The degree to which top banks on Wall Street are giving up on prop trading (proprietary trading news) has been somewhat surprising. Many thought they would try to retain these traders as part of internal hedge funds or in market making units.

But Goldman Sachs (NYSE: GS) seemed to set the tone when it announced it would actually disband its Principal Strategies group. Some have suggested the bloom is off the rose for prop traders, that they're best days are behind them so to speak. Profits have been harder to come by in this market.

But even as they cast off their prop traders, big banks are welcoming high-frequency traders. This amounts to a bet of sorts that the high-frequency, algorithmic approach will trump the human-dependent, higher touch approach of star prop traders.

That said, hedge funds--where the algorithmic approach proved to disappoint in recent years--seem more than willing to hire prop traders. We're seeing a lot of that. It will be interesting to see how all this works out.

For more:
- here's an item from Business Insider and one from Dow Jones

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