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CTA Prop Trading Record - Notional?
- Thread starter heech
- Start date
Exchange margin is literally the amount the FCM has to post at the exchange, for the positions of their clients. So, intuitively, many FCMs just pass that margin requirement onto their clients.Quote from kcgoogler:
Can someone explain what exactly the above statement means in more detail with some examples.
These margins are set by the exchange right; for /ES for example the overnight margin is around 5500$; should be same across all FCMs. No?
But the FCMs have the option of doing it differently, depending on their view of risk...
- if it's low liquidity/high volatility stuff (or heavily short options, for example)... they might demand MORE margin from their clients, to protect themselves. That was my case, where some FCMs asked for 200% of exchange margin. I actually didn't really have a problem with that, since I had plenty of equity anyways... except the FCM in question (RCG) was brain-dead in doing their math, and started requesting 500%-1000% of exchange margin in some cases.
- if it's high liquidity/low volatility stuff, like ES... they might choose to ask for LESS than exchange margin from some clients, and just cover the margin requirement from other sources. They're hoping to capture the cowboys on ET with a few hundred dollars burning a hole in their pocket.
I already mentioned Biog once today, hope he doesn't mind if I blow his cover again. I actually know for a fact he did most of the legal work himself, and in fact did (not sure if he still does?) his own accounting via Excel + Quickbooks, and just generated statements himself. He only started looking at admin firms 1-2 years into the process. So, maybe you can ask him.Quote from caementarius:
Thanks! I have the NFA invoice. I'm just wondering if I can do the due diligence/records on my own or if it is strongly recommended to hire someone. I think I can do it on my own.
Another question: is there a comprehensive list of where CTAs submit their numbers to? (Barclay, ITR etc)
In my case, I paid my attorney $25k for comprehensive, do *everything* for me service (including establishing LLC/LP/*everything*). You could probably get by with $10-$15k if you want to pay someone to draft basic legal docs for you at this point.
As far as submitting numbers to databases... there really aren't that many that are worthwhile. hedgefund.net, barclayhedge, iasg, autumngold...
Quote from heech:
The "problem" is that I leverage up my funds far greater than what I'd do with investor funds. Basically, I see my own prop account as being 50% "notionally funded"... so returns up/down are multiplied by 2.
Institutional clients are concerned only with Sharpe, which is independent of leverage or capital. They can and do make their own determination as to leverage, possibly by underfunding the account.
Quote from heech:
I already mentioned Biog once today, hope he doesn't mind if I blow his cover again. I actually know for a fact he did most of the legal work himself, and in fact did (not sure if he still does?) his own accounting via Excel + Quickbooks, and just generated statements himself. He only started looking at admin firms 1-2 years into the process. So, maybe you can ask him.
In my case, I paid my attorney $25k for comprehensive, do *everything* for me service (including establishing LLC/LP/*everything*). You could probably get by with $10-$15k if you want to pay someone to draft basic legal docs for you at this point.
As far as submitting numbers to databases... there really aren't that many that are worthwhile. hedgefund.net, barclayhedge, iasg, autumngold...
No worries Heech, I always enjoy helping out when I can.
Our pool used a lawyer to setup the documents and run them through the NFA approval process. I could have had the fund (initial investors, including myself) reimburse the legal setup costs over a specified period but instead I decided not to since all of the early investors were my family and friends. The legal costs ran about 8K or so.
As for accounting, I use a CPA that specializes in accounting for pools/hedge funds (that is all he does). He charges a very reasonable monthly charge ($400) and does an excellent job. The NFA came to audit last year and found zero issues. The NFA audit is one of the most important reasons to use a professional to handle the accounting, imo.
Quote from Biog:
No worries Heech, I always enjoy helping out when I can.
Our pool used a lawyer to setup the documents and run them through the NFA approval process. I could have had the fund (initial investors, including myself) reimburse the legal setup costs over a specified period but instead I decided not to since all of the early investors were my family and friends. The legal costs ran about 8K or so.
As for accounting, I use a CPA that specializes in accounting for pools/hedge funds (that is all he does). He charges a very reasonable monthly charge ($400) and does an excellent job. The NFA came to audit last year and found zero issues. The NFA audit is one of the most important reasons to use a professional to handle the accounting, imo.
Thanks very much for this reply.