Bright Trading's new payout model

Don Bright · Aug 5, 2010

Update on Goldman:

Goldman Sachs Said to Shift Principal Strategies Into a Fund

Aug. 5 (Bloomberg) -- Goldman Sachs Group Inc.âs principal- strategies business, a group that makes bets with the firmâs own capital, plans to transform into a fund and raise outside money, a person with direct knowledge of the decision said.

Full story:

http://www.businessweek.com/news/20...o-shift-principal-strategies-into-a-fund.html

Don

Maverick74 · Aug 5, 2010

Quote from Don Bright:

(Man, eyes are getting tired and sore trying to keep up with all this, LOL - I called you last night Mav, I'll try again later today - let's chat a second).

We actually to agree that more starting capital is better - but my point is that a more skilled person is also better (read: younger recent grad, with great computer and some programming skills vs. someone we have to start from scratch with - no offense to anyone) - and that trading is very scalable, size wise.

Bob and I have agreed to conduct a more thorough interview process for those who, due to their youth etc. perhaps only have $10K...and, we have our JVc program participants to help with our analysis and review.

Don

Don I'll chat with you when I have some downtime. Really busy with a lot of stuff though. I know we have had very long conversations in the past about capital and success and you and I were 100% in agreement that these firms with the 5k and 10k down model were a joke and now you seem to have changed your tune. Now I know times are tough in terms of recruiting new traders, but you really should be raising your standards now, not relaxing them.

Maverick74 · Aug 5, 2010

Quote from MohdSalleh:

Times are bad huh?

There is no such thing as good or bad. The industry changes. Every business runs on capital. It's about risk vs reward. A slow choppy market may be bad for a momentum trader but great for a counter trend trader. I am speaking about the the state of the prop firm industry from a firm perspective. Markets themselves are never good or bad.

MohdSalleh · Aug 5, 2010

Quote from Maverick74:

There is no such thing as good or bad. The industry changes. Every business runs on capital. It's about risk vs reward. A slow choppy market may be bad for a momentum trader but great for a counter trend trader. I am speaking about the the state of the prop firm industry from a firm perspective. Markets themselves are never good or bad.

i mean from your firm's pnl perspective

Maverick74 · Aug 5, 2010

Quote from MohdSalleh:

i mean from your firm's pnl perspective

We are very sensitive to market making conditions and you can pretty much track market makers by using the VIX. The lower it goes, the worse for market makers in general. In general I think you can track prop firm's operations p&l with the VIX. The lower it goes, the less opportunity and the less activity.

Peternam · Aug 5, 2010

Quote from Maverick74:

We are very sensitive to market making conditions and you can pretty much track market makers by using the VIX. The lower it goes, the worse for market makers in general. In general I think you can track prop firm's operations p&l with the VIX. The lower it goes, the less opportunity and the less activity.

Do you have any numbers on the correlation between the 2 ?

CQNC · Aug 5, 2010

http://www.finalternatives.com/node/13445

Goldman To Spin-Off Proprietary Business As Hedge Fund
Aug 5 2010 | 1:45pm ET
The next really big hedge fund launch is likely to be the regulator-required spin-off of Goldman Sachsâ proprietary trading business.
Goldman Sachs plans to close its Principal Strategies business and transform it into a hedge fund, Bloomberg News reports. An announcement could come as soon as tomorrow, with the spin-off coming by the end of the year.
It is still unclear how much the GSPS team, led by Morgan Sze, hopes to raise in outside capital, or what role, if any, Goldman will have in the new hedge fund. The newly-passed Dodd-Frank financial regulation reform bars banks from proprietary trading, but allows them to invest up to 3% of their capital in hedge funds.
Goldman appears to be trying to beat other firms to the punch: Under the provisions of the so-called Volcker rule, banks have up to four years to wind down their prop. desks. The move also comes as Morgan Stanley is reportedly finalizing plans to spin-off its FrontPoint Partners hedge fund.
Goldman does not disclose how much GSPS manages. But prop. trading accounts for about 10%, on average, of its annual revenue.

Quote from Don Bright:

All good questions - my initial thought is that I'm happy to not have to complete with my Clearing Firm's prop traders.

In reality, and with what is happening at ML/BofA (being forced to separate I'm told) - that is what is happening - restructure.

We'll see...

Don

atticus · Aug 5, 2010

Quote from CQNC:

http://www.finalternatives.com/node/13445

Goldman To Spin-Off Proprietary Business As Hedge Fund
Aug 5 2010 | 1:45pm ET
The next really big hedge fund launch is likely to be the regulator-required spin-off of Goldman Sachsâ proprietary trading business.
Goldman Sachs plans to close its Principal Strategies business and transform it into a hedge fund, Bloomberg News reports. An announcement could come as soon as tomorrow, with the spin-off coming by the end of the year.
It is still unclear how much the GSPS team, led by Morgan Sze, hopes to raise in outside capital, or what role, if any, Goldman will have in the new hedge fund. The newly-passed Dodd-Frank financial regulation reform bars banks from proprietary trading, but allows them to invest up to 3% of their capital in hedge funds.
Goldman appears to be trying to beat other firms to the punch: Under the provisions of the so-called Volcker rule, banks have up to four years to wind down their prop. desks. The move also comes as Morgan Stanley is reportedly finalizing plans to spin-off its FrontPoint Partners hedge fund.
Goldman does not disclose how much GSPS manages. But prop. trading accounts for about 10%, on average, of its annual revenue.

The spin-off will be scrutinized to the n-th degree. No way it will be a success.

sulli · Aug 5, 2010

As Far as the 80/20 payout - Couldn't you just give free commissions & interest up to 20% of the traders profits? If possible, that would be a good work around. Giving up 20% is a hell of a lot for taking most of the risk.

Shreddog · Aug 5, 2010

Quote from sulli:

As Far as the 80/20 payout - Couldn't you just give free commissions & interest up to 20% of the traders profits? If possible, that would be a good work around. Giving up 20% is a hell of a lot for taking most of the risk.

My understanding is that under this business model trader deposits are no longer allowed. So the risk falls fully on the firm. Correct Don?