Bright Trading's new payout model

[stockwrangler]

Quote from taclander:

Good to see you back Don. I was getting worried you had decided to forgo this board as we haven't heard from you in awhile.
Are you still doing Opening Orders and the like? Haven't seen a post there in awhile.

Quote from Don Bright:

Thanks...I've had some health issues (again)...spending too much time on Dr's offices....but doing "ok" - sometimes have to layoff just to keep my blood pressure in line, LOL (just kidding).

Don

Edit; Regarding the openings...working? Yes. Working as they did in the past, no. More selectivity, more awareness of pairs pre-market (love that part)...."throwing spaghetti against the wall and taking the "free money" - not so much any more. Still doing them? Absolutely.

Filed under: "Adapting to The Market (and Changing Diet) for Survival"

BT Frontman former fav known as "The Vegas Opening Orders Special"

 

[Don Bright]

Quote from NKNY:

HI Don, maybe you missed my prior post, have you guys considered changing clearing firms at all...

Thanks

Nick

We have discussed with the other majors, but none can guarantee that they would not be going the same direction.

Too many traders have auto programs with Redi, so we're trying our bet to stay with GS, and we value our relationship with GS as well.

All I can say is that we're dealing with it, traders are fine. No letter from the SEC yet ("open letter" to trading firms from SEC)... we'll do whatever we can to make things right after it gets published. This may be "much ado about nothing" - in the long run.

Don

 

[Don Bright]

Quote from stockwrangler:

Filed under: "Adapting to The Market (and Changing Diet) for Survival"

BT Frontman former fav known as "The Vegas Opening Orders Special”

Hmmm, breakfast....LOL - thanks Don

Don

 

[pairsarbtooo]

Quote from Maverick74:

Let me re-phrase what I'm trying to say. A trader with 10k in capital has close to zero chance of ever making it. I know that, Don Bright knows that, Bob Bright knows that and everyone on the street knows that. This is what I was trying to get at when questioning Don about taking in 10k accounts, or youngsters as he likes to call them.

Look, when I started at Worldco back in 2000, we had arguably one of the best markets in history to trade. The only way we could produce good traders was to let them go anywhere from 25k to 100k deep in the red in their accounts. Even the guys that came in with capital, usually 10k to 20k, we let them go 50k into firm money. The good ones dug their way out and did well. The bad ones we cut. Net net they never really lost that much money on them as it was mostly commissions.

I know I'm not suppose to say this but the biggest fraud of the prop firm business is not commissions, or leverage, or whether or not you need a series 7, it's the fact that firms sells the dream of success to young guys that don't know any better. Well I do know better. I know it not because I'm a smart ass trying to pick a fight with Don, this really has little to do with Don in particular, it has to do with the fact that I've been in this business for 10 years and have been around over 1000 traders who have gone through the system. I know the numbers because I've seen the numbers.

There is a direct correlation between the amount of capital you have to trade and your odds of success. Not leverage, CAPITAL! These numbers are indisputable. I know them, I've seen them.

At the end of the day, after 10 years, I realized the biggest edge in this business is not computers, not charts, not leverage, but equity. Pure old fashioned good american equity. If anyone tries to tell you otherwise, they are probably trying to sell you something.

i agree for a new person....but once you overcome fees trading is equity invariant. I don't buy the biggest edge is equity, its necessary but not sufficient. NO disrespect intended, and 10 years isn't a long time in the business to speak from. If you had, say, 30 years in the business, had a section in a book highlighting great traders dedicated to what you did with an MIT punch car computer in the 60s, and bought an island, perhaps then you can tell me of all the traders who go hundreds of thousands into the red and make it, but most of those guy blow out and live in a shack somewhere. 10 years is a microsecond.

Its the men who don't manage risk well that end up broke. this bs about needed tons of capital is a lark. the tons of capital is for these pseudo trading firms to fee you to death..thats why the want guys with large deposits....is that so hard to see? Frims like to take on 25k guys cause they know the bulk of that goes to comms and fees....why take the time to talk to a 5k guy..thats not much in firm profit to milk. End of story.

If you have a small amount of capital and your trading overcomes fees, that very quickly either on its own or by scads of people throwing money at you turns into TONS of capital, if you are in the red before you start, those two former things rarely happen.

 

[CQNC]

makes no difference whether your capital base is $1 or $1M to an experienced trader. i can start with $1000 leveraged and be doubled up four time in a week to cover any real potential loss in a blowout trade. it's not that difficult. just scalp the right stock. rookies, sure. they'll lose whatever they start with, guaranteed, without a system in place restricting their decisions and movements.

 

[tradingjournals]

Quote from pairsarbtooo:

... Frims like to take on 25k guys cause they know the bulk of that goes to comms and fees....why take the time to talk to a 5k guy..thats not much in firm profit to milk. End of story.

How about this one: what prevents them from using the 25K to lend to other traders, and use the SPAN margin to lend 20 times as much. If leverage is 20, you time that by the interest they charge on the lending, you get a good number. If you use 3% as interest charge, the 25K can make around 13K per year.

What can be worse is if a firm were to exploit the 25K and leverage by saying something like "the firm can lend 500K of our capital", when in fact it is a 25k deposit of another dude multiplied by the leverage from margins.

I hope the laws prevent them from doing the above.

If someone is in the prop business, could you comment on the scenario described?

 

[CQNC]

the firm should be making a significant profit on the difference between the lending rate to the trader for the few hours they're trading, if calculated as a day's interest that is, and the money market rate they're being charged by their bank. a significant profit. so how the funds are distributed, to 5 5K guys or one 25K guy, matters not except as a risk management decision. my guess is, the 25K guy is probably going all in more often and generating way higher commissions than the 5K guys combined. he's also much more profitable and less maintenance. kinda like the difference between a real wife and a trophy wife. one's an expensive whore, one's a nagging bitch.

Quote from tradingjournals:

How about this one: what prevents them from using the 25K to lend to other traders, and use the SPAN margin to lend 20 times as much. If leverage is 20, you time that by the interest they charge on the lending, you get a good number. If you use 3% as interest charge, the 25K can make around 13K per year.

What can be worse is if a firm were to exploit the 25K and leverage by saying something like "the firm can lend 500K of our capital", when in fact it is a 25k deposit of another dude multiplied by the leverage from margins.

I hope the laws prevent them from doing the above.

 

[ProTrendQuest]

What commissions are you paying on etrade pro?

I am sure they are nowhere near what prop firms can offer you.

Quote from noob_trad3r:

So what is the purpose of joining a prop firm?

I get 100% Payouts with etrade pro minus the little commission which is nothing really.

Vs giving some firm 20% of my earnings.

I see no purpose for joining a prop firm.

 

[ProTrendQuest]

Quote from Don Bright:

(Back from my 2 week vacation/cruise to Amsterdam, Russia, Germany, Finland, Sweden etc. - whew, talk about exhausting, but fun).

I can't say too much at this point, but the basic premise is that there is extreme pressure (so much that some "competitors" chose to just stop accepting new traders) to assure that we (and the other major GS firms) are "true prop" in that they don't have 100% payout traders).

Reference: FINRA 10-18 - as previously discussed

Our Accountant in Chicago who handles dozens of trading firms informs us that many are already changing policies too.

Knowing that this was coming, we set up our JVC program where traders can qualify for a second account, no downside risk, and keep at least 50% of the profits. Read previous posts or feel free to call me discuss this.

Our current traders have been advised of this upcoming event, and we suggested that those with adequate capital, take a $million or so and use IB for certain trades, keep a smaller amount to use the leverage here. We will help them with this.

We are extremely comfortable that with the other major benefits we offer that most firms don't, and that the other major firms have already adopted this, that overall this will not have a big effect for most traders.

Don,

Could you please direct me to the Fin Reg notice that explicitly states the minimun 80% payout.

I see you reference Reference: FINRA 10-18 - which addresses master/sub-account arrangements, however, I have failed to find anything FINRA related that mentions anything about payout percentages.

Thanks in advance.

 

[Don Bright]

Quote from tradingjournals:

How about this one: what prevents them from using the 25K to lend to other traders, and use the SPAN margin to lend 20 times as much. If leverage is 20, you time that by the interest they charge on the lending, you get a good number. If you use 3% as interest charge, the 25K can make around 13K per year.

What can be worse is if a firm were to exploit the 25K and leverage by saying something like "the firm can lend 500K of our capital", when in fact it is a 25k deposit of another dude multiplied by the leverage from margins.

I hope the laws prevent them from doing the above.

If someone is in the prop business, could you comment on the scenario described?

(Bright Tradng only, that's the only Firm I can speak for obviously)
Response to a couple of points.

Some may, but we don't have to use trades capital for the Firm's overall trading requirements. We can refund initial deposits without holding for 12 months. And, yes, I can't say for sure, but if not illegal, it should be.

OK, the retail vs. prop has been beaten to death, but just a simple example. If you have $25K and can use $50K or even $100K, you are still locked out of some successful strategies. And, if you're making $20K per year with $25k retail, how much would you make using $300k prop? And, FWIW, we are working through the 80/20 thing...who knows what things will be like next year.

Don