Day Trading Firms vs. Prop Trading Firms

Don Bright · Apr 24, 2006

I appreciate the kind words, but don't like it when things get nasty here on the board. In 1997 there were somewhere around 200 "trading firms" - now there are, maybe 5, and only 3 or 4 that are truly independent....and maybe 2 that are secure enough to allow proper use of capital.

We've had an influx of returning traders from every single one of these bigger firms, so evidently pricing has "bottomed out" and the traders are seeking more in the way of overall support, and worry more about their bottom line. Some by Kia's (actually a good car), some buy Buicks, some buy Maybach's....and everyone has a good reasonf for doing so (I think we're somewhere between a Buick and a Hyundai, LOL..and I drive a Dodge)...not sure what that means, but it seems to make some sense, LOL..

Good trading everyone...

Don

limitdown · Apr 24, 2006

Quote from blufftrader:

Yea I heard Caliber a firm that clears threw hold brothers was not returning there money when they wanted to leave and lynx capital partners which clears threw Assent I used to work there they threated to take legal action if you tried to leave there firm what ever happen to trading is a way to be free . I actually trade next to a Schonfeld office those guys buy 100 shares then sell 20000 shares so they can get short doesn't sound to legal

so they trigger a 0-tick or a +tick jus to release the stock for shorting?

that could be expensive in a falling market.

seems easier to do in a flat market for that particular stock

fhl · Apr 24, 2006

bluff said: "I actually trade next to a Schonfeld office those guys buy 100 shares then sell 20000 shares so they can get short doesn't sound to legal"

Preference orders made this possible in late 90's. Get a hundred, then a ton of preference orders that you wait to see what gets filled as the market is tanking. Didn't know it was still going on. Maybe some other method is being used.

princessa · Apr 24, 2006

Quote from Don Bright:

Proprietary trading takes many forms: Day trading, pairs trading, M&A, scalping, swing, portfolio management, hedge funds, etc.
"Prop" comes in two types...One, the "stock exchange floor trading business model" (like ours) where the traders are independent, keep 100% of their profits, put up some risk capital ($20K or so), and use $mill or more of the firm's capital to trade with. Hope this helps...

Don

hey don, please clarify for me. why would a firm let you trade with their money and keep 100% of profits? what's in it for them if they get no money up front and no profits? maybe fees?

Jayford · Apr 24, 2006

Commish.

And you don't really trade their money as in Don's example. You get huge leverage using their money, but are on the hook when you lose.

blufftrader · Apr 25, 2006

Hey princessa Don drives a Dodge so he says lol I drive a Benz can I get a date I put all my money into my car Don put all is money into his Multi million dollar house now you guys keep trading so he can make his mortgage payments.

Don Bright · Apr 25, 2006

Quote from princessa:

hey don, please clarify for me. why would a firm let you trade with their money and keep 100% of profits? what's in it for them if they get no money up front and no profits? maybe fees?

Hi, yes, as I mentioned above, the "stock exchange" business model allows firms to let traders use the firm's capital (it takes a $million at minimum to make a good living in this business, IMO), most have traders put up a small risk amount so they can pay 100% of the profits to the trader. And, yes, due to tremndous "economies of scale" we can charge the traders a good rate, and keep a portion for the Firm. Best of both world's for the traders, again IMO. I thought it was great "back in the day" when my brother and I started...that, after buying a seat on the exchange, we could put up $25K or so, and use $1Mil-$5mil, of what is now, Goldman Sachs, money to trade with...and keep all the profits, not be an "employee" - stay independent, etc. So, we duplicated that business model for our traders.....and our traders don't have to the expensive seat on the exchange.

Don

zdreg · Apr 25, 2006

"You charge .003 or just for a LLC to start a company threw you."

i know what an LLC is. what does this sentence mean

pineman · Apr 26, 2006

Quote from Don Bright:

I appreciate the kind words, but don't like it when things get nasty here on the board. In 1997 there were somewhere around 200 "trading firms" - now there are, maybe 5, and only 3 or 4 that are truly independent....and maybe 2 that are secure enough to allow proper use of capital.

We've had an influx of returning traders from every single one of these bigger firms, so evidently pricing has "bottomed out" and the traders are seeking more in the way of overall support, and worry more about their bottom line. Some by Kia's (actually a good car), some buy Buicks, some buy Maybach's....and everyone has a good reasonf for doing so (I think we're somewhere between a Buick and a Hyundai, LOL..and I drive a Dodge)...not sure what that means, but it seems to make some sense, LOL..

Good trading everyone...

Don

Don :

where would you place Echo and Ptg Group in your above example ?

NTB · Apr 26, 2006

Don probably charges more per share because he is pricing in the X factor option. This is the free option given to traders who use his capital that they may blow-up and go far beyond their capital deposit. This option rarely expires 'in the money' but when it does, watch out!! This option is highly underpriced by most 'prop firms'. He's probably pricing this option better than most, although, he is probably still selling it too cheaply. Time will tell...