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"New Day Rising
TRADER DAILY
The golden era of day trading may be ancient history, but the industry is far from extinct. Examining the unlikely, unheralded second act of the professional proprietary equity trader.
David Bender is not your typical 28-year-old. At an age when many of his contemporaries are fortunate to find any job at all on Wall Street, he has already made partner at First New York Securities. And he's no junior partner, either. Bender is one of the best traders at his firm, which counts a handful of former SAC standouts among its ranks.
Bender, who grew up in Great Neck, New York, spends his days stalking event-driven U.S. equity opportunities, eating what he kills, particularly during earnings season. In 2007, Bender's P&L flirted with eight figures, of which the Emory University graduate -- he was a triple major -- took home half. Call him exceptional (he's said to be a scratch golfer), call him confident (he actually acknowledges that he is, indeed, a scratch golfer), but don't dare call him a day trader. The term implies a certain unwashed recklessness, and that's not his way.
"My style has proven consistent," he says. "Last year I had 240 trading days. I think I lost money on five of them."
Hordes of equity traders such as Bender -- young, self-assured, flush with employer-sponsored capital, free to chase daily stock gyrations aggressively -- once roamed the financial landscape, until the bursting of the tech bubble at the turn of the century treated day traders the way asteroids treated the dinosaurs. Those who survived (the traders, not the dinosaurs) have reinvented the space, a maturation that has brought more focus and technical savvy, more disciplined risk control and the trading of more instruments and markets beyond tech stocks -- though don't think some of the new breed haven't made money long GOOG and short MSFT.
Labeling themselves "prop" or "professional" outfits, these "Day Trading 2.0" players -- just a few firms remain, such as FNYS, Schonfeld Group and T3 Capital Management, and they're prospering -- now snatch up traders from the big banks. Just this year, for example, FNYS has hired away 20 traders from banks such as Goldman, Lehman and JPMorgan. And these traders aren't just riding the latest high flyers; Steven Schonfeld's team is branching out into black-box, quantitative strategies, while FNYS has diversified into commodities and energy trading.
The game has completely changed, but links to the late-'90s heyday can still be found. The top guys at Broadway -- the king of day-trading firms back when its founder, George West, was writing bestsellers -- split into a few groups. One of those, led by Richboro, Pennsylvania, native Marc Sperling, morphed into T3; the core assets of Broadway, as well as Heartland, another big operation from the late '90s, are now part of Schonfeld's empire.
"It was a lot different back then," says Sperling, now 36 and T3's president. "We weren't as serious about it. My friends and I used to walk into the office in flip-flops. The business has definitely grown up."
A principal at Broadway when it went bankrupt, Sperling never gave up, launching his own firm, Sperling Enterprises; it merged with Nexis Capital last year to form T3.
"The guys who stuck it out during the down years are the ones who love trading," says Scott Redler, Sperling's partner and of late a frequent guest technicals analyst on CNBC. "The guys who quit when things got bad didn't have a passion for the markets."
Of course, there was a time when day trading captivated the American imagination. In January 2000, the Super Bowl telecast featured E*Trade's memorable "so easy a monkey can do it" ad. The online brokerages did their part to cultivate the myth of the day traders. But the real action was taking place in offices, at outfits such as Chicago Trading & Arbitrage, the so-called "SOES bandits," and at Schonfeld's home base on Long Island. Sure, there was no shortage of stay-at-home phenoms such as pool contractor Dan Zanger -- who in an 18-month period ending in 2000 famously turned $10,000 into $42 million -- but the first generation of day traders were more likely recent college grads who got hooked after seeing their friends making six figures or more on dot-coms and telecoms that often jumped 10 points a session. Legions of stock jockeys could do battle with the biggest institutions, and played off Janus fund flows. Firms such as Broadway and Heartland attracted thousands of fast-buck artists too young to remember October 1987.
Today, only a handful of those companies are still around. Most either flamed out during the tech bust or merged with bigger players. Those that survived, though, are reprising their golden years, albeit with fewer traders, more sophistication and greater capital and experience.
At its peak in 2000, Schonfeld employed roughly 1,100 traders working out of 11 locations in the United States. "We currently have about 400 prop traders," says Steven Schonfeld, the firm's founder and CEO. "The fallout from 2000–2001 weeded out those who shouldn't have been here in the first place."
In the years prior to Schonfeld's retrenchment, actually losing money was sometimes a bit of a challenge. "It was almost comical back then," says Randy Guttenberg, 37, a former day trader who executed through Broadway and who now runs a small trading group called Afreshstart. "I'll never forget a trade with DELL. The stock opened up four points, and I still made 17 points on the trade that day. But people got very lazy trading these layup breakouts and failed to learn the basics.""
CONTINUED:
Trader Daily § (continued)
TRADER DAILY
The golden era of day trading may be ancient history, but the industry is far from extinct. Examining the unlikely, unheralded second act of the professional proprietary equity trader.
David Bender is not your typical 28-year-old. At an age when many of his contemporaries are fortunate to find any job at all on Wall Street, he has already made partner at First New York Securities. And he's no junior partner, either. Bender is one of the best traders at his firm, which counts a handful of former SAC standouts among its ranks.
Bender, who grew up in Great Neck, New York, spends his days stalking event-driven U.S. equity opportunities, eating what he kills, particularly during earnings season. In 2007, Bender's P&L flirted with eight figures, of which the Emory University graduate -- he was a triple major -- took home half. Call him exceptional (he's said to be a scratch golfer), call him confident (he actually acknowledges that he is, indeed, a scratch golfer), but don't dare call him a day trader. The term implies a certain unwashed recklessness, and that's not his way.
"My style has proven consistent," he says. "Last year I had 240 trading days. I think I lost money on five of them."
Hordes of equity traders such as Bender -- young, self-assured, flush with employer-sponsored capital, free to chase daily stock gyrations aggressively -- once roamed the financial landscape, until the bursting of the tech bubble at the turn of the century treated day traders the way asteroids treated the dinosaurs. Those who survived (the traders, not the dinosaurs) have reinvented the space, a maturation that has brought more focus and technical savvy, more disciplined risk control and the trading of more instruments and markets beyond tech stocks -- though don't think some of the new breed haven't made money long GOOG and short MSFT.
Labeling themselves "prop" or "professional" outfits, these "Day Trading 2.0" players -- just a few firms remain, such as FNYS, Schonfeld Group and T3 Capital Management, and they're prospering -- now snatch up traders from the big banks. Just this year, for example, FNYS has hired away 20 traders from banks such as Goldman, Lehman and JPMorgan. And these traders aren't just riding the latest high flyers; Steven Schonfeld's team is branching out into black-box, quantitative strategies, while FNYS has diversified into commodities and energy trading.
The game has completely changed, but links to the late-'90s heyday can still be found. The top guys at Broadway -- the king of day-trading firms back when its founder, George West, was writing bestsellers -- split into a few groups. One of those, led by Richboro, Pennsylvania, native Marc Sperling, morphed into T3; the core assets of Broadway, as well as Heartland, another big operation from the late '90s, are now part of Schonfeld's empire.
"It was a lot different back then," says Sperling, now 36 and T3's president. "We weren't as serious about it. My friends and I used to walk into the office in flip-flops. The business has definitely grown up."
A principal at Broadway when it went bankrupt, Sperling never gave up, launching his own firm, Sperling Enterprises; it merged with Nexis Capital last year to form T3.
"The guys who stuck it out during the down years are the ones who love trading," says Scott Redler, Sperling's partner and of late a frequent guest technicals analyst on CNBC. "The guys who quit when things got bad didn't have a passion for the markets."
Of course, there was a time when day trading captivated the American imagination. In January 2000, the Super Bowl telecast featured E*Trade's memorable "so easy a monkey can do it" ad. The online brokerages did their part to cultivate the myth of the day traders. But the real action was taking place in offices, at outfits such as Chicago Trading & Arbitrage, the so-called "SOES bandits," and at Schonfeld's home base on Long Island. Sure, there was no shortage of stay-at-home phenoms such as pool contractor Dan Zanger -- who in an 18-month period ending in 2000 famously turned $10,000 into $42 million -- but the first generation of day traders were more likely recent college grads who got hooked after seeing their friends making six figures or more on dot-coms and telecoms that often jumped 10 points a session. Legions of stock jockeys could do battle with the biggest institutions, and played off Janus fund flows. Firms such as Broadway and Heartland attracted thousands of fast-buck artists too young to remember October 1987.
Today, only a handful of those companies are still around. Most either flamed out during the tech bust or merged with bigger players. Those that survived, though, are reprising their golden years, albeit with fewer traders, more sophistication and greater capital and experience.
At its peak in 2000, Schonfeld employed roughly 1,100 traders working out of 11 locations in the United States. "We currently have about 400 prop traders," says Steven Schonfeld, the firm's founder and CEO. "The fallout from 2000–2001 weeded out those who shouldn't have been here in the first place."
In the years prior to Schonfeld's retrenchment, actually losing money was sometimes a bit of a challenge. "It was almost comical back then," says Randy Guttenberg, 37, a former day trader who executed through Broadway and who now runs a small trading group called Afreshstart. "I'll never forget a trade with DELL. The stock opened up four points, and I still made 17 points on the trade that day. But people got very lazy trading these layup breakouts and failed to learn the basics.""
CONTINUED:
Trader Daily § (continued)
