Lock-in contracts at prop shops

[Gusto&Vim]

Im finishing off a joint honours degree in compsci/economics this summer, and would like to enter a trading career. Applying to IBs has been hard in the current economic situation but the feedback from prop trading firms has been better. Ive had a few interviews and tests with a mixed feedback.

Several of the firms stressed that they have a "lock-in" contract you sign before you start - this is to stop ppl from going just for training courses and then to competitors. Contracts have ranged from 2 years all the way up to 4 years which I find a little too long.

How do they work? Say I start at a prop shop, after half a year don't find everything to my liking, and want to move on for reasons. How can they really (legally ?) prevent you from taking up another offer at another firm?

how legally legit are these lock-in contracts? what if you just dont like the company and things dont work out?

 

[fifty2aces]

The contracts are probably less legit than the companies would like you to think, but as with many things in contracts, they're probably relying on people's ignorance of their rights.

If you're having doubts, I'd definitely recommend speaking to a lawyer - don't take legal advice from strangers on the internet.

 

[Gusto&Vim]

The contracts are probably less legit than the companies would like you to think, but as with many things in contracts, they're probably relying on people's ignorance of their rights.

If you're having doubts, I'd definitely recommend speaking to a lawyer - don't take legal advice from strangers on the internet.

I think I have to do this before I sign anything.

From my understanding, unless youre self backed, the prop shop backs you with its own capital and gives you the margins to be able to trade. Youre not an employee but a partner. Would normal employer/employee rights apply in this case ?

 

[Bloodhound]

I think I have to do this before I sign anything.

From my understanding, unless youre self backed, the prop shop backs you with its own capital and gives you the margins to be able to trade. Youre not an employee but a partner. Would normal employer/employee rights apply in this case ?

Although I have no knowledge about prop shops I know a little about training-related lock-ins. In my experience you might find that they could include a clause in your contract which requires you to 'repay' training costs if you leave within a certain time period. This is to protect them from the costly exercise of training you up and you then just leaving. As 52 said, you should get legal advice before signing a contract. For free advice it's worth giving ACAS a call.

 

[arabianights]

Not legal advice:

With respect to first question, not enforceable and even if it were they wouldn't bother anyway. Personally I'd be more worried about some of them resorting to, er, "extra legal" methods... however why would you want to leave a good prop shop?

With respect to the second question, you join as self employed at all of them that I can think of, thus your status is similar to a contractor. This gives you extra freedom in return for effectively no employment rights whatsoever - as someone who doesn't believe in employment rights but rather enjoys the freedom to turn up whenever I like, this is great - I think most traders think this way

 

[rawrschach]

The 'training' at most shops consists of being taught what 'PMI' stands for and the constant reitaration of 'I don't know, just watch the ladder' in the event of any trading related question being asked. So if it came down to it, there's not much to support them in a court case.

 

[Gusto&Vim]

Although I have no knowledge about prop shops I know a little about training-related lock-ins. In my experience you might find that they could include a clause in your contract which requires you to 'repay' training costs if you leave within a certain time period. This is to protect them from the costly exercise of training you up and you then just leaving. As 52 said, you should get legal advice before signing a contract. For free advice it's worth giving ACAS a call.

Yes indeed, one of the props shops had just such a clause - basically, if you leave within the period of the contract and youre "caught" trading at another trading firm, theyll chase their training expenses, which was some ridiculously high figure in the ten's of thousands (plus profits you generate at your new firm).

Sounds like a scare tactic and its pretty ludicrous, and not the best way to instill confidence in somebody like myself wanting to make inroads into the world of trading.

maybe I should do a masters instead and apply to IBs the year after next?!

 

[arabianights]

stop being a bender and get stuck in ffs

 

[Technically Fundamental]

I cant see it holding up in court unless they can prove the training expenses. I'm locked into a similar deal in my accountancy firm.

I'd gladly sign in to an agreement like that as a first job in trading. At least you get to slap 2 yrs experience on your CV before you move.

 

[arabianights]

The most important clause in my contract is not brining the firm into disrepute, which is why I don't say on here where I work...

 

[Technically Fundamental]

The most important in mine is erm... oh wait... I dont have a written one. My letter of employment is the only thing that gives me legal rights as an employee as I've worked here for over 6 months (legal min for employee rights). And the group discussions on policy are classed as verbal/mutual agreements in employment terms.

Get me a job arabian.

 

[arabianights]

Aaron

 

[Gusto&Vim]

Aaron

I guess me and most of my graduate mates are gonna end up there (at MacD's) at the end of this summer.

flipping burgers aint so bad in a recession.

 

[Technically Fundamental]

Aaron

Arabian

 

[Bloodhound]

Yes indeed, one of the props shops had just such a clause - basically, if you leave within the period of the contract and youre "caught" trading at another trading firm, theyll chase their training expenses, which was some ridiculously high figure in the ten's of thousands (plus profits you generate at your new firm).

Sounds like a scare tactic and its pretty ludicrous, and not the best way to instill confidence in somebody like myself wanting to make inroads into the world of trading.

maybe I should do a masters instead and apply to IBs the year after next?!

I guessed that might be the case. Not that I'm condoning the amount it but it's worth bearing in mind that the training process will always mean a certain amount of outlay on behalf of your employer - whether it's a prop shop or Maccy D's.....

 

[Technically Fundamental]

I guess me and most of my graduate mates are gonna end up there (at MacD's) at the end of this summer.

flipping burgers aint so bad in a recession.

I keep getting knocked back on these trading jobs I apply for. It's a hard industry to break into. You have to consider you're gonna be looking at people like arabian to hire you. Its an absolute nightmare.

 

[Technically Fundamental]

What masters would you people say is most likely to secure you a job in trading?

 

[arabianights]

Master bating

 

[Gusto&Vim]

What masters would you people say is most likely to secure you a job in trading?

These are ideal ones but competitive and expensive:

Masters | Postgraduate Course Information - Mathematical Trading and Finance (MSc)
Masters in Finance at London Business School

flipping burgers it is then.

However, I dont want to go off topic. A few people have given back some useful pointers and info - Im surprised that more have not jumped on this thread - is it meant to be one of those "no no" topics of discussion.

Are there any people out there, who have signed these lock-in contracts, and then moved on for various reasons with no problems? How much do companies chase up trainees?

I was unable to find any major previous threads/posts on this issue of employment rights, contracts, and industry-wide abuse of these rights.

 

[combotrader]

If you think that a degree will get you into trading then think again.

The MFin at LBS is by far the best - but it will only take experienced people.

MTF at Cass is a good course, known in the city - but again, you need to have experience. Without any experience, I know ppl who have done the MTF and now work in product control. If you are lucky and times are good you can make the jump from there onto the trading desk - but much harder now. Look at the careers forums.

Bottom line is they want young and smart blood. Think Oxbridge etc. If you want to trade - just trade and build up a record. Then take it to prop firms.