Hello Wilmotters,

I was just wondering how many of you have to deal with the "strategist" (a.k.a. "strats") model of business nowadays? Everyone or only a certain portion of the quantitative world?  It seems to me like this "business model" is effectively a new prop desk that trades by proxy instead of directly. 

What are your thoughts?

CB

So, just for clarity, you are talking about the traditional GS quant business model, imported to MS circa 2006/7 in the form of Jay Dweck? I have no idea what that has to do with prop trading in the current era, but that is a secondary consideration.

Hi Bearish,

Yes, I mean the GS model where you have a group of "strategists" who devise strategies and IT for front office. 

Prop trading in the sense that they devise various "hedge" and other strategies for traders to take on, which are largely proprietary in nature and not purely for hedge purposes. 

For example, during "Brexit" one FX trader at my employer was long GBP/short EUR and USD in a strip of forwards and was advised by one of the strats team to go short 250% of the overall notional of where he was long.  That would seem to me to be a lot more directional and more in the sense of old prop trading than truely hedging against the Brexit EURGBP/USDGBP move.

CB

OK - I see. I have been out of the sell side game for too long to have relevant first hand insights, but I did have a conversation with the head of fixed income trading for one of the big banks the other day that may support you point to some extent. He was describing a particular trade in a vanilla product that was customer initiated (so definitely done in a market making capacity) but where the scale was so large that they had to execute the hedge across multiple closely related products, relying on pretty tightly calibrated models. The fact that he was very happy to have done the trade for 1.5 bps told me that we are not living in 1996 anymore...