Looking to trade professionally, directly with the banks

Quote from bundlemaker:

If it's safety that's of chief concern, I understand that Canadian Forex accounts are protected by the government up to something like $200,000. Please do your due diligence, I'm just remembering off top of my head from another thread.

IB is different that other brokers due to their unique Universal account, where all unused funds are swept to an equities account which is covered by SIPC, but only up to SIPC limits, of course.
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What I read from the website of CIPF (Canadian's SIPC) is they protect securities, cash, commodities and futures contracts, and segregated insurance funds with an uplimit of C$1,000,000. I don't konw where the "$200,000" comes from and when CIPF begins to protect currency spot cotracts.

SIPC would compensate investor with a maximum amount of $500,000 (cash uplimit is $100,000) if his broker failed. SIPC's coverage includes cash and securities (stocks and bonds), but excludes commodity and futures contracts, currency contracts and other type of contracts which is not registered in SEC (refer to Securities Act of 1933).

There may be several types of assets in your IB accout, only cash and securities are protected. That's what I understand.
 
The problem with dealing with ODL or any other second tier prime broker is that you will be paying another level of fees (their fee plus the prime broker fee) as opposed to going to the prime broker (bank) directly.

I realize some people don't have the capital to open directly with a bank and have to go through a second tier broker, but this is a consideration when figuring out your all in cost.
 
When you open an account with the prime broker (bank) do you have to trade as a company or can you open an account and trade as an individual on independent means?
 
Banks opening prime brokerage lines are less willing to deal with individuals (in my experience) even with significant means behind them (2 million+) There are some
(RBS for one) who have been a little more lenient in this area in the past but I think even they are upping their requirements.

This is where the second tier prime brokers (ODL, FC Stone) come in. They will
allow you to trade under their prime brokerage agreement in exchange for a fee, but as I previously mentioned you are adding another layer of fees to the equation on top of the normal PB fees and any commissions your platform is charging.
 
There isn't much different trading as company or as individual. Unless the prime brokers mean the company has to have some form of exchange membership, in which case the prime broker will be redundant. Even a $2 company is easy to set up. Weird requirement by the prime brokers.
 
taboni:

In your experience, for a retail customer, is it more expensive (in terms of transaction and rollover costs) to deal through a second-tier prime broker like ODL than through an ECN like Hotspot?

Can you possibly provide some rough ballpark figures by way of illustration?

One can assume that the average monthly trading volume is decent, say USD 10 million, and that differences in interest rates on margin deposits are ignored for such comparison purposes.

Thanks!
 
First to answer a previous question, it doesn't so much matter that you can set up a $2 company, the fact is that when applying for a prime brokerage agreement with a bank, you are going to have to provide financials, open your books, show assets, etc for their credit department to decide to give you a credit line. Some (most) banks wouldn't want to speak with you if you are not an established trading company with sufficient capital. Some will, and the alternative is to go through a secondary shop (eg ODL) who has a much looser credit requirement.

As far as the question of costs to deal through a secondary PB, it is all subjective. Your fee is negotiable between yourselves and the PB so each case is different. Perhaps 2cents can elaborate since he is using them at the moment, but say RBS charges you a
PB fee of $10 for illustration purposes, ODL is going to tack on an other 3 or 4 bucks for themselves. On top of that you have the commission you have to pay to whatever platform you are accessing through the PB, so it adds another fee essentially for your lack of creditworthiness with the direct PB bank.
Also not to belittle anyone wwx, but 10 million a month is not decent volume when discussing this type of structure.
Think more in terms of 1 billion USD per month.
 
Point taken, taboni. I just recalled 2cents' similar comment about a second-tier PB expecting a customer to do at least a yard per month. :)
http://www.elitetrader.com/vb/showthread.php?s=&postid=1018844#post1018844

All things considered, is the trading platform and environment the main reason you prefer Hotspot retail over a secondary PB, with costs being only a peripheral issue?

Thanks again!

PS I've been using Hotspot's demo over the last few days. It's indeed rather different from IB and Oanda, especially as one can't have an open order and exit the program!
 
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