former Tuco traders

[kinggyppo]

Quote from NazSpaz:

Not sure if you were around in '99, but I was, and I remember when they passed the Series 7 rule. At the time everyone and their mother started daytrading, I mean some serious losers, and thousands of people that had no clue of what they were doing were walking into firms that gave leverage (there were a ton of them back then) and smoking their whole savings/retirement in weeks.

Most firms were not doing any due diligence at all on the people they would let trade, and it was causing a major risk to stupid people's money. And as we know of the government, they always step in when stupid people lose money, such as all the subprime idiots buying mansions that our tax dollars are bailing out.

So they came in and said if you want leverage on your money, take this test: A - to prove you are not completely an idiot, and B - so you have to work for it a little to get 'professional' trader leverage. Prove that you are worthy of it and will jump a hoop to get it.

I am really glad they did it, the quality of the professional trader went way up after that and I think it did keep a lot of idiots out of the game that should never get in the game in the first place anyways.

Think back to '99, daytrading was all over the news, everyone was talking about it, quitting their jobs to try it, and most people getting smoked very quickly on it. And there were a lot of smaller/newer firms that were bankrupting and taking the account holders' funds with them. The Series 7 was the best fix they could come up with quickly to make trading somewhat exclusive again and I think it worked great.

I'll bet if Don chimes in on this he'll agree that it really only keeps out the riff-raff and the general quality of the traders now is higher since that rule was enacted.

It kills me how some people think having to take that test is the worst thing in the world, it's really quite an easy test if you read the book. And you learn some great things along the way.

LOL. Good post. When grandma is daytrading the bubble is complete.

 

[TM_Direct]

Quote from listedguru:

TM Direct,

You mention several more rules coming down the pike? Can you tell us what might be in store? Are they going to take away leverage from the series 7 guys? Will only the 'retail' guys be left? I'd like to know (as well as many others)...

-Guru

Hedge Funds will be regulated by FINRA within a year...so all these guys who have 5-10 million sitting in an account being traded by unlicensed traderr...they will have to either a) align with a FINRA firm or b) become registered

 

[ratboy88]

interesting TM.. thanks.

 

[5Pillars]

Quote from TM_Direct:

Hedge Funds will be regulated by FINRA within a year...so all these guys who have 5-10 million sitting in an account being traded by unlicensed traderr...they will have to either a) align with a FINRA firm or b) become registered

As the global financial grid tightens I am not surprised by this at all - was only a matter of time.

 

[ratboy88]

Quote from 5Pillars:

As the global financial grid tightens I am not surprised by this at all - was only a matter of time.

LOL.... i was thinking the same exact thing. they caused all the problems and now they are going to protect us by strangling the industry more. LMAO

 

[TM_Direct]

Quote from 5Pillars:

As the global financial grid tightens I am not surprised by this at all - was only a matter of time.

Has nothng to do with that....You think that GS and Merrill and the other players on wall st like the idea that so much money is flowing outside their hands???

FINRA is a tool the largest companies on the street use to either restrict or eliminate competition

 

[ratboy88]

Quote from TM_Direct:

Has nothng to do with that....You think that GS and Merrill and the other players on wall st like the idea that so much money is flowing outside their hands???

FINRA is a tool the largest companies on the street use to either restrict or eliminate competition

isn't GS one of these largest companies that use finra as a tool?

 

[zdreg]

Quote from NazSpaz:

Bright is a REGISTERED broker/dealer, Tuco was not. It's really that simple.

There are laws in this country that if you want to handle/invest the public's money you have to tell the SEC you exist and open your books for random inspection to make sure you are not a ponzi or some other scheme.

Tuco did not register with the SEC but was buying and selling securities. Bright and the others like them register, and have their books examined twice a year by exchange auditors to make sure there is no funny business.

Do you seriously want your money with ANY firm that flaunts the rules by not registering, and could walk away with your funds at any minute because they feel like using them to retire on a beach? Or do you want your funds at a REGISTERED and highly scrutinized firm where you know the people running the firm have had in depth background checks (to join the exchange), are operating legally, have plenty of capital to handle the trading they are doing, and at random times during the year hardcore auditors keep making sure that remains so.

To me the extra $500 a year and piddly test BS are well worth the tons of security that provides. I pay waaay more each year just for insurance on my car and I feel that is nothing compared to the insurance a registered firm provides.

.
"There are laws in this country that if you want to handle/invest the public's money you have to tell the SEC you exist and open your books for random inspection to make sure you are not a ponzi or some other scheme."

not true.
under your definition every hedge fund would be subject to sec inspection.

tuco was acting like a broker because it was charging its members commissions.
only broker dealers are allowed to charge commissions.
the sec concluded they were acting as an unregistered broker dealer.

tuco also performed other actions which
made them look like they were broker dealers which would subject them to registration.

 

[NazSpaz]

Quote from TM_Direct:

Not sure what your point is here...For starters...there is no requiement for two audits a year...In fact, due to lack of regulators, some small firms are on a 3 year schedule....The SEC usually visits a large firm every three years...a small one???? some times NEVER...The series 7 has nothing to do with how a firm's money is being handled...quite frankley...the series 7 only allows the INDIVIDUAL rep. to solicit and sell securities to public customers...A series 7 only rep can;t even work on a market making desk ( he needs 55 as well)

The SEC is not the one doing the audits, it is the regulatory department of the exchange the firm is registered with. The firm as well as their clearing firm has to report any capital deficiencies daily, the firm must file their books with the exchange auditors monthly, each year they are required to have an independant auditor audit the firm's books and file their findings with the exchange, and the exchange regulators do two audits of the firm each year, one announced and one unannounced. The SEC only gets involved when the exchange finds a problem.

An unregistered firm has no audits, no audited financials, no regulatory oversight, no capital requirements, no one knowing where all the money is except the guys at the top of the firm. How is this as secure as a registered firm? It's not, plain and simple.

And for all the protection I pay $500 a year to the exchange for a membership. To me that's a great freakin deal.

Quote from TM_Direct:

Lastly, Some of the worst , lying, robbing, cheating and scum sucking firms on the street were filled with Series 7 brokers who were total scum....a few that come to mind:
Baron Chase, S. Richmond Securities, Ar Baron, 'Blinder and Robber'son", and the list goes on.

They have to let all these guys open a business, they all became criminals after they were up and running and got greedy. But the reason we know about them is they got caught, if they were unregistered they would have done the same things or worse but would probably be on a beach instead of prison. Don't see how this supports your argument that unregistered and unregulated is better.

 

[TM_Direct]

Quote from ratboy88:

isn't GS one of these largest companies that use finra as a tool?

Thats what I said...No rule on Wall st. gets passed without their approval..and they often get finra to pass rules to eliminate small frims..