New York Prop Shops

Discussion in 'Professional Trading' started by ImJWish622, Oct 5, 2009.

  1. I was recently given an offer to work next year for a prop shop in New York. It pays a salary for the first year and I do not have to put up capital. It seems like a decent deal to me. Is it?

    I have a few questions if you don't mind. I tried searching the forums for answers, but did not find answers specific to my questions. I hope you can help:

    1. Why does a exist? If I do not put up capital, what is in it for the owners or the capital contributors? Why don't they just trade for themselves? I mean, if they're good enough to trade, why would they teach me how to trade... why don't they just trade the money themselves?

    2. What do they have to gain by hiring me? I realize they make commission on trades I make, but are those commissions > than just trading their own money? I don't even put up capital.

    3. Whats the advantage/disadvantage of trading for a prop shop like Trillium or Chimera instead of a prop desk of GS or Deutsche?

    4. Most importantly, what am I going to learn? can I use these skills if I leave the firm? Should I work here or apply to standard consulting/banking routes?

    Thank you, be gentle.
  2. cb1504


    I found this on another forum:

    "Prop firms I have dealt with require an initial deposit of 10k - 30k. Then given your track record the your trading skill, the management will decide how much capital to allocate for your trading. So you might work with $1million, $3million, etc....

    Risk control is fairly strict. Any down month and you are likely to be suspended or even fired from the position. What prop firms want is conservative traders without the volatile PNL fluctuations. Some firms may limit your monthly loss limit to 3-4% of the capital allocated. Regardless, they will absorb the loss if it goes beyond your initial deposit.

    The advantage within prop firms is you have access to institutional tools, high-end trading platforms, interact with professional traders, etc... You can pick up many strategies that your buddies may be implementing. Hence a great environment to learn.

    Regarding profits, the percentage varies from firm to firm. Here in Tokyo, banks paid 5% while prop firms paid up to 40%. But the difference was with banks you have access to alot more capital than what a prop firm would provide. Hope this helps."

    As you can see, I'm a newbie - brand spanking new. I have to look up most of what I read here online somewhere else to begin to get a clue. I'll go back to lurkdom now - unless you'd care to explain to me what a TROLL is? I get the picture it's someone hanging around looking for tips???

  3. If you work for a prop firm where you put down your own capital usually the payout is anywhere from 75 to 100 percent if you work for a prop desk for a bank or no money down it's usually 40 to 60 percent but it can go higher as you get better. If your new to trading you should always try to go to a prop where no initial deposit is required and if possible a salary is given. I've had friends be down 15000 dollars till they finally got good at trading and started to go positive. If you go to a place where an initial deposit is required once you blowout your account they let you go unless you can add more money.
  4. StrHead


    Having watched ET pretty much passively for a number of months I think I can actually help for once!

    I traded in a large prop shop with branches in NY, London and (I believe) chichgo called Goldenberg Hehmeyer and Co. I worked in London. It was also one which gave a salary.

    1. The business model is basically get a bunch of guys and gals (the gals seemed better actually) in a room. Give them some kind of training - this could be anything depending on how much they want to govern their traders - and then let the traders trade. They then manage each trader as a position of their own cutting the losers and running the winners.

    So the difference between this and a hedge fund is that there is not so much a single strategy that is being traded towards so it is more diversified.

    2. Hiring you they think you can make a winning trade if managed appropriately. A smart hirer may think you will make a different winning trade to the traders already there. (GH did not do this. We were all encouraged to do the same thing - the kiss of death)

    3. A prop desk in an investment bank (I work doing research in a large investment bank in NY now) is cooommmppllleeeetteeeelllyyyy different to a indepandent small prop shop.

    - Getting the job - a prop shop will probably hire you and give you a 'book' (using IB lingo) very quickly. It's then pretty much sink or swim.

    - Doing the job - working in a prop house is bliss in as much as you have complete freedom. And if you can make money even more so! I was on a salary so got to enjoy a spectacular (though poor - it was not a big salary) lifestyle or early finishes, casual work, reading books etc but in the end if you cannot make money you need to move yourself on before it's done for you. In a bank it is still basically an office job - though a risk taking one.

    - Trading. Prop desks in banks tend to trade a much wider variety of positions taking complicated risk management views and long horizons able to put on positions which will last long after they are gone. These OTC products are just not accessible to prop shops. The size traded is of several orders of magnitude larger. A bank Fixed Income prop house carry many billions of dollars worth of bonds in a carry trade whereas a prop house could not even repo 100k of bonds.

    - pay - larger size means larger risk means potential larger pay. Investment bank base salaries can be pretty decent in winning and losing years.
    Banking bonuses for trading may run to 10% whereas in a prop shop you can be upto 90% over certain balances.

    Hope it helps! Have fun - its a blast even if it doesn't last!
  5. StrHead


    sorry missed 4.

    What will you learn. Possibly nothing. Possibly how to make a living. It all depends on your openness to the market and ability to learn what it is teaching you. Sounds new agey and waffly but I mean it -most likely there will be no-one to teach you but yourself. I left in the end as I could not work out what I was doing wrong so did not know how to improve.

    Or... you could find one of those few mentors who is good and willing to teach. rare indeed!