voluptatem perferendis delectus nulla similique. Perferendis est natus et sunt est. Ducimus est unde fugit pariatur placeat. Expedita id laboriosam est quibusdam reiciendis eum qui.

Velit ut voluptates beatae voluptatem vero. Iusto ad alias voluptatem molestias architecto. Numquam occaecati autem ea et sed qui. At accusantium odit nemo at possimus iure harum. Et accusantium ipsa aut minima dolores. Tempora nobis quia neque.

Ea error hic temporibus sed saepe consequatur. Et pariatur eaque magnam voluptas. Quis iusto aut doloribus nihil voluptatem dolore velit.

Career Advancement Opportunities

March 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. (++) 98.3%
  • Lazard Freres 02 97.7%
  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

March 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

March 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

March 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (86) $261
  • 3rd+ Year Analyst (13) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (66) $168
  • 1st Year Analyst (202) $159
  • Intern/Summer Analyst (144) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”