https://seekingalpha.com/news/33567...le-rewrite-said-drop-key-trading-burden-banks Anybody things the heyday of Proptrading will come back with this rewrite? or it's useless nonsense? Would be curious to see if new prop desks start popping up in the next 6 months....
Prop trading still wouldn't be allowed, it would just make it somewhat easier to claim that you aren't prop trading even if you effectively are. Unlikely that prop desks come back at big banks, they were going away anyway and no reason to incur the regulatory risk on a business line that it turned out was too volitile to be of value anyway, IMHO.
No. Prior to 2008 prop desks were like weeds. There were everywhere at banks. Virtually every trading desk would have a prop trader. Prop trading produced high return on capital and was an easy way to juice returns without having to build a better customer desk. Plus Goldman was really good at it and everyone wanted to be like Goldman.
I don't think the issue was returns, it was variability of returns which was huge vs something like market making. I think the model you mention of having a prop trader or two at a desk to take advantage of the (usually) legal inside info would definitely come back if it could. Many would argue it already has, effectively. I just don't think the operations that were essentially internal hedge funds using firm capital would come back, but curious on the thoughts of others with more experience than me on the matter?
The returns were a lot more variable for sure. Overall the model worked when information flowed freely for example Cash equities traders getting info on cds flows. I’m not sure the embedded desks ever left. Sle would know better as I left the industry just as volcker was being implemented. I think though that banks would happily bring back the internal hedge funds if they could. In the end they generally earned (with a few notable exceptions).
Sadly sle has left the board, our loss. Appreciate your thoughts though, only a couple of you with actual experience in the industry left here.
I was talking to a buddy about this about commodities. Anyone who worked on a bank prop desk is well in their 40s now. Each bank used to hire 300 fresh MBAs every year. in 2009 they might have had 4. You might be able to raid some merchant firms...but these people used to work on bank desks and ...they ain't coming back without a massive premium