I'm a college senior looking to go into prop trading. I have been trading equity derivatives on my own interactive brokers account for almost a year and I think that this is really what I want to do for a career. I would prefer options but I would trade equities as well. I am trying to find a good prop firm in NYC to start trading with. I really would like to find someone who would treat me more as an employee than a customer. I would rather be somewhere where I don't have to put up capital (I can though if necessary) just because I would like to see a firm that is willing to make an investment in me and train me so that I can appreciate the firms capital rather than somewhere that would just give me a desk and then charge me for commissions. Anyone have recommendations? Other cities are good too, but I would prefer NYC. So far I have interviewed with SIG and Group One for equity derivative market making but did not get an offer at SIG and am waiting on Group One. I also have an interview with Lynx Capital Partners coming up, but I have read some not so nice things about them on this forum.
I notice this on this site so often that I think it's important to make a distinction because there seems to be some confusion about the definition of what a "proprietary (prop)" trading firm is. Somewhere along the line, the same term started being used for two very different types of firms. The traditional definition of a proprietary trading firm is one that trades for their own FIRM account. That is to say they do not have any "customers" or trade any customer money. Rather, the firm partners or traders trade the firm's money for the firm's own P&L. The traders who work for these types of firms (like SIG) are employees who work for a salary and most likely a discretionary bonus. Some may have some type of percentage deal, but that would be very unusual. Somehow, and as I said causing much confusion, the term "prop firm" came to be used in reference to an entirely different type of firm with an entirely different business model. That is the firms such as Bright and Echo that are really a cross between a retail firm and a professional clearing firm. Like both a retail and a pro clearing firm, in this type of prop firm, the trader opens his OWN account, usually depositing a certain amount of capital (just as you would in a retail account....although there are apparently some firms out there that require no capital contribution....I am currently exploring for this type of deal myself). The firm will then provide you with the use of their capital (and charge you interest on this capital usage), for leverage purposes only. This way you can trade in bigger size than you could with just your own small amount of capital. You are not an employee of this type of firm. You get neither salary nor benefits. Depending on the amount of capital you put up and the volume you trade, the firm will charge you varying levels of commissions and keep a certain percentage of your profits. From what I've learned, the advantage of this type of firm is that you can get considerably more leverage than you could with a retail firm and you don't have to become your own broker-dealer, with it's additional costs and complicated compliance and reporting issues, as you would as a member of a professional clearing firm. In either case, while your trades do go through the firm and their platform, you are trading YOUR OWN ACCOUNT. If you put up your own money, and lost it, the firm would either make you put up more or would cut you loose. If you found a firm that required you put up no capital (meaning they were willing to back your trading completely because they were willing to take a shot that you would make them money....remember in this situation you are giving up a piece of your profits in exchange for not having to put money up...of course they charge you commissions as well), they would surely have you on a short leash and, if you lost, would let you go before they took too much of a hit. I don't know how the term "proprietary trading firm" morphed into this definition but, as I said, it is confusing and somewhat misleading. The latter definition type of firm is looking to make money largely on the commissions they assess and the interest they charge you on using their money. Make sure you know what situation you really want to work in. DLama
(Just to try to help with the Prop definitions). All of our traders trade our Firm account, they simply have sub-accounts to keep track of their P&L. This "morphed" from the stock exchange floor trader business model that my brother and I enjoyed for so long. Back in 1978/79. We bought seats on various exchanges, put up $25-$50K with what is now Goldman Sachs (SLK), kept all of our trading profits, and were able to use their capital to trade with. By having access to a $million or more, we could engage in more sophisticated strategies vs. picking direction of the market or something. All the clearing firm asked was that we run our trades through them. The other model has been discussed a lot here on ET. Since you're required to keep money in the account, you're basically putting money up anyway, and give away a big portion of your profits. They don't keep you if you don't make money. This can be attractive, and actually works well for some. Others prefer the independence and payout. We simply duplicated the floor trading model in 1992. Happy New Year's! Don