There was an article at www.finalternatives.com regarding a report by Infovest21 that detailed why proprietary traders at investment banks were starting their own or moving to hedge funds. Prop traders use the bank's capital to earn a profit and act much like funds. They are kept separate, physically and legally, from the flow traders that handle the buyside's orders.
There are a few reasons for the migration. In 2008 and 2009, many banks experienced losses from the credit crisis and cut back on their prop trading desks. Also in 2009, the banks that were bailed-out, which included all of the major investment banks, were being pressured to hold down bonuses by the government, the press and, probably, everybody else. The Wall Street Reform Act of 2010, signed into law in July, prohibits banks from prop trading.
The article, with two tables of top traders, is here.
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