Schonfeld Traders R.I.P.

"...The days of a trader making a living by generating $50k to $75k of adjusted gross annually are over..."

http://notablecalls.blogspot.com/2010/07/schonfeld-letter-to-traders-it-is.html

 

wow...

 

Sucks, I kept posting here these last 1.5 years were complete shit...but noooooooooooooo, traders here at ET are raking it in and its their "best year ever"

 

i give much respect for the owners. they are doing these traders a HUGE favor by compelling them to embark on another more stable career.
i have seen this coming for over 3 years,its just not a healthy life style; for most.

 

And you believed them? Posers all.

 

We are hearing similar themes and trends from others, confirming what Mr. Schonfeld is saying in his letter to traders, who he plans to let go soon.

Computer hardware and software is continuing to take over jobs and displace people throughout our economy. It’s partially why there is a jobless-recovery. It’s sadly-ironic because people who were displaced from manufacturing and other jobs found a new working-home in trading. Unfortunately, technology is threatening their jobs in trading too.

It seems that every few decades, entire industries must adapt or face decline as technology races through convergence into wide-scale deployment. Think video rental in video stores, to DVDs, to online downloads, to iTunes, and now Blockbuster is history. Look at the technological-obsolescence in printing to iPad too. Service businesses are the next up for outsourcing and loss of jobs to computers too. It’s not just manufacturing.

In the 1970s, there were fixed-commissions and Wall Street was a sleepy place to work, with little risk taking and a very low and depressed Dow Jones average. Unlocking fixed rates generated lots of competition and innovation.

When regulators allowed the creation of electronic-exchanges, business moved away from floor-specialists. It created an opening for people to take on the role of mini-specialists-of-sorts on ECNs, and those retail and prop traders became the new market makers. Rock bottom commissions, technology and day trading firm structures (like Schonfeld) empowered this change.

But now technology has progressed further and high-speed computers with algorithms and auto-trading programs is displacing the small-business market marker. It’s like big-corporate farms with high-speed combines replacing the small family farm.

HFT (high-frequency-trading) is all the rage and causing it now too. Pundits blame HFT for the flash crash in early summer and retail traders are complaining that HFT are crowding them out of the markets. But just like ECNs replaced floor-specialists (people), computer-trading may be replacing some small-business ECNs too.

HFT may get a beating down from Congress, as part of Fin Reg and tax policy too. Can the HFT firestorm be held back?

I am not a trader, but am wondering if HFT create market opportunities for other types of traders. This needs to be explored and discussed.

Option trading is picking up steam in our view as tax preparers. Is this one of the reasons? Because option trading is less susceptible to HFT?

Brokers, prop trading firms and others are also now marketing auto-trading systems to traders. Some prop trading firms have talked about offering black box systems - with capital to trade - to traders and splitting the profits. Retail firms are running TV ads for auto-trading systems too. But can small traders compete against HFT companies even with these auto-trading resources? Some probably can and others may still have trouble.

What’s the future of trading as a business? It’s an important question for all of us to discuss.

 

America's current joblessness is different from anything we've experienced in the past. There is no solution.

Likely we'll end up with an unfortunately large proportion of our population working for minimum wage and living the lifestyle that goes with it.

 

Even if this is true, letting go "lesser skilled traders" isn't a big deal IMHO. We all know the automated space has become ultra competitive and saturated. Traders making $50k-$75k (AGI) sounds like college interns, summer interns or kids who have just graduated with little to no trading experience.
Sounds like the same reason why the $5k $10/1000 prop firms are going away…

 

I started trading almost 20 years ago. The first big innovation thereafter being that you could call in and touch tone your order.

I honestly don't think that if I were to start today, that I could make it.

In addition, if things get markedly worse, I have considered retiring from trading. Worse being that the level of difficulty rises and the reward diminishes to a point that is just not worthwhile anymore to continue trading even if still profitable.

I have noticed that to get the same level of return, I seem to be taking on more risk which I loathe.

 

Another issue. Are regulators pressuring prop trading firms – behind the scenes - on the “disguised retail customer” (beneficial-owner) issue too? Regulatory pressure may call for more equal profit-sharing between traders and their prop trading firms, plus not allow deposits. If that becomes the new normal, it begs the question - why do business with smaller prop traders who don’t make lots of money?