I don't understand how it works. I'm must be missing something, somewhere along the line.
You're charging more than twice as much for your "Gauntlet" as TopStep charges for the equivalent Combine.
Your pass-rate on the Gauntlet is lower than their Combine pass rates.
Your Gauntlet takes 60 days, whereas a Combine can be far shorter.
You say only that successfully funded traders can get an "up to 80%" profit share, depending on how they've done in the Gauntlet, whereas all TopStep funded traders get 80%, after getting 100% of the first $5,000 profit.
In the long run, how can you hope to compete with them, on this basis?
Hey Lukas,
1) You're charging more than twice as much for your "Gauntlet" as TopStep charges for the equivalent Combine.
It's not really Apples to Apples. If you compare the equivalent live accounts of $150k from them and $25k from our partners, you actually get pretty much equal for less up front. Once you're funded you can only trade a maximum of 3 contracts from the start until you've profited more. That's really about $18k or so in full margin. Then, you're allowed to lose $4500 in a trailing drawdown, and $3k in a daily/weekly loss limit. You also have limitations to your trading such as during news and permitted times. They charge $375/month, and The Gauntlet is $349/60 days. On the $25k, you can use the entire full margin (could be over 10 contracts with certain markets) and trade whenever you want. On the Gauntlet, you could potentially all but wipe your account and make it back and still pass. If you make it to a live account, you're typically given an offer of up to 20-50% drawdown, which could be significantly higher than $4500. Not to mention there aren't typically daily/weekly loss limits.
2) Your pass-rate on the Gauntlet is lower than their Combine pass rates.
It's not our place to comment on their pass rates, but they've been around for far longer than we have and have had more people pass through their combine, thus their stats have had a chance to average out. As you know with most statistics, the more data you pass through it the more accurate it becomes.
3) Your Gauntlet takes 60 days, whereas a Combine can be far shorter.
The Gauntlet model is meant to judge how a trader trades based on their own criteria. In order to gauge whether or not a trader is being consistent to their trading style, our partners felt that they would require a 60 day report to examine and identify success.
4) You say only that successfully funded traders can get an "up to 80%" profit share, depending on how they've done in the Gauntlet, whereas all TopStep funded traders get 80%, after getting 100% of the first $5,000 profit.
Our prop firm partners recognize that every trader is different and thus deserves a different offer. This is why we give our traders freedom to trade the way they trade, and do our utmost to reduce limitations placed on their trading style. Just like when you go into a job interview, you know the salary and offer range but based on your knowledge, experience and how you interview, you'll be offered and can negotiate something different.
Few other key things to note:
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Data fees. With most of our competitors you have to pay for your own data directly. With our partners, you can elect to have the fees come out of your account balance thus not directly costing you any money.
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Taxes. Our partners actually make the trader a limited member/partner of their trading firm. This means that at tax time, the trader receives a K1 statement where the trading PNL passes through with the normal benefits. For instance, on Futures, it's the 60/40 capital gains as normal. This sort of income is not normally subject to SE tax. With many other prop firms in this industry, you're actually a 1099 contractor and thus all of the income is reported as ordinary income and is subject to SE tax. This can amount to SIGNIFICANT TAX SAVINGS.
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Regulatory Issues. Based on conversations with our legal counsel and the NFA, the 1099 setup most other competitors offer has some major regulatory issues. The setup our partner firms offer does not. For instance, the definition of a CTA is verbatim:
"A commodity trading advisor (CTA) is an individual or organization that, for compensation or profit, advises others, directly or indirectly, as to the value of or the advisability of trading futures contracts, options on futures, retail off-exchange forex contracts or swaps."
So, from our understanding, if you're a 1099 contractor to a prop firm, they are your client/customer and you're given a POA over their account. Thus, you likely fit the definition of a CTA. Some may say that you could fall under a CTA exemption, specifically the exemption in CFTC 4.14 that states,
"Advice was provided to 15 or fewer persons during the past 12 months and the entity does not generally hold itself out to the public as a CTA". However, the moment you or anyone else (like the prop firm) talks about how you're a funded trader for them, you could be holding yourself out as a CTA, thus the exemption doesn't apply. Assuming it did apply, if funded traders in other programs don't file their exemption and they're acting as a CTA, they're violating regulations. Our founders are NFA members and principals of a registered CTA, thus do everything they can to make sure the regulations are followed.
Hope this answers your questions!
