my point is this: aside from the so called "paper work",how is a firm more at risk by writing a weekly check if the trader only takes out profits but always leaves in his initial deposit amount? i do not understand the risk part..whats the difference?
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Chimera Capital---a problem ?
- Thread starter executioner
- Start date
Quote from cstfx:
Since most props are nothing but sub LLCs trading with a retail account, the account does have SIPC protection in case the firm the account was opened with goes under (assent, genesis, Goldman sachs, etc)
However, your agreement is with the llc you trade with, not the SIPC. Most LLC's are not registered with any regulatory agency and as such, don't have to do anything. They could, for all intents and purposes, transfer all their trading capital, which includes your deposit, to some off shore account and you are SOL.
If you want SIPC protection to protect yourself, then you have to get your own retail account which gives you 4:1 intraday buying power and 2:1 overnight
Sorry, gotta jump in here. Even though firm's may pay SIPC dues, they are not protected...Bright is not protected by SIPC from Goldman Sachs (that's why we keep our money with someone who we know has the money to always make good vs. some small clearing firm that may have less money than we do).
And, SIPC is hardly enough protection for professional traders with, at times, millions in their trading account....and that's the reason I always preach that everyone "should check the balance sheets" of the Firm they're dealing with. We guarantee a bare minimum of $10 Million of Class A (owners) money to be put with the traders (Class B) money...giving traders basically 100 times SIPC protection....meaning that a trader would have to lose all their money, a (bare) minimum of $10 million of ours, before any possible chance of a trader losing a nickel.
Obviously we keep multiple of that amount in the Firm no matter what.
Anyway, just correcting the SIPC deal...SIPC only "protects" retail accounts (unless something has drastically changed that I don't know about).
Don
Quote from Don Bright:
Sorry, gotta jump in here. Even though firm's may pay SIPC dues, they are not protected...Bright is not protected by SIPC from Goldman Sachs (that's why we keep our money with someone who we know has the money to always make good vs. some small clearing firm that may have less money than we do).
And, SIPC is hardly enough protection for professional traders with, at times, millions in their trading account....and that's the reason I always preach that everyone "should check the balance sheets" of the Firm they're dealing with. We guarantee a bare minimum of $10 Million of Class A (owners) money to be put with the traders (Class B) money...giving traders basically 100 times SIPC protection....meaning that a trader would have to lose all their money, a (bare) minimum of $10 million of ours, before any possible chance of a trader losing a nickel.
Obviously we keep multiple of that amount in the Firm no matter what.
Anyway, just correcting the SIPC deal...SIPC only "protects" retail accounts (unless something has drastically changed that I don't know about).
Don
Don, you miss the basic premise I am saying, most props are just sub LLC's with a retail account. Registered firms pay SIPC dues, most props don't. It is these accounts they pool your money and give you leverage. And these "props" mistakenly give noobs the impression that there is nothing to worry about because it is SIPC protected. But again, SIPC only protects the account holder in the event the firm holding the account blows up. Nothing protects the trader if an unlicensed LLC blows up.
This was never a comment about real (or licensed) props. Take your "Bob's Trading" or "ABC Capital" or whatever the current Craig's List ad offering "employment" - they are nothing more than a retail account with sub-account trading privileges and risk management backends to allocate leverage and risk.
You guys at Bright don't have retail accounts and as such don't have SIPC protection.
But most of these other commission shops (they ain't prop, so let's stop calling them that) are not a registered firm like yours and only have one retail account that everyone trades thru because the only thing they can get is a retail account thru Genesis or Assent (ok. maybe GS wasn't a good comparison). I've done the leg work and this is what has been presented to me.
This is all in reference to a mistaken understanding by an earlier poster who believed all accounts are SIPC protected.
i know for a fact that someone trading for a small LLC is NOT protected by SIPC. the one who runs the LLC has SIPC protection for his own account which is then broken up into a bunch of sub accounts. technically the one who runs the LLC can keep the money and the sub account holders are left with nothing..
Quote from executioner:
i know for a fact that someone trading for a small LLC is NOT protected by SIPC. the one who runs the LLC has SIPC protection for his own account which is then broken up into a bunch of sub accounts. technically the one who runs the LLC can keep the money and the sub account holders are left with nothing..
You are totally missing the point that CSTFX made.
SIPC is totally irrelevant in this discussion. That only insures you if the broker/clearing firm where the account is goes under. If an LLC entity blows up from trading losses, no one is going to grant you a do over and replenish all your money (not even the owner of the LLC).
Mr. csftx...I agree with you, and worry a lot about these basic retail groups who trade a single retail account, non-registered, non licensed.
And, yes, I think we got off the topic somewhere along the line, LOL (not the first time on eT, LOL).
All the best,
Don
And, yes, I think we got off the topic somewhere along the line, LOL (not the first time on eT, LOL).
All the best,
Don
Quote from Don Bright:
We guarantee a bare minimum of $10 Million of Class A (owners) money to be put with the traders (Class B) money...giving traders basically 100 times SIPC protection....meaning that a trader would have to lose all their money, a (bare) minimum of $10 million of ours, before any possible chance of a trader losing a nickel.
Don
Don,
How can you guarantee it? Bright is a LLC and the members can take back their contribution anytime they want. Please tell me how we look at the balance sheet.
Even with 10 million from class A owners, I beg it is a lot smaller than the total contribution from class B (traders). If you have 500 traders with each one holding assets of over 1 million, the total holding in the company is over 500 million. Assuming the traders are holding random stocks, it is very likely that it will lose more than 10 million.
Quote from yip1997:
Don,
How can you guarantee it? Bright is a LLC and the members can take back their contribution anytime they want. Please tell me how we look at the balance sheet.
Even with 10 million from class A owners, I beg it is a lot smaller than the total contribution from class B (traders). If you have 500 traders with each one holding assets of over 1 million, the total holding in the company is over 500 million. Assuming the traders are holding random stocks, it is very likely that it will lose more than 10 million.
We have never had to use our traders money for "net capital calculations" - so, by definition, we have enough capital reserves to cover everyone's positions.
Below is our 2006 balance sheet, sorry about the formatting. As you can see, other than a small cash account, we keep over $100 million in the LLC. (Class 'A' is us, Class B is the trader's portion).
The "long stock" vs. "short stock" had a net difference of only about $15million. I think there were about 400 "active" members, including the Bright family (which is a big portion of the long and short stock). The bulk of the money is with Goldman Sachs (Receivable from Clearing Agent).
This is only the LLC, which is what we're talking about here.
Bright Trading, LLC
Statement of Financial Condition â December 31, 2006
Cash in Bank $ 6,416,566 Reserve for Payables $ 2,279,454
Long Securities 100,201,960 Short Securities 115,808,090
Receivable from
Clearing Agent 118,821,571 Accounts Payable 284,314
Other Receivable 163,646 Class B Member Capital (0)
Other Investments 476,700 Class A Capital 107,708,585
Total Asset $ 226,080,443 Liabies & Equity $226,080,443
(This report was audited by Romeo & Chiaverelli, Certified Public Accountants)
I think is pretty good as far as "full disclosure"and "transparency" goes, especially for a private company. And, since this is all family money (no investors or shareholders), we do a pretty good job of risk control, LOL.
"Could" anyone lose more than their account, sure..."could" they blow out the Firm....I can't see how that could ever happen, knowing the numbers.
We did the "guarantee" disclosure and amount ($10million) many years ago, just to give traders peace of mind...as you can see, we keep considerably more in the LLC. Even if someone happened to lose a few $million, do you really think we would risk our reputation for that amount, of course not.
This exemplifies the reason that I am may seem to be "down" on "Sub-LLC's" and other "pseudo" type firms...sure, we could form a sub llc and limit our risk to a $million or whatever (as some of the other guys do), but we believe in what we do, and keep a pretty good amount of money in the Main LLC.
As always, check balance sheets, and do your due diligence, regardless of what business venture you're engaging in. "Know your business partner."
All the best,
Don
The formatting looks horrible....for you "non accountants" the Assest are listed vertically on the left side, the liabilities and capital are listed vertically on the right side.
Don
Don
I'll try it one last time- it depends on the size of the deposit and the trader's risk profile. If a trader (or group of traders) has a minimal deposit, that's not much protection for the firm. There are traders out there who didn't have to make a deposit, and plenty that only have a few thousand dollars down. Do you really think a trader can't lose $10K-$20K in a week or month? Some traders swing more than that per day. If their deposit is $5k, then the firm would have to eat the rest of that loss. See the risk yet? I'm not saying that's the case with this group, I have no idea nor do I care to know, but it is the case in some circumstances.
For you to say that every trader should DEMAND to be paid more frequently or move to another firm just confirms my suspicion that you have an agenda here...
For you to say that every trader should DEMAND to be paid more frequently or move to another firm just confirms my suspicion that you have an agenda here...