Schonfeld Fires 15% Of Traders, Blames Fast, Greedy Robots

Tyler Durden's picture

The very special gift presented to 50 prop traders at Schonfeld Securities in advance of the celebratory July 4th holiday weekend... was a pink slip. The palliative reason given to these newly unemployed by founder Steven Schonfeld: it is all the fault of "black boxes, stat arb and high frequency trading." Welcome to the new paradigm - you are now all redundant. Only robots are allowed to trade with robots. But. But. We thought they only provide liquidity (er, viscocity - the specific gravity of motor oil is 0.8). Full letter below.


‘On December 5, 1988 we started Schonfeld Securities. Very soon after, we started hiring prop traders, and many years later formed “Opus Trading Fund”.

Prop trading has always been and will always be an extremely important part of our business and certainly the one that is closest to our hearts. The best Schonfeld traders will always have a place to trade and the capital to maximize their earnings potential. We are committed to them and will always strive to provide an environment for them to succeed. Sadly, however, we are re-thinking the notion that less skilled and less successful traders can be here forever without producing sufficiently for themselves and the firm.

For over 21 years we have always done everything we could, with the traders' best interests in mind, to provide careers and opportunities for our traders.

We have always cared more than you could imagine for your careers, happiness, well being and future.

We truly admired many of your passions for trading and for the markets. Over the years we have stood by you and you have stood by us as well. There has been real loyalty on both ends and don’t ever think we took your loyalty for granted for one second.

Bull and bear markets come and go. Good trading markets come and go. But unfortunately, our vision of the future of trading has changed. It is getting much tougher for traders to make a living or get by. The direct competition from black boxes, stat arb and high frequency trading which continues to grow at exponential rates is here to stay and has caused us to change our outlook for lesser skilled traders.

Based on the above competitive changes to the trading arena, we feel we are doing an injustice to both our lesser skilled traders and the firm by keeping them around. At best, they will barely get by and that’s not why we are in his business or what they should be here for.

Unfortunately the career of trading is not a good option for lesser skilled traders going forward. We will be letting go many of these traders over the next 6-12 months. It is with deep regret and the hardest thing we have had to do since the inception of the firm in 1988. It truly saddens us to do this, but we are doing the traders who will not be making a living going forward a favor, so they can venture into different careers.

It is even more painful since many of you have been so loyal and really good guys.

To those of you that we ultimately let go, we deeply apologize but whether you understand it immediately or not, it truly is best for you.

After discussions with the managers and exhaustive quantitative research our objective will be to reduce the number of traders we have down to those that we believe will make a great or very good living trading for years and years to come with the necessary skills needed.

The traders who are newer to trading will be given some extra time to potentially have their skills stand out. The days of a trader making a living by generating $50k to $75k of adjusted gross annually are over. There is room for only highly motivated, skilled and developing traders that can add value to each other and the firm.

Once again, we wish it was different and are extremely sorry for those that don’t make it.

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deepsouthdoug's picture

Another win for the SkyNet Stock Exchange. 

Noah Vail's picture

Who knows, maybe one day they'll be tearing down all those skyscrapers in Manhattan and replacing them with the equivalent of those computerized traffic control boxes you see on street corners. Humans need not apply.

Commander Cody's picture

The old guys got the ax.  The newer guys are getting a break, providing they drop their iThings and get to the business of trading, whatever that is.

King_of_simpletons's picture

This greedy nut is comparing a human with a robot and is saying a human is less skilled than the algos, so you are fired... better become a cyborg at your next trading job.

papaswamp's picture

Steven Schonfeld might be a T1000...50 traders Skynet infiltrating the trading offices?

Internet Tough Guy's picture

Send in a blade runner and hook him up to the Voight-Kampff. It's the only way to be sure.


Muir's picture

Leon: I've never seen a turtle... But I understand what you mean.

Cognitive Dissonance's picture

They're basically getting rid of their minor league and going with their best players. Good luck in a few years when those "best players" become former best players and there's no pool to draw upon for replacements.

Another fine example of minute to minute thinking. I'm not really blaming them. It's the condition of the (GoM) water they're swimming in that dictates their strategy. Productivity is being elevated at the expense of long term growth.

Assetman's picture

Yeah, I don't necessarily think it's good long term thinking... but political environment strongly supports autobot/HFT trading above all else.

While I'm confident the tide will turn strongly against HFT, you can't afford to run a business model voting against it.

Perhaps those human traders losing their jobs will go out and politically march against the machines.  Or the humans running the machines.  Or the govenment support the running of machines.

Take your pick.

Scooby Dooby Doo's picture

Before I take my pick can one of the ex traders tell me how much Schonfeld Securities lost?

Assetman's picture

The answer is no.

Now move along. ;)

bbbilly1326's picture

Or maybe turn against them and become whistleblowers.........we can dream can't we ?

Edmon Plume's picture

Do bots count toward "jobs saved" for BLS stats?

It's all fun and games until some bot learns how to surf porn.  Then they'll have to fire them, too.

Internet Tough Guy's picture

'More human than human' is our motto.

Muir's picture

Deckard: You're reading a magazine. You come across a full-page nude photo of a girl.
Rachael: Is this testing whether I'm a replicant or a lesbian, Mr. Deckard?

Mark Beck's picture

Roy, "I like a man who stays put".

Translational Lift's picture

If you are only generating  $50k to $75k of adjusted gross annually as a trader you probably should find a different line of work...........

Tinsu's picture

Looks like they will be doing just that.

Cognitive Dissonance's picture

I suspect they may have been generating higher numbers right up until the algo servers began to dominate trading.

Cheeky Bastard's picture

Well if they decided to trade FI or derivatives they might have had a chance of survival. Equities trading is too crowded; too many people chasing a limited # of instruments, while OTOH debt is perpetual, unlimited and always in need of a good churn. Derivatives even more so where the market is literally unlimited in volume; but nooooo everyone and their mothers want to "trade stocks"; well fuck it son; there is just too many of ya.

drwells's picture

I've asked a few of these places why they don't crawl out of the turd-encrusted sandbox known as the US equity market and go into commodes or forex or whatever. No one seems to have a good answer.

What I wouldn't give to have someplace like Commodities Corporation to go try out for...

yourapostasy's picture

Cheeky Bastard said:

Well if they decided to trade FI or derivatives they might have had a chance of survival. Equities trading is too crowded; too many people chasing a limited # of instruments...

The better HFTs have long since started building for trading in options, FX and other markets. Any market that has an electronic feed, granular historical data for back testing, and lots of volatility will do. There is only one market condition that kills them: low volatility, low volume, trading-averse but investment-oriented. That is, if everyone else stops trading, and starts investing with ultra-long time horizons (5+ years), they can't thrive. They'll survive, but it will get increasingly grim for them the longer everyone turns into and stays with Buffett-like patience on position churn, or simply walks from the market and sits on cash earnings.

Algos, HFTs and the like are a well-deserved bitch slap across all human market participants trying to trade rather than invest in markets. You don't necessarily need regulations to drive the black boxen out; returning to the fundamental investment purpose of markets by the majority of human participants and concomitant investment behavior is sufficient to tone down the black boxen, and what little you give up to them on any multi-year round-trip on a position should be rounding error.

antidisestablishmentarianismishness's picture

I'm having a difficult time shedding many tears for unsuccessful traders.  There must be a million do-it-yourself traders falling by the wayside every day and nobody sends them a sad letter...more likely their wives are loudly berating them in the background.

Tinsu's picture

... with comments like "Hey Mr. Trader, when are going to get out of the basement and go get a real job!  This comp check ain't going to last forever."

unionbroker's picture

Too many traders not enough investors... too many people trying to steal pennies off me

Waterfallsparkles's picture

Soon there will be no Human Traders left.  Including the Floor of the NYSE.  Wall Street has effectivly eliminated themselves.  The HFT Computer does not need a Salary, a Bonus, Health Insurance, Pensions, Stock Options and most important the HFT NEVER LOSES MONEY.

Good by Wall Street you have been replaced by a Computer.

Yes, total Wall Street Greed.  Now the Big Firms will not have to share even a penny with Traders.  They will keep it all themselves.

firstdivision's picture

Those pesky bots would lose money if the exchanges would stop "reversing" these erroneous trades. 

walküre's picture

I don't see what's bad about that. We're driving cars that are manufactured by robots, so why not trust your portfolio to a computer program that's chasing whatever is served on the heat maps?

And as with cars, you can afford either the GM or the Mercedes trading model.

The GM model will guarantee 50% depreciation in 5 years, the Mercedes only 25%.

Either way though, you and your money will be parted.

Stock losses are a fact of life like the depreciation of your car or the aging of your wife.

Cognitive Dissonance's picture

"Stock losses are a fact of life like the depreciation of your car or the aging of your wife."

I assume in your male centric world husbands don't age, they just get better and better. Right?

walküre's picture

Dang. I knew there was someone out there paying attention and flogging me for being a tad bit chauvenistic.

Cognitive Dissonance's picture

Thanks for being a good sport. :>)

russki standart's picture

And there will be no one else to trade against... just a bunch of bots betting against each other. Say good bye to the secondary capital markets..

MsCreant's picture

I get the skynet thing, but the Matrix works really well too. The machines are taking over and lulling us to sleep, using us as batteries to power the system. While we dream, they suck our life force.

Translational Lift's picture

"suck our life force"        Hmmmm

Muir's picture

Group Capt. Lionel Mandrake: Hmm.
General Jack D. Ripper: I can assure you it has not recurred, Mandrake. Women uh... women sense my power and they seek the life essence. I, uh... I do not avoid women, Mandrake.
Group Capt. Lionel Mandrake: No.
General Jack D. Ripper: But I... I do deny them my essence.

Paper CRUSHer's picture

These highly efficient machines render CARBON BASED UNITS such as ourselves to a mere nothingness..........THEY LACK COMPASSION PEOPLE.....COMPASSION

A classic clip of a Twilight Zone episode.

The Brain Center at Whipple's (1964):







RockyR's picture

love it.  traders displaced with code written by offshore developers in india.  no doubt this is poetic justice.

wackyquacker's picture

boo hoo hoo I'm with you. Sorry blokes, inevitable evolution of automation and off-shoring: 1st the 'workin man', then engineers, now money changers....

Goldfinger's picture

26 weeks of unemployment  vs 50-75k gross? I'll take the latter. No need to beg. It's worth more than $.

Segestan's picture

Oh, but now these former workers will be accused of being lazy fat American pigs bleeding the system dry.

Problem Is's picture

"26 weeks of unemployment..."

Then those traders are no longer unemployed by U3...

Just Marginally Attached... Bitchez...

Note To Unemployed Traders: Take last year's bonus... buy a shrimp boat.. and gamble on some Gulf shrimp profit margins...

There is always a future for a bright guy...

walküre's picture

I didn't cover this morning.

Fuck you, Ben. I win.

oscar t. grouch's picture

we're not talking about anyone who was contributing to the upward march of humanity in any meaningful way here.  this isn't even newsworthy.  who cares?

antidisestablishmentarianismishness's picture

Yeah, I doubt mom & pop investor will be feeling too bad about it.  Gee, those Wall Street guys who fleeced us are now getting fleeced by computers...that's a darn shame.

FranSix's picture

Is this an episode from Futurama?

bugs_'s picture

couldn't front run fast enough.

still kicking's picture

That letter sounds like it was written by a greedy ass hole that was terrified someone might call him on his bullshit.  Fortunately it was for everyone's good so no one should object right?