becoming your own broker dealer
- Thread starter Sky123987
- Start date
Swifttrade has its own B/D, it's called: 'BIREMIS LLC
(127840) BIREMIS, CORP. " (MMID: BRMS)
However, they recently stopped using their own B/D and are now, since a month or 2, are using the Penson B/D: PFSE (so they're now using Penson both as a clearing house and as a B/D, not sure why they switched from their own B/D to Penson's though)
which brings me back to my original point that LLC's are pretending to give you 20,50:1 ...FINRA members CANNOT...heres how it works:
I have an LLC....I put 1 million in,,,,under FINRA rules i can only have 4 million in BP intraday...so you come along as my first client of the LLC and you put up 25k.....I tell you im going to give you...say 250k in BP.(10:1 in your mind)...some other guy comes along and puts up 100k....the LLC gives him 1 mill in BP.......and so on and so forth....the two keys are 1) Your just trading the master account bp and 2) hopefully not everyone will use their BP all together on a given day.
I understand what you mean and I'm sure this is how it 'normally' works, but in these 2 cases I really have my doubts ... I just can't imagine Swift/Title having hundreds of millions sitting in their LLC's to back up the BP. Maybe Swift has cut a deal with Penson: Penson puts up 1:4 and swift gets 1:100 from Penson. Must be something like that IMHO
LOL, I can see this thread as a perfect example of what "is" what "was" and what "might be" - a little of each.
For example, Bright, as exchange members does not have to be a member of FINRA (no retail accounts). The FASB150 ruling a couple of years ago prevented the "pooling" of traders money for "leverage" (net capital) uses. However, some firms do it anyway, I'm told (not my problem). I can only speak for us, and we have never had to "pool" traders money to allow 10x, 20x, or 100x "use of capital" (I prefer that term vs. "leverage").
An "Introducing Broker" (to clarify, I don't have any reason to keep up with changes in this category, I'll say what it used to be) can set up with $5,000 or so, which is why so many "IB's" have gone out of business (why do most business ventures fail? Lack of capital of course). And the FASB150 changes eliminate many of the other smaller firms who needed to hold trader money etc.
Now, I asume that Shill Trading qualifies with $5,000 IB to give 1000x leverage to anyone with $10.00 put up, pays 110% payout, free commissions, with rebates, and gives health insurance and a limo ride to and from the office, right TM?
Don
For example, Bright, as exchange members does not have to be a member of FINRA (no retail accounts). The FASB150 ruling a couple of years ago prevented the "pooling" of traders money for "leverage" (net capital) uses. However, some firms do it anyway, I'm told (not my problem). I can only speak for us, and we have never had to "pool" traders money to allow 10x, 20x, or 100x "use of capital" (I prefer that term vs. "leverage").
An "Introducing Broker" (to clarify, I don't have any reason to keep up with changes in this category, I'll say what it used to be) can set up with $5,000 or so, which is why so many "IB's" have gone out of business (why do most business ventures fail? Lack of capital of course). And the FASB150 changes eliminate many of the other smaller firms who needed to hold trader money etc.
Now, I asume that Shill Trading qualifies with $5,000 IB to give 1000x leverage to anyone with $10.00 put up, pays 110% payout, free commissions, with rebates, and gives health insurance and a limo ride to and from the office, right TM?
Don
Since the firm has 4 million BP, and if one trader longs 1 million value of GOOG, and another trader shorts 1 million of GOOG, the actual BP used is 0. Besides, you also can get cross margining benefit from the clearing firm.
I understood how it works, but I don't know if there are any regulation for running a prop trading frim or JBO.
Just a comment..."NO GOOGLE" LOL.
Yes, there a lots of regulations. You might look up FOCUS reports, and Net Capital Rules. Aggregation requirements (which is what you're referring to with the long short example). In our Firm, we are just one big account, which qualifies to have each trader treated independently for their P&L and long short rules. For example, if we didn't have the ability to "aggregate" then if one trader was short GE, and another one long, the long trader would have to mark Short Sale to get out (not hard since elimination of uptick rule, but the Clearing Firm must still borrow the short stock).
By having only one account to look it, it saves Goldman from having to monitor risk for each trader (which we do, obvioulsy), and that makes for a great long term relationship. Same Firm since 1978 (Spear Leeds bought by First Options and then sold back to Spear Leeds, and then bought by Goldman, whew! LOL).
Anyway, just sharing what I feel comfortable with to help others understand how it works.
All the best,
Don
edit: And, yes, TM has that right, capital use on both sides, unlike retail brokers who have long and shorts, but don't pay interest on the short stock sales (except maybe IB with a certain account balance).