Survival Tips for Prop Traders

Prop traders have become an endangered species as the Volcker rule forces banks to jettison their prop trading operations. But the betting money is that most will end up on their feet. Russ Gerson of the Gerson Group says that the "talented guys have nothing to worry about."

The majority figure to be snatched up by hedge funds. Others will simply shift over to their bank's fund unit, as is the case at Citigroup. Still others might raise capital and launch their own funds. Whatever the case, if you're a prop trader, you're surely weighing your options right now. Here's a few things to do to survive the ride.

Gather Information

If you plan to join a hedge fund, the first thing you'll be asked to do is demonstrate your investment performance. So, cull together documentation to show how you added to your bank's bottom line. Be prepared to describe your investment methodologies and why you shorted certain equities when you did. Doing so will go a long way toward showing you can run your own business, something that many traders leveraged off the bank's balance sheet aren't used to doing.

Know WHat You Really Want

Be realistic. Think about the type of platform that would be a good fit. Leslie Gordon, at Korn/Ferry International, suggests that traders who move to a hedge fund pick one that provides an environment they're used to. Choose a fund with a strategy you're familiar with. At the same time, recognize that working at a hedge fund is vastly different than working within the friendly confines of a bank. Same goes for working at an independent prop trading shop. While it may be tempting to move to one of these firms, you'll likely spend more time marketing and managing staff than before.

Be Patient But Proactive

Treat the situation as you would any other deal. Be active and talk to people inside and on the outside - your boss if that's possible, recruiters and fund managers. Try to find out what's happening internally, and what the plans are for you.

At the same time, don't wait for the phone to ring with the news you're being let go. Recruiters are being flooded with resumes. They can tell you who is doing what and which funds are looking to grab prop trading talent. Be ready to move quickly and seize on the right opportunity - because if you don't, someone else probably will.