THE RETURN OF THE PROPRIETARY TRADER
Since quantitative easing we have seen a huge upraise in HFT trading and sadly since 2008 a demise in the historical proprietary trading house .
Returns in prop trading have been lower as stock markets beta returns have bettered them and turned investors away . Low interest rates and lean pickings made prop houses a dying industry as HFT houses run amok with colocation ,speed and technology .
However in 2017 we are seeing HFT desks close down , they are dominated by Citadel and Virtu who control 85% of business ,HFT are showing dismal returns with alarming costs despite stock markets soaring etc . Had investors put monies into stock markets rather than HFT their returns would of been 50% BETTER !
The return of the prop house is simply because markets are returning to "normalization " and its players need to know how to trade news, flow and data , just having a maths quant degree is no longer good enough . The Trader has now become the new sought after person who understands open interest and value etc , he waited a long time in the wilderness .
Prop shops have now adapted and most accept external monies from professionals ,retail , pension and endowment funds , which have allowed them back with a presence in the market place .This is also good as provides real liquidity and volume for exchanges as well as restoring "fair and orderly markets " We are well aware what HFT does in fast markets ..........disappear !
2017 has Janet Yellen talking of "normalization" and we are seeing technology no longer the number one driver in our markets , traders with a decade of experience of black swans and volatility are becoming the new gold dust and sadly the quant trader who fails to adapt to this new market place is now the new dinosaur !
THE GAP HAS CLOSED