The general concept is the more volume the firm does, the lower their rate of commision fees from the exchanges on which they trade.
Let's assume firm A gets a relatively low rate Let's say their fee happens to be somewhere between .20 and .80 per r/t per contract (futures)because all in all they do x amount of volume (everyone combined).
By the same concept (economies of scale), they are able to pay relatively lower fees for virtually every trading expense (with the exception of rent) . So for example, while the lone trader pays 900.00 per month for CQG charts, firm A's expense might be 400.00 per seat because they happen to have a 20-seat package, and got a nice discount. The same concept applies to order entry platforms, news services, squawks, etc. The trouble is, sometimes these lower rates are not passed on to the trader.
Now, their percieved value added to the newbie, as the OP suggested, might be the fact that there is 0% capital contribution required and you get to trade their money, get trained, and better yet keep 50% of what you earn in the markets with it. Sounds great, assuming you can make money in the markets.
Here's the difference between a shiesty operation (the shops you here about on this forum with all the turnover), and the LEGIT pro-firms, or "trading arcades" as I've heard them referred to as on here...
Firm A might have built profit into their "desk fee" albeit only a couple hundred dollars, while Firm B may pass all of their low and actual costs on to the trader.
Firm A's PRIMARY OBJECTIVE is for you to make enough in profit from the market with the rope they hand you to cover the cost they will likely charge you in overhead, as a "desk fee". Unfortonunately, and unethically, they might explain the desk fee to be their ACTUAL costs, and insist that they are making nothing in profit from the charges you incur as a trader (front-end, charts, news, commissions, etc...).
Whats better is if the trader can be net profitable in the market AFTER the desk fees. Everything else is just icing on the cake (they're entitled to 50% of your profit or whatever the split is agreed to be)
In closing, I'll say that yes, there are honest and ethical firms out there that pass on their low costs directly to the trader, but there are probably far more Firm A's out there than Firm B's, as it applies to this niche of "proprietary trading".
I challenge any shiester in a "trading manager/mentor/coach/recruiter" role at such a firm to refute the above comments...
I'm sure someone in such a role will feel compelled to defend his/her firm on here and we'll probably hear comments like "not true... we are highly selective with out trainees and teach them our profitable system, we make all of our money as a firm from the profit we take from the market...we only make money on the split of profits our traders make, etc, etc..."
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