Capital lock down

[Fractal]

Quote from jmreyes:

With regard to certain firms choosing not to hold deposits for the one year period, let me add that just because a firm doesn't impliment something doesn't mean it doesn't apply. SDV, LLC lets anyone trade at their office without registering their traders. This is a clear violation. The fact that they do not register people with an exchange or the NASD doesn't mean that under certain circumstances registration doesn't apply.

Thanks, that was helpful. I thought if the firm were not a registered member of an exchange (which is sketchy in itself) they could sorta get by without even licensing their traders.

All the other firms that <i>are</i> basically have to register traders and lock down their capital? I mean, I know of one or two big places that have S7 traders who can just go elsewhere with their money at their discretion. Curious as to what the difference is.

Licensing isn't so much an issue as there being other options for groups without requiring their deposits to be held for a year.

 

[jmreyes]

It would appear as though there's some bizarre language gap. Once again, just because a firm doesn't enforce something doesnt mean it's right or that there is an exception. The SEC is apparently attempting to eliminate deposits accross the board (except where retail accounts are concerned). They want the line between proprietary firms and traders, and broker/dealer and client relationships to become more distinct. Firms that impliment the K1/LLC model are essentially selling an equity ownership of their company to the trader. In turn, the trader receives a portion of their profits and the firm's profits. This model allows for a pseudo-deposit. The SEC, recognizing that firms may be abusing this model, fired back by forcing firms that follow this model to hold the funds for a period of one year. There's a great article on the subject, attached is the link.

http://www.greencompany.com/PropTraders/Traders.shtml

 

[50 cent]

Quote from Fractal:


For those of you who trade at prop firms, is it common practice for the firm to lock part of your capital down for 1 year?

it is known for a FACT that some prop firms, including very large ones such as Generic, lock your capital for 1 year, due to some SEC rule. you will not be able to take back your money until 1 year from the time of deposit.

not all firms follow this rule (a fact that makes you wonder what kind of a strange rule it is), but some firms certainly do, so double check the firm you're trying to get into. the fact that your boss (the prop firm) has your money and you cannot get it back from him for a whole year can interfere with your trading psychology. so be careful.

 

[Don Bright]

Our trader simply do not have to wait to withdraw whatever amount is in their account...we don't need their money for any reason.

We've talked about this for years......

Don

 

[Fractal]

Quote from Don Bright:

Our trader simply do not have to wait to withdraw whatever amount is in their account...we don't need their money for any reason.

We've talked about this for years......

Don

Thanks Don (Mav).

I'm currently looking for places with offices for a team in NYC though, and I know you're mostly remote.

Thanks to the rest, I appreciate the link and info. I still can't figure out the reason why some firms seem to slip by this lockdown reg UNLESS they don't use trader cap toward their net cap reporting (which seems to be the case with Bright only, so far) OR they just are flying under the radar of the SEC. The latter seems unlikely to me. The SEC has had years to weed out these firms, and from what I've seen they're not big enough to be leveraging their own funds without using those of their traders.

 

[Don Bright]

Quote from Fractal:

Thanks Don (Mav).

I'm currently looking for places with offices for a team in NYC though, and I know you're mostly remote.

Thanks to the rest, I appreciate the link and info. I still can't figure out the reason why some firms seem to slip by this lockdown reg UNLESS they don't use trader cap toward their net cap reporting (which seems to be the case with Bright only, so far) OR they just are flying under the radar of the SEC. The latter seems unlikely to me. The SEC has had years to weed out these firms, and from what I've seen they're not big enough to be leveraging their own funds without using those of their traders.

If you get a group together in NYC, let me know, I'll certainly consider re-opening on Broadway, or better yet, you become an affiliate location (as we now have in Great Neck, Boston, Miami, Vancouver, coming soon to Austin, etc.)....

Edit: My Great Neck people say they are only 20 minutes away from NYC, great guys, let me know.


I can't speak for other firms (and their financial condition- that's why I tell everyone to check balance sheets first)....

Any office discussion should be done on PM or phone call, of course.

All the best,

Don

 

[syswizard]

Quote from Fractal:

Thanks to the rest, I appreciate the link and info. I still can't figure out the reason why some firms seem to slip by this lockdown reg UNLESS they don't use trader cap toward their net cap reporting (which seems to be the case with Bright only, so far) OR they just are flying under the radar of the SEC. The latter seems unlikely to me. The SEC has had years to weed out these firms, and from what I've seen they're not big enough to be leveraging their own funds without using those of their traders.

Uh...if you've followed other posts such as the one regarding why prop firms would keep your money, etc.
http://www.elitetrader.com/vb/showthread.php?s=&threadid=82316&highlight=Prop+firms+keep+money
it's apparent many prop firms are still behaving badly and without accountability. I think the problem is too many bureaucracies.....when I had a problem, I was bounced from the NASD, back and forth to the SEC. They each accomplished NOTHING....so under the radar they (props) still fly. Unless the SEC decides to step-up enforcement with rigorous audits, be careful who you deal with !