Kershner Trading finds profits in market volatility
Finance Professor Kumar Venkataraman of SMU's Cox School of Business talks about the viability of proprietary trading companies, or 'prop shops.'
By Kirk Ladendorf
AMERICAN-STATESMAN STAFF
In 2001, when he was 32, Andy Kershner and three partners sold an Austin securities trading company for $150 million.
Now, eight years later, Kershner heads another expanding securities trading business with a growing trading floor in Austin and a fledgling operation in Shanghai, China.
Kershner Trading Group does not disclose its financial results, but Kershner said the company had a record year in 2008, with more than $50 million in revenue from profitable stock and options trades.
It wasn't the only one. Experts say more than 100 proprietary trading companies, or "prop shops," operate around the country and a number of them reported strong profits last year.
"Proprietary trading desks are short-term traders, and they thrive on volatility," said Kumar Venkataraman , a finance professor at Southern Methodist University's Cox School of Business . "In the last year or so, the volatility has been tremendous." . . .
The prop shops have expanded with the rise of more sophisticated software and electronic networks, Venkataraman said. Giant Wall Street firms used to dominate stock trading in the U.S., but now New York-based traders with seats on the securities exchanges account for only about 30 percent of all New York Stock Exchange trading, the professor said.
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