Lynx Capital Partners
- Thread starter gibrahim
- Start date
I don't think it would be proper to do that, but the point is that we give all of our traders a copy of our balance sheets every year....and those not trading with us, can get a copy in the office. I'm pretty sure I showed you when you were in Vegas....
Don
From a legal entity standpoint, there's no such things as "sub LLC". LLC is simply Limited Liability Company formed by an Article of Organization and an Operating Agreement by the partners which can be either members or managers. Forming an LLC means you are forming a company to do business, the only thing that are positive or negative is whether the LLC has enough capital to fund its operation, are their management experienced, and whether they have certain insurance and licensing to protect its members (such as being a NASD member, FDIC/SPIC insured, etc...) So whether or not it's a sub-LLC or a regular LLC in regards to the way it's being interpreted in this forum, it's irrelevant unless you can have an auditor to check the company's book and background to see if they meet certain conditions that satisfy the trader's expectation.
We've discussed this quite a bit in the past. What happens is this: Say Company A has an LLC, but not too much "owners" capital, so they cannot afford to expand and open new offices. They find another group "B" who aligns with "A" for clearing etc. The "owners" of "B" put up a small amount of capital themselves, and then ask traders to fund their accounts...thus giving the appearance of solvency to "B". When a couple of traders in "B" lose money, thus affecting the continuing operations of "B" ..."B" goes bankrupt, or simply dissolves....and "A" can simply turn their back on the traders, leases, equipment, and all the rest. There have been numerous examples in the last couple of years.
If you think about it, it's sort of like 'multi-level marketing" where the people at the top have all the advantages, with all the risk going to the people at the bottom (traders in this example).
I'm sure that there are viable "sub - LLc's" ...but you need to double and triple check the overall financial solvency of the firms, and their alignment with one another. Kind of like having your money in 1 bank, and you thought it was part of Bank America or something, but it turns out it is "Joe's bank of america"....and Joe goes bankrupt. Just be careful, as in all things...do the due diligence.
(This is in no way a comment on Lynx, or any other specific entity, just a general concern)
Don
the important thing is that the traders in "B" who lose money, lose only their own money, not the firm's.
beyond that, the firm "B" only needs to be able to cover its expenses to stay in business....given the lucrative returns commission charges yield, and that "B" is unlikely to have gone into business in the first place unless it had some traders lined up, it is unlikely that "B" wouldn't be able to cover its expenses..
Valid to a point. Many traders who "blow up" actually lose some or all of the firm's capital....and that is where it can get risky. Remember, the trader has a "limited" liability, but the other traders are on the hook for the additional losses.
Regarding the "lucrative returns"...this is where it doesn't make much sense. If firm "A" charges "B" xxx, and then "B" charges traders xxx+.25cents, then why wouldn't Firm "A" simply run the operation themselves, keeping the additional profits and becoming a more viable, solid entity. The "layering" of liability ("bamboo curtain") seems suspicious at times.
Most "franchise" operations have had problems in the past, and there are very few left that I know of.
Again, this isn't to say that on a case by case basis, solid and substantial individuals cannot make something along these lines work. I'm speaking in general terms, not any specific group.
(Again, I'm in no way targeting Lynx, as I don't know much about them at this point....they may have a fine group, I'm just speaking to the general concepts).
All the best....
Don
Originally posted by Don Bright
That's where the firm's risk management and assessment of potential traders comes into play. There's no reason to assume that a trader will 'blow up' and take everyone with him. Such possibilities certainly exist, but they can be planned for so that the likelihood of such an occurance is greatly diminished.
Nothing really suspicious about it. Doing the 'sub' thing is just easier. There's less hoops to jump through to set the operation up.
From what i've seen most of these 'sub' groups are set up by actual traders, who would've been trading anyway, and just form the sub llc to get a better deal for themselves and traders that will trade with them. From what i've seen, 'raking it in' from commissions isn't the primary goal. Still, .25 cents - and i'm pretty sure they get better than that - is still quite substantial. (you oughta know that!
)
That's where the firm's risk management and assessment of potential traders comes into play. There's no reason to assume that a trader will 'blow up' and take everyone with him. Such possibilities certainly exist, but they can be planned for so that the likelihood of such an occurance is greatly diminished.
Nothing really suspicious about it. Doing the 'sub' thing is just easier. There's less hoops to jump through to set the operation up.
From what i've seen most of these 'sub' groups are set up by actual traders, who would've been trading anyway, and just form the sub llc to get a better deal for themselves and traders that will trade with them. From what i've seen, 'raking it in' from commissions isn't the primary goal. Still, .25 cents - and i'm pretty sure they get better than that - is still quite substantial. (you oughta know that!
)