I have an entry-level assistant trader offer from a top proprietary market making firm in Chicago that is involved with both pit and electronic trading. I also have an offer in consulting at one of the Big Four. I know these are two completely different career paths. My personality is definitely fit for trading, I am competitive, quantitative, and aggressive. However, I am fearful that trading, especially pit trading, will become obsolete. By selecting the consulting track I will have a much bigger chance at getting into a quality b-school if I ever want to switch career paths. I do not think I would have the same b-school opportunities out of a trading job. I have a few questions I hope you guys can answer: 1. What does the future look like for derivatives trading at prop firms? 2. How will the evolution to electronic trading affect the need for traders? 3. In case trading does not work out, what are some possible options in the future? 4. How respected are proprietary trading firms in the eyes of IBs in case I want to look at corporate finance later on? I see trading as a lifestyle, and if I do take the trading opportunity I look forward to succeeding. My hesitations stem from a lack of an engineering/computer science background and the possibility of a decreased demand for traders.
1. + 2. has been going around from 10 years ago. Generally, if you want to trade models you developed, you will be given 20% of the profits of you make through the model. You will be expected to do pay and implement the models on your own. This is especially with automated trading. Prop. trading in Chicago is, 10% making money (You're a trader. You make money by trading. It's not the goal but the bare minimum to be profitable). The other 90% is about networking. There's a high turnover rate and don't expect people to go around teaching you. What you can expect is, "Here's your computer and here's how the computer works. Now make money." Pure quantitative roles are part of in-house research. The trading side and research teams are pretty much seperated. The traders tell you a bunch of stuff they want researched and you will be expected to come up with a profitable model, on a timely matter The most important factor in Chicago Trading industry is networking. It's a very small industry, a bad word about you will go around faster than you think. The longer you survive, the degree of relations get smaller. I doubt that the degree never goes beyond 3. Of course, traders are very close to each other... the whole Chicago Futures Industry is like a mega frat house, seperated between Merc and Board of Trade. 3. You have little options. Either you make it or you don't. When you move in the the Big 4s, you're basically given a chance. By going prop. you're track record becomes the most important factor. Unless, you go IT support, which you can't. From my view, we'll start calling you accountant. Not a trader. 4. No relevance. Finally, I can see that you are not quantitative at all. Corporate Finance / consulting roles are definitely not Quant. or Research legible. You should mention that you are "analyzing and detailed". Watch out how you sell yourself. Lifestyle???? If your view of lifestyle for a Chicago prop. trader as drinking all night and getting high with loads of crack, every night. Being leeched by some crack addicts, from bars and restaurants... You are correct.
i have been in chicago for about 10 years and have not experienced anything like what tsgann wrote. I will say that the consultants look wealthier than the guys in trading firms. So if you're about appearances then go consulting.
I think I was misunderstood, by lifestyle I meant that trading is not like a job...instead, its a lifestyle. You trade because you enjoy it, not because you have to go to work. I could care less about the after-hours and the superficiality of "looking rich," I want to enjoy what I am doing and have fun. The reason for my post was to gauge what people think of the future of the industry.
The position at one of the Big Four is open for a short time.. the prop trading can be done anytime. With a big name on your resume, this will help open doors later on.
for exchange traded securities learn to program and know statistics. for the OTC market find something where information is not easily accessible, barriers to entry, inffeciency, and everything is opaque. ie. europe is to deregulate there power/gas market next year which could be like the US in 1997
I think some of the replies are from people assuming that the prop firm you describe is really an "arcade" where you would contribute your own money. It doesn't sound like that's the case. Some of the firms in Chicago have great training etc for new grads. Don't expect to be a bigtime trader in 2 years or anything, but it can be a good career choice.
I agree with the 'bove. I very much depends on the training program offered. look into stuff like employee retention rate, products traded (more sophisticated the better), clients, market share. eg. if it's a 20 man futures shop with a 50% turnover formed in 2003: run like hell. but if it's a 25 year old options market maker with several offices worldwide and a big player in a certain market: definitely give it some thought