Pro & Prop are they really different?

Discussion in 'Professional Trading' started by Canuck709, Aug 28, 2009.

  1. Hi all,

    I was recently ofered a positioned with a bank pro desk where they povide the capital, leverage, low commission and 50/0 split. I was thinking about going the self funded prop route. When comparing the 2 roles prop vs Pro I have to ask:

    Is there really a difference? If you think about it they are not so different.While true prop firms don't require capital they typically hold back a percentage of gross profits in a seperate account to ensure you don't do something irresponsible with your capital. Often the limits are far above what you would deposit at a prop firm. For that increased deposit you get much less margin and BP as a result. I'll acknowledge that commissions are considerably lower but when you work out the different between profit splits i.e. 70/30 vs 50/50 it more than mkes up for the difference.

    Perhaps the difference really comes down to losses. When your capital is gone at these arcades so are you. A true proprietary desk expects of months i imagine. Also as many don't have the ability to self fud the $25k and 6 months living expenses the 50/50 with no capital is a better path.

    any one else have thoughts? Perhaps I am mising something else?
  2. Depends, a lot of prop shops are hack "churn & burn" shops that charge per share and take a % of profits. This way they don't care if you churn your account down to $0 over time - they still made $ on the shares you traded. That setup is more of a pyramid scheme than a real trading shop IMO.

    I'd say it depends on your trading style. Are you high frequency? What do you trade and how many units/shares? I often scalp for ~$0.05/trade so if I was charged a penny in and a penny out + 25% of profits the house would keep .0325 out of my nickel... Not worth it IMO. However if you are going small size for bigger gains then maybe it would be worth it.

    Also you need to factor in what you are trading and what your team/group is going to be like. Do they offer any trading, support, coaching, motivation, etc.? are you going to be on a desk with other successful guys/gals or just be one of the crowd?

    In my experience any shop that will give you their capital to trade usually wants you to suceed because you'll be losing their money not your own.

    Hope that helps/answers your questions/gets your conversation started.
  3. nebulous


    Hi Canuck,
    Been in both situations. I much prefer the bank pro trading. I'd call pro trading the evolving of canadian equity market making - the banks also often have proprietary trading as a seperate division where they sub portfolios or allocate cap outside thus the naming distiction.

    I found it much easier to make money inside the bank. You may have salary, no capital contribution, very different stop losses and profit expectations and access to a number of opportunities that aren't there in canadian prop shops. There is also a lot of flexibility to develop diverse strategies on multiple timeframes. Depending on the bank, they can typically allow much, much larger and longer drawdowns and/or time to become profitable. I also found it nice to be somewhere where the most senior trader on the desk has a vested interest in your success - helps having guys with 20+ years around to bounce ideas off of.

    I also prefer a place where you don't risk any of your own cap. I personally feel that most people that worry too much about the profit split put the horse before the cart -> worry about building solid strats and profitability, the bank will let you scale up proven strats and extend cap quickly. It that's still not enough to compensate for the split % then look for a better % or opportunity at that point.

    Just my experience and opinions - hope it helps.