I was wondering what the general consensus on prop trading at investment banks is? There has been many news articles detailing the closing down of many banks' prop desks at firms from Goldman to Bank of America. This is to comply with the Volcker rule that limits the banks trading its own capital. For some examples; http://www.wallstreetandtech.com/trading-technology/229219571 http://cachef.ft.com/cms/s/0/6c285214-1cfc-11e0-8c86-00144feab49a.html#axzz1HJuj1g00 http://dealbook.nytimes.com/2010/09/29/bank-of-america-cuts-back-its-prop-trading-desk/ What is your opinion? Is prop trading at banks dead? Will the banks somehow find a way to get around this rule? Will trader relocate to outside the US? What are the career prospects for a budding IB prop trader?
This "phenomena" has also spread to the Canadian investment banks. For example, Scotia Capital recently shut down it's energy prop desk, despite the fact it was profitable.
Prop trading as it was known at US banks is dead but there are still remnants of it. Some prop traders have been moved to asset management and seeded with client money. Others have been moved to flow type desks but allowed to take more risk than a typical flow desk might take. Other than that there will be small prop groups just nothing like it used to be. But prop trading is alive and well at non-US banks and hedge funds so you still have those opportunities. But regardless it's hard to get the seat.
Prop desk doesn't have the same rules or obligations as the market making business. In prop trading ,the bank or investment bank is taking a large position in the financial markets using money from the bank and is mostly money from the banks overnight lending rates from the central bank. Banks don't have any money of their own. There is a fine line between prop trading 'business' and market making 'business'.