Prop to bank

[fiftyfifty]

Been trading in a proprietary futures house for awhile now. Just wondering whether anyone has advise as to how to make the move to trading for a bank? Pro's and con's etc.

 

[scotty_dog]

Been trading in a proprietary futures house for awhile now. Just wondering whether anyone has advise as to how to make the move to trading for a bank? Pro's and con's etc.

Be lucky.

 

[fiftyfifty]

Well I'm pretty sure it would be described as a prop shop, no one here trading their own cash, all company funds. Although the firm only wants spread trading so I suppose you could say it has arcade characteristics as well. The reason for considering the change would be that I'd see trading in a bank as more experience, broadening what I've already experienced. Feel that after a certain amount of time trading in one area i.e. prop firm or arcade, you may be removing the possibility of working in other areas. Also to experience and understand the mentality and process of bank traders would give me a greater insight into market participants, knowing what you're up against and how they behave I feel would put you at an advantage to many later in my career if I choose to trade my own cash.

Yes some prop houses give some really good deals mean if you are making decent cash why would you want to move? But if you are making cash by trading one method, one market or whatever and not continuing to explore new trades then how can you create a career that will last any length of time? I suppose I'm just worried that what I'm doing will become stagnant, feel that I need to push myself, see more of the trading world and become a more complete trader.

Nothing earth shattering I'd guess. Get some stats together showing risk/return type analysis as well as a basic description of your trading style, find a few bank prop desks with a similar profile, and give them a call. You might also consider hedge funds, as many of them aren't a whole lot different to a bank prop desk anyway.

But the main question is are you really working at a prop shop, or is it more of an arcade type setup? Are you forced to trade a certain way (churning, minimum lots etc.?). Banks aren't going to be keen on someone from that background as it doesn't really fit with what they do.

Bottom line is - unless you're doing well you're unlikely to be able to make the switch, and if you're doing well, what's making you want to make that switch? The deals at some smaller prop shops in terms of profit share are, as I understand it pretty generous if you're bringing in the dough.

Are you sure you want to join a bank? You might find it's very different to what you imagine, particularly with respect to how much freedom you have.

Good luck

GJ

 

[fiftyfifty]

Cheers for the feedback. Haven't fully developed a plan of action yet but think I'll do grand.

 

[TWI]

A track record is always helpful if you can include it with any application. Only has to be on spreadsheet. With a lot of prop shop type jobs, particularly spread trading you will use very high leverage and so returns are likely to be 100-1000% pa on a 20-30k nominal account. I would work this back to show ~20-30% pa by upping the nominal margin amount to reflect this return, looks better when presented and more realistic to funds/banks than a 20k account leveraged to the hilt which they will have difficulty understanding. Then just a case of being very persistent in your application, it will not be at all easy without the "right" background or contacts but people do manage it. Good luck.

 

[Parky]

I am a little surprised you do not have flexibility at the prop shop you are in.
Most of the "better" shops would not restrict you in applying your trading model to whatever market you consider best suits your style and offers the best returns at that time.
Usually it is the trader that does not want to consdier a change, there are plenty of Ostrichs out there with the "I have always traded this contract and always will mentaility.
For example we have seen a steady flow of short end traders moving from the Euribor and Eurodollar to the Crude Oil markets, because theit trading style works on Energy and the returns are better. We assisted these guys by getting them to talk to our longstanding Energy traders and brokers and providing them with sqwarks etc. We only limit our traders to the markets and contracts we have connectivity on and even then if it makes commercial sense we are happy to join other exchanges.
It's in everyones interest to maximise their potential.
From my experience the ability to try different markets and contracts is far greater in Arcades and Prop Shops than in Banks.

 

[Halo]

The traffic tends to be in the other direction i.e. from a Bank/Broker to trading for yourself. Traders at banks are pretty different animals to your general futures trader. For a start there are few (if any) opportunities trading exclusively Futures - cash markets (swaps, bonds, equities) are where banks reside and any listed derivatives action is primarily hedging or the domain of Funds who have a wider scope to be more aggressive.....what I'm getting at is that if you'd like to move to a bank then they're more likely to look at your educational background/qualifications than your arcade P&L, impressive though this may be.

 

[Halo]

having said all that I know an ex-Futures guy who trades prop FX at a bank and another who trades cash Gilts - so not impossible as the previous post said.

 

[rzepe93]

A very accurate insight.

The traffic tends to be in the other direction i.e. from a Bank/Broker to trading for yourself. Traders at banks are pretty different animals to your general futures trader. For a start there are few (if any) opportunities trading exclusively Futures - cash markets (swaps, bonds, equities) are where banks reside and any listed derivatives action is primarily hedging or the domain of Funds who have a wider scope to be more aggressive.....what I'm getting at is that if you'd like to move to a bank then they're more likely to look at your educational background/qualifications than your arcade P&L, impressive though this may be.

I've made the jump and am now looking to make a move back towards being an independent trader again. Secondary education is everything no matter where it's from and previous P/L means nothing. Geting in is extremely tough and once accepted by convincing an MBA+ who doesn't want to hear anything that could bruise their ego is a whole other fight in itself. It's a jump worth trying if you think you will greatly benefit from other traders in the room but at the same time a lot of banks are not speculating as much as hedging. Either way trading is trading and only you know what's going to work for you. Good luck.

 

[fiftyfifty]

Thanks for all the feedback, has given me plenty to think about.

 

[TWI]

I have made jump both ways.
It really depends on the environment you feel comfortable in and the compensation available.
Trading your own account is great but unless you are sufficiently capitalised you will find it very difficult to grow your capital. Just do a simple spreadsheet and look how long it takes you to make gains after subtracting all your business and living expenses if you make a 100% p.a. return . Often traders who go down this route find that the monthly expenses eat up their profit and that they struggle to grow their capital and hence their volume beyond a fixed level. In some cases, in arcade environments, position limits are such that nominal account size means little as the arcade owners dish out limits and will always increase them for superstars far beyond that individuals equity limit, in which case this limitation on own account trading can be overcome. This is an exception rather than rule.
There is also an issue of security of remuneration. As a self fund, if you have a couple of shoddy months it does not mean that the cost of living and business expenses are reduced, it can get very stressful and seriously interfere with your life. Some people do not want or cannot handle that sort of stress on top of their trading related stress.
There is a lot to be said for trading client funds where a management fee pays all the bills and salaries and then a profit share is the bonus paid at the end of the year. Why do all those hedgefund owners bother with client funds do you think? because it is a leveraged money machine and ultimately worth far far more than any individual can make off their own back in the same time frame.