Bright Trading's new payout model

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Quote from Midas:

Do you expect the programmers to work for free?

The JVC program is really simple. There is a very successful stat arb group within Bright. Bob will back its traders who follow this strategy. You can only trade minimum size in the beginning limiting Brights risk. If you make money they will let you increase your size. If you don't you are shown the door.

I really don't understand why this is so hard for people believe.

I got started in this business with a similar arangement in 2000 except my commisions never went down while bright brings theirs down to cost incrementally.
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I don't think anyone is confused by the JVC model Midas. The title of this thread has to do with Bright's new payout, not the JVC program. I only brought up the JVC program to discuss the viability of equity prop trading going forward.

My original comments still stand. I don't see how given the current operating margins that equity prop trading can continue in it's "current" form. Every time Don posts I get more and more bearish. He is not convincing me to cover.
 
these prop trading thing is just for brokers like goldman sachs to get into the retail brokerage business without the retail brokerage regulations. these are not prop trading accounts. when you deposit cash into a prop firms accounts like these,,the broker or firm can use your cash to trade their own accounts.

goldman sachs, morgan stanley, bear stearns were all violating SEC and securities regulations for years but nobody seems to care since they wer makin so much money from their prop trading division.

The SEC and finra guys just turned a blind eye on their acitivities. like everybody turned a blind eye on the sub prime fraud activities. going on for years.

Quote from Maverick74:

I'm curious why Don has not commented yet on Bright Trading moving to an 80% payout model. Not by his choice, but Goldman's.
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If you can afford the capital then prop trading with a direct access broker like Interactive Brokers should be ideal. If you can put up 100k then you enjoy a portfolio margin account which can give you close to 10:1 leverage for ETFs and close to 6:1 leverage for stocks. This is overnight leverage and intraday, it is the same for portfolio margin.

If you trade options to hedge your stock positions then you can get close to 40:1 leverage. Their margin rates are close to 1% as well. Check out this article from Barrons
http://webreprints.djreprints.com/2417800443909.html


Their commissions start at 1/2 penny per share but get as low as 1/10th penny per share along with passing the make/take fees to you so you could even rebate trade if your orders are adding liquidity.

No fee to open an account, no fee to close one, no fee to use their technology or platform, everything is free except for the commission cited above.

To open an account then just click this link:

https://www.interactivebrokers.com/Universal/servlet/formWelcome?p=100&atype=IT&ibsrp=139
 
Don, can I get some clarification here. Per this link:

http://www.stocktrading.com/jvc.html

It states that your normal haircut charges are 12%? That can't be right. Is this old?

"Since account starts with a zero balance, there will be no haircut charges, only a 3% per annum capital charge for overnight positions (which is roughtly 1/4 "normal" haircut."

If your traders are using 10 to 1 leverage on overnights on the pairs they need to make 100% a year just to break even?
 
Quote from sulli:

Probably because Echo clears with Merrill. GS is the one requiring the 80/20 payout. Just a guess?
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Per my podcast/blog on Aug 5, 2010.
Prop-trading update
Goldman Sachs told one of the largest prop-trading firms to change its payouts to prop traders to 80 percent or less, down from 100 percent. FINRA Regulatory Notice 10-18 said that 100 percent payouts were indicative of “beneficial owners” (disguised customer accounts and these firms are not registered customer-account broker dealers). Goldman seems to be closely following all rules now to stay out of trouble with the SEC. (Click here for the background on this issue – see my blog archive June 22, 2010 “FINRA's notice to prop traders.”)

Note for EliteTrader:
I am guessing - and I know that is not good enough here - that other large broker dealers and their prop trading firm clients may follow Goldman and Bright Trading’s move to 80% pay-outs. From what I have seen and heard to date, it seems that Goldman reacted to FINRA notice 10-18 and asked Bright to make this change. But, I have not confirmed this with Goldman.

Goldman seems to be cleaning house now to get ahead of the regulatory-curve, to be a good corporate-citizen with the SEC and other regulatory bodies too. Goldman settled their recent large SEC lawsuit and later announced they are spinning-off their prop trading unit to comply earlier then scheduled with the Dodd-Frank bill’s Volcker rule.

While other brokers and banks may delay complying with the Volcker rule for many years, Goldman was probably scared into complying early to avoid further regulatory trouble.

Bank of America and their bailout-acquisition Merrill Lynch were smack in the middle of controversy and it seems unlikely they can drag their feet on regulatory alerts like FINRA 10-18. BoA Merrill may follow Goldman’s suit – on prop trading firms and other issues - to avoid Goldman’s lawsuits.
 
Quote from Robert A. Green:

Per my podcast/blog on Aug 5, 2010.
Prop-trading update
Goldman Sachs told one of the largest prop-trading firms to change its payouts to prop traders to 80 percent or less, down from 100 percent. FINRA Regulatory Notice 10-18 said that 100 percent payouts were indicative of “beneficial owners” (disguised customer accounts and these firms are not registered customer-account broker dealers). Goldman seems to be closely following all rules now to stay out of trouble with the SEC. (Click here for the background on this issue – see my blog archive June 22, 2010 “FINRA's notice to prop traders.”)

Note for EliteTrader:
I am guessing - and I know that is not good enough here - that other large broker dealers and their prop trading firm clients may follow Goldman and Bright Trading’s move to 80% pay-outs. From what I have seen and heard to date, it seems that Goldman reacted to FINRA notice 10-18 and asked Bright to make this change. But, I have not confirmed this with Goldman.

Goldman seems to be cleaning house now to get ahead of the regulatory-curve, to be a good corporate-citizen with the SEC and other regulatory bodies too. Goldman settled their recent large SEC lawsuit and later announced they are spinning-off their prop trading unit to comply earlier then scheduled with the Dodd-Frank bill’s Volcker rule.

While other brokers and banks may delay complying with the Volcker rule for many years, Goldman was probably scared into complying early to avoid further regulatory trouble.

Bank of America and their bailout-acquisition Merrill Lynch were smack in the middle of controversy and it seems unlikely they can drag their feet on regulatory alerts like FINRA 10-18. BoA Merrill may follow Goldman’s suit – on prop trading firms and other issues - to avoid Goldman’s lawsuits.
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Goldman, JPM, Merrill, BoA, and the other Broker Dealers cause Trillions of loss of dollars to the nation / taxpayers through their Fraud and Felonious actions (and yet don't even have to be prosecuted for it) and Prop firms HAD nothing to do with what these Broker Dealers did when they executed all their scams yet Prop Firms may become extinct or at least have to morph into something new because of it...

sheeeshh... What a croc... :confused:

Someday these Broker Dealers and their admin heads are going to get exactly what they deserve... some place some time... Lehman and Bear Sterns got theirs... the rest someday soon going with you someday soon...
 
Quote from Maverick74:

Don, can I get some clarification here. Per this link:

http://www.stocktrading.com/jvc.html

It states that your normal haircut charges are 12%? That can't be right. Is this old?

"Since account starts with a zero balance, there will be no haircut charges, only a 3% per annum capital charge for overnight positions (which is roughtly 1/4 "normal" haircut."

If your traders are using 10 to 1 leverage on overnights on the pairs they need to make 100% a year just to break even?
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These rates have been posted many times.

6 times equity overnight = Zero haircut
6-10 times = 2% per year (thus, less than 1% per year net.)


10-15 times = 4% peryear scaling up - individualized by trader.

Thus (don't you just love the word "thus" LOL) - since trader has zero money up, he/she only pays 3% per year to use the funds, pretty good. And, as each $10,000 goal is reached the commissions go down...another incentive for JVC.

And, yes, for those who go above 30 times or so (as a deterrant for cash accounts) could pay 1% per month for a couple of days).

$15,000 account using $150,000 would be 10% per year to stay at $15,000, right? 100% on using $150,000 would be $150,000 which is what we're looking for.


Don
 
Quote from Don Bright:

These rates have been posted many times.

6 times equity overnight = Zero haircut
6-10 times = 2% per year (thus, less than 1% per year net.)


10-15 times = 4% peryear scaling up - individualized by trader.

Thus (don't you just love the word "thus" LOL) - since trader has zero money up, he/she only pays 3% per year to use the funds, pretty good. And, as each $10,000 goal is reached the commissions go down...another incentive for JVC.

And, yes, for those who go above 30 times or so (as a deterrant for cash accounts) could pay 1% per month for a couple of days).

$15,000 account using $150,000 would be 10% per year to stay at $15,000, right? 100% on using $150,000 would be $150,000 which is what we're looking for.


Don
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I know you've gone over this a few times but when you said 1/4 your normal haircut charges that implies 12% annual interest. I see that is only on 30 to 1 leverage. Can you double check my math on this.

If someone has a 20k account and you give them 600k in leverage (30 to 1) at 12% interest, that's about 600k a year in interest charges right? Assuming they held that amount of capital every night for a year. And that means they need to make 3000% a year to break even on their trading? I think my math is off somewhere so can you walk me through it.

Now on the 15 times leverage for 4%, say you have a 20k account which would give you 300k in capital. At 4% interest, you would need to earn 60% on your trading to breakeven right?
 
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