Business models of prop-shops?

Maverick74 said:
Again, this question goes back to my main point. And I'm not directing this at you, but most of the people on ET don't know what real prop firms are or what they do. I'm taking about firms like DRW, DV, Ronin, Jane Street, Susquehanna, etc. Most of the firms that ETers reference are NOT prop firms. For example, a firm can provide funding, but that is not the same thing as a prop firm. Hell, I could provide you funding, that doesn't mean I'm a prop firm, it simply means I'm a backer. Firms that sell education are essentially providing a service at a price. They are not prop firms and you won't find that word mentioned anywhere on their website. ETers seem to associate those firms with prop firms for reasons I'm not sure. As a general rule, you won't find prop firms daytrading stocks or futures. Most of them are spreaders, make markets in options or trade OTC products.
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Mav, for my education, and I assume many others, I'd sure like to hear an exposition from you on what prop shops do.
 
tonysoprano said:
Mav, for my education, and I assume many others, I'd sure like to hear an exposition from you on what prop shops do.
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Most prop firms try to extract the excess premium that comes from providing liquidity in less liquid markets. Here is a good example from the old days. Prop firms would trade OTC cash fixed income securities and hedge with treasuries futures on the exchange. This is a similar trade that LTCM trade milked for a few years. Treasuries would be auctioned off Tues through Thurs in which there would be massive liquidity. These were known as "on the run" issues. After they were auctioned they would become "off the run". They would still trade but liquidity would dry up. These securities would have to trade at a discount to attract buyers. Fixed income is easily arbed since it's just the value of money across time. So firms would bid for these issues OTC at a discount and hedge using the more liquid futures. This is a typical trade that requires very cheap execution cost, access to OTC markets and access to lots of capital. There was a real quantifiable edge here. This is just one example. There are all sorts of these trades in the market but they "generally" share the same idea, extracting the excess premium that comes from providing liquidity.
 
just got an email like most of you from another "Pretend prop" selling "Tests" on a promise that you may get funded if you pass the test... LOL another day another sucker!
 
traderjo said:
just got an email like most of you from another "Pretend prop" selling "Tests" on a promise that you may get funded if you pass the test... LOL another day another sucker!
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You need to be careful using the word prop. "You" are attributing this word to different firms that don't call themselves prop firms. If a firm calls themselves a prop firm, then you can criticize them if they are not. But if a firm is not a prop firm, then why are you calling them a prop firm? I'm just puzzled by this. Words matter. Just so we are clear for the 100th time, I might be willing to back you as a trader, but that does "not" make me a prop firm. In fact, in the old days that's how floor guys got started in this business. They started off as clerks for a floor trader and after about 12 months, that trader might back the clerk to trade his own account. That is NOT the same thing as prop trading.
 
It is not me, it is the firm itself claiming that they are a "Prop " Firm have a look..."ActualTraders has been at the forefront of propriety trading since its foundation." and then they have this disclaimer LOL ....Oy Bolsador Ab (business-id FI 24913197 doing business as www.actualtraders.com) sells services (simulation and testing in financial markets) to clients in Finland and abroad. "

so does that mean they dont really trade themselves
Contrasting ! Highly questionable!

I call them Pretend prop to Mock them! but OK Mav74 you win , Lets call them "Trader Backing firms" I hope you get my main point though.. that is these "Backing firms" business model is questionable, becasue unlike true top level prop firms these companies charge people money and when asked "How many % wise you really fund" they hide.. because the truth behind is the business makes more money by selling the "Tests"
With your knowledge Mav you can take a critical look at these mushrooming "Industry" rather than getting stuck on correcting my nomenclature
Disclaimer: I do not work for any such firm my concern is transparency and ethics that sis all.. I see lot of people getting sucked in to this thinking $99 a month or whatever is going make them a great trader with millions funding behind it! TRUE firm which back good traders ( call them prop or Trader backing whatever) do not charge such Test fees, it is like Ford or Toyota they Employ engineers dont ask Engineers to pay a test fee! DO they
 
traderjo said:
It is not me, it is the firm itself claiming that they are a "Prop " Firm have a look..."ActualTraders has been at the forefront of propriety trading since its foundation." and then they have this disclaimer LOL ....Oy Bolsador Ab (business-id FI 24913197 doing business as www.actualtraders.com) sells services (simulation and testing in financial markets) to clients in Finland and abroad. "

so does that mean they dont really trade themselves
Contrasting ! Highly questionable!

I call them Pretend prop to Mock them! but OK Mav74 you win , Lets call them "Trader Backing firms" I hope you get my main point though.. that is these "Backing firms" business model is questionable, becasue unlike true top level prop firms these companies charge people money and when asked "How many % wise you really fund" they hide.. because the truth behind is the business makes more money by selling the "Tests"
With your knowledge Mav you can take a critical look at these mushrooming "Industry" rather than getting stuck on correcting my nomenclature
Disclaimer: I do not work for any such firm my concern is transparency and ethics that sis all.. I see lot of people getting sucked in to this thinking $99 a month or whatever is going make them a great trader with millions funding behind it! TRUE firm which back good traders ( call them prop or Trader backing whatever) do not charge such Test fees, it is like Ford or Toyota they Employ engineers dont ask Engineers to pay a test fee! DO they
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You are right, they do refer to themselves in their blog posts as a prop trading firm but they are based in Finland. They could not get away with this in the US. I'm not sure where you reside, but there is NEVER, any reason why a US citizen should get involved with a foreign firm. I've never even heard of a financial company trying to operate out of Finland, a cradle to grave welfare state. I'm not sure how their gov't even allows this business to operate there.
 
Maverick74 said:
You are right, they do refer to themselves in their blog posts as a prop trading firm but they are based in Finland. They could not get away with this in the US. I'm not sure where you reside, but there is NEVER, any reason why a US citizen should get involved with a foreign firm. I've never even heard of a financial company trying to operate out of Finland, a cradle to grave welfare state. I'm not sure how their gov't even allows this business to operate there.
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It seems some firms " are getting away with same model and based in USA! so where anybody is based is different issue, the main issue is are people being sucked in to a day dream.
sell 100 tests collect $ and fund 1-2 if at all seems to be the "mantra"
Not regulated in any shape or form, where as somebody like Bright / T3 and people joining them has to go through regulations!

Smallstops: the business model that is being scrutinized here is Remote trading but not a arcade, arcade just gives you technology access and leverage they don't claim to train you and fund you if you pass a "Test" but Mav can cross check what I just said...

anybody interested have a look at this

When I looked at what they called a "EXPRESS account so no tests " where one can start trading immediately it seems all you do is trade your own money! Is my analysis correct? or I am missing something? how is it diff to having my own account with LMAX So for a monthly fee of Euro 185 (USD 220 approx) you give 25,000 position size limit (Notional) meaning a leverage of 1:113 Does this not mean we actually trading our own money becasue the "Firms' loss limit is $150! LAMX itself offers 1:100 leverage where one can have own account with a deposit of $250 and get to trade $25000! and NOT SHARE the profits
 
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