High leverage stock broker?

Limited Partners. When you join a JBO(Joint Back Office) , Prop firm, you become a limited partner of a broker dealer, where your capital is at risk to the entire firm, but you participate based on your earning only, with no SIPC protection.
 
So, would it be appropriate to join that LP as an LLC than a sole entity?

I assume there are protections set in place that limits loss to the capital that you brought in.
 
You are generally limited to your deposit unless you sign a person guarantee, which would not be typical. I'm not sure if they will allow a entity as a member. You have to register with them and U4.
 
rmorse said:
You are generally limited to your deposit unless you sign a person guarantee, which would not be typical. I'm not sure if they will allow a entity as a member. You have to register with them and U4.
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So if the risk is 100% on me, does that mean that the profits are 100% mine
and the firm just acts like a broker for me?
 
NO! These are not customer accounts. You will not be their customer. When you join a prop firm of this kind, you are a member of a broker dealer and your capital joins with their capital. When this happens, the SEC requires your capital stay in the firm for at least 1 year. They give you an account to trade in, to monitor P & L. However, you are trading firm capital with your money as first loss. They make most of their money by charging a higher commission that the Prime Broker charges them. They receive a percentage of your profits too for providing leverage. Typical your split is 80% to 99%. They mostly care about volume, as that is where they make most of their money. Some firms charge for training too.
 
rg12,

Check out this PDF. I wrote this a few years ago. It compares institutional accounts using portfolio margin vs Prop firms.

Bob
 

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rmorse said:
NO! These are not customer accounts. You will not be their customer. When you join a prop firm of this kind, you are a member of a broker dealer and your capital joins with their capital. When this happens, the SEC requires your capital stay in the firm for at least 1 year. They give you an account to trade in, to monitor P & L. However, you are trading firm capital with your money as first loss. They make most of their money by charging a higher commission that the Prime Broker charges them. They receive a percentage of your profits too for providing leverage. Typical your split is 80% to 99%. They mostly care about volume, as that is where they make most of their money. Some firms charge for training too.
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So if they run into financial problems you could go down with them? IE : Refco FX.



:)
 
OTM-Options said:
So if they run into financial problems you could go down with them? IE : Refco FX.



:)
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Most of these JBO/prop firms focus on equity day traders. Some allow options but that requires more capital and has more risk. I'm not familiar with ones that trade futures or FX, as you can get a lot of leverage in futures and FX with small accounts, but you can't get that with equity smalls accounts.

However the answer is YES, your capital is at risk from other traders at the firm, the firm itself and the clearing broker and you are NOT afforded SIPC protection.
 
rg12,

BTW, these are USA regulatory rules. I have no idea how foreign prop firms like this are regulated when operated outside the US.
 
rmorse said:
rg12,

BTW, these are USA regulatory rules. I have no idea how foreign prop firms like this are regulated when operated outside the US.
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So that means I can't trade remotely from Europe or Asia for a US based firm?

About the 365 day capital lock up, Is there a way i can withdraw money or get some
kind of a pay check from the firm during that 365 day period?
 
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