Actually, Schonfeld let go of 15% of its staff, according to this article: http://www.businessweek.com/news/2010-07-06/schonfeld-to-fire-50-traders-as-speed-curbs-profits.html Chimera is still around, and is one of the few "true prop" trading firms: http://www.chimerasecurities.com You're right about the new exam, tentatively called the Series 56, which applies to CBOE prop firms, "shady" or not. http://www.sec.gov/rules/sro/cboe/2010/34-63314.pdf
Prop, 20 yeas ago and on, used to mean you got staked 100% after digging ditches as a runner or a clerk at an exchange and showing promise, or by whatever other relationship you could extablish. That was a mono on mono, don't care about your pedigree, make me money, time. The whole subject needs to be put in context over time to come to a defination as to what it means today. SAC used to stake guys with nothing more than a reference and a one strike and you are out gig. It is a broad subject and very misunderstood.
Great way of thinking about it. The traditional Chicago Prop business model involves day-trading derivatives and the trader being both staked 100% and also having a draw salary.
Agreed. However, even for the equity prop business model that stake the traders 100% and pay a salary/draw, if they are a CBSX member, then they're regulated by their SRO, so I guess they can't really be called a "hedge fund" in the traditional sense.
But seriously, why bother going "true" prop if you are already successful? Besides 50% of your profits, what else do you need to give away for such a deal? A firm covering your losses is not worth much at all -- you're consistently profitble, correct?. A salary? Same thing. Sure I can see if one traded very liquid markets and got immediate access to 10x more capital to trade, a firm would be able to sell a deal and take advantage of a trader just starting to turn the corner. But for seasoned profitable traders, all the leverage for larger markets could easily be found in futures/derivatives markets, correct?