I heard from a friend yesterday that one of the largest prop trading firms was closing up shop. For those of you scrambling to find a new trading home, I have been there. My understanding is that Sungard Financial, a large financial services firm, that owns Assent is no longer interested in being in the prop trading business. If these rumors are inaccurate please feel free to correct me: [email protected] I am having a flashback to 2005 when I was trading on Etrade’s prop trading floor in midtown Manhattan. One day Etrade prop was thriving, the next, some suit came in an announced they were closing.
One day an Etrade executive overseeing their prop business walked onto the trading floor, with an entourage of those I had never seen before, and said essentially “we are closed for business”. We were basically informed that it was a “business” decision. At Wharton I didn’t learn that business strategy where you shut down an entity consistently printing cash. There were rumors that Etrade was interested in a merger with Ameritrade and quickly needed to get out of the prop busines. There had been no warning. Just one day Etrade prop was no more.
Certainly this was a less than professional way (I am being polite 🙂 ) to deliver such significant news and shocking to the many traders who were generating daily trading profits for Etrade. There was even a security detail presence to make sure we were all out by the end of the day. How would we continue our livelihood? And more importantly, where?
When Etrade pulled the plug on their profitable operations Bella and I needed to find a new trading firm. I put Bella in charge of finding a fit that could provide us with superior technology and a trading environment that added value. ( I did learn the importance of a company adding value at business school 🙂 ) Bella looked around and spoke to a few firms. Well first he grabbed a big breakfast with those who had just been locked out of their trading firm. Bella has a talent for keeping in touch with people and knowing how to acquire information. Our options were somewhat limited. As momentum traders, who focused on stocks with fresh news, we required the fastest and most stable trading technology available. Also, we were interested in an environment, similar to the beginning of our careers when five figure days were commonplace, where traders worked together and shared valuable trading information.
To our surprise we couldn’t find a firm that provided great technology and a great environment in the day trading space. We landed at a place by default that had recently built their own platform promising stability. Nice guys, who were trying very hard. But it was a disaster! We wasted nine months of our trading career frustrated at a place that could not provide a platform that met our technology needs. This was a costly mistake as our trading profits suffered (evaporated?). Our patience with and loyalty towards this new firm, offering this new technology was unwise financially.
Today I trade on Lightspeed. As I write, Lightspeed is a terrific trading platform.
During our search Mike said something interesting to me. Maybe we should just start our own firm? I just shrugged him off at the time. To be honest, I blew him off (which you can do to someone you have known since the age of five). Build a firm from scratch? Trading was already a full time job. I wasn’t interested in three full time jobs. At our new firm the environment did not add value. Besides the technology disruptions, noone was talking or sharing any information about the stocks they were trading. Frankly, I would have rather have just stayed home and saved the time and money I spent commuting.
Mike approached me again about the idea of starting our own firm. We had seen the necessity of working with other traders who shared trading ideas. One good idea shared by a fellow trader could make our week. One call out in STEC yesterday, or AMZN above 136 recently, or MON yesterday can make all the difference to your bottom line. Three months later SMB Capital was born. And of course, one of our core values is for traders to work as a team to make more money individually. We share our best trading ideas, through our AM meeting, intraday alerts, audio feed, SMB Radar, etc. Traders are armed with trading ideas so they have more opportunities to make excellent risk/reward trades.
For those Assent traders looking for a new home, hopefully, some of you will use this crisis as an opportunity to build your own best trading environment. For the rest who just want to trade and are not interested or ready to be entrepreneurial, we hope you discover your best trading environment.