Professional or Non-Professional Subscriber for Exchange Data Fees

J

JSOP

Ok I am REALLY confused as to whether I would be considered as a professional or non-professional subscriber. Basically I am trading for myself only. I have NO CLIENTS; I am NOT advising anybody; I am NOT trading for anyone else but I am thinking of incorporating. I will still be trading through my current account that is in my personal name NOT in my new corporation's name and I am NOT registered with any SEC or CFTC or any associations or any regulatory bodies and will NOT be after I incorporate.

According to NYSE, AMEX and NASDAQ's Definition (taken from IB's website):

Professional/Non-Professional Subscriber Definitions


Professional – Any person that meets any of the following criteria:

  • Is registered or qualified with: the Securities and Exchange Commission, the Commodities Futures Trading Commission, any state securities agency, any securities exchange or association, or any commodities or futures contract market or association.
  • Is engaged as an "investment advisor" as that term is defined in Section 201(11) of the Investment Advisor's Act of 1940 (whether or not registered or qualified under that Act).
  • Is employed by a bank or another organization that is exempt from registration under Federal and/or state securities laws to perform functions that would require him or her to be so registered or qualified if he or she were to perform such functions for an organization not so exempt.
Non-Professional - is any natural person and cannot be a corporation, trust, organization, institution or partnership account.


So according to the above rules, I should be considered a non-professional subscriber.

But according to this from IB's KB 2369 which further elaborates the above rules states that:

  • If the user is accessing/using information in course of employment or in connection with any form of trade or business
and the Optionhouse Etrade's site:

You conduct trading for the benefit of a corporation, partnership, LLC, tax-exempt organization, trust or other entity.

What does this "any form of trade or business" mean? And "trading for the benefit of a corporation" mean? So according to these criteria, do they mean once I incorporate, I would no longer be considered a non-professional subscriber even I still trade solely for myself and in my own name only?

Any advice would help. Thanks.
 
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If your account is in your name and you are not a BD, RIA or CTA, you should be non-pro. If you switch to trade through any entity, you will have to claim Pro-MD. Yes, if your account is for the benefit of a corporation, you will pay more.

Bob
 
Simple, you answered your own question. You are considered non-professional. But you most likely cannot claim any special tax/trader status because you derive capital gains and income via your own person account and not the corporation account. In that it defeats the purpose and begs the question why you want to incorporate.

JSOP said:
Ok I am REALLY confused as to whether I would be considered as a professional or non-professional subscriber. Basically I am trading for myself only. I have NO CLIENTS; I am NOT advising anybody; I am NOT trading for anyone else but I am thinking of incorporating. I will still be trading through my current account that is in my personal name NOT in my new corporation's name and I am NOT registered with any SEC or CFTC or any associations or any regulatory bodies and will NOT be after I incorporate.

According to NYSE, AMEX and NASDAQ's Definition (taken from IB's website):

Professional/Non-Professional Subscriber Definitions


Professional – Any person that meets any of the following criteria:

  • Is registered or qualified with: the Securities and Exchange Commission, the Commodities Futures Trading Commission, any state securities agency, any securities exchange or association, or any commodities or futures contract market or association.
  • Is engaged as an "investment advisor" as that term is defined in Section 201(11) of the Investment Advisor's Act of 1940 (whether or not registered or qualified under that Act).
  • Is employed by a bank or another organization that is exempt from registration under Federal and/or state securities laws to perform functions that would require him or her to be so registered or qualified if he or she were to perform such functions for an organization not so exempt.
Non-Professional - is any natural person and cannot be a corporation, trust, organization, institution or partnership account.


So according to the above rules, I should be considered a non-professional subscriber.

But according to this from IB's KB 2369 which further elaborates the above rules states that:

  • If the user is accessing/using information in course of employment or in connection with any form of trade or business
and the Optionhouse Etrade's site:

You conduct trading for the benefit of a corporation, partnership, LLC, tax-exempt organization, trust or other entity.

What does this "any form of trade or business" mean? And "trading for the benefit of a corporation" mean? So according to these criteria, do they mean once I incorporate, I would no longer be considered a non-professional subscriber even I still trade solely for myself and in my own name only?

Any advice would help. Thanks.
More...
 
Zzzz1 said:
Simple, you answered your own question. You are considered non-professional. But you most likely cannot claim any special tax/trader status because you derive capital gains and income via your own person account and not the corporation account. In that it defeats the purpose and begs the question why you want to incorporate.
More...

Off the top of my head:
Limited liability
Ability to right off expenses
Ability to go back three years with losses
Pension plan
Health insurance

You can apply for MTM accounting with either a personal account or an LLC. Green suggests there are less audits with an entity and MTM. It is best to consult your tax attorney for any tax related items or questions.
 
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JSOP said:
Ok I am REALLY confused as to whether I would be considered as a professional or non-professional subscriber. Basically I am trading for myself only. I have NO CLIENTS; I am NOT advising anybody; I am NOT trading for anyone else but I am thinking of incorporating. I will still be trading through my current account that is in my personal name NOT in my new corporation's name and I am NOT registered with any SEC or CFTC or any associations or any regulatory bodies and will NOT be after I incorporate.

According to NYSE, AMEX and NASDAQ's Definition (taken from IB's website):

Professional/Non-Professional Subscriber Definitions


Professional – Any person that meets any of the following criteria:

  • Is registered or qualified with: the Securities and Exchange Commission, the Commodities Futures Trading Commission, any state securities agency, any securities exchange or association, or any commodities or futures contract market or association.
  • Is engaged as an "investment advisor" as that term is defined in Section 201(11) of the Investment Advisor's Act of 1940 (whether or not registered or qualified under that Act).
  • Is employed by a bank or another organization that is exempt from registration under Federal and/or state securities laws to perform functions that would require him or her to be so registered or qualified if he or she were to perform such functions for an organization not so exempt.
Non-Professional - is any natural person and cannot be a corporation, trust, organization, institution or partnership account.


So according to the above rules, I should be considered a non-professional subscriber.

But according to this from IB's KB 2369 which further elaborates the above rules states that:

  • If the user is accessing/using information in course of employment or in connection with any form of trade or business
and the Optionhouse Etrade's site:

You conduct trading for the benefit of a corporation, partnership, LLC, tax-exempt organization, trust or other entity.

What does this "any form of trade or business" mean? And "trading for the benefit of a corporation" mean? So according to these criteria, do they mean once I incorporate, I would no longer be considered a non-professional subscriber even I still trade solely for myself and in my own name only?

Any advice would help. Thanks.
More...

I've read as much as I can about this topic, reading everything at IB's website and everything I could find about it on NYSE, AMEX, NASDAQ websites. IB's website seems to summarize the distinctions whereas the exchange websites go into more detail. And still, there is one grey area that never seemed crystal clear to me:

If you are an individual trader and you trade under your own name and you want to file for mark-to-market status, then you must have trader tax status. When you have trader tax status, you can write off business expenses on Schedule C and (assuming you have not incorporated) you are naturally considered to be a sole proprietorship. The question is, does a sole proprietorship qualify as a "professional" in terms of these data fees?

The last time I did this analysis, after I read IB's website I came to the conclusion that a sole proprietor is a professional in terms of these data fees. However, when I read further at the exchange websites, it seemed like a sole proprietor was a non-professional in terms of these data fees.

What is clear to me, is if you are an individual and you set up a business entity, then you have to pay the professional fees.

I guess the real question is whether a sole proprietorship is a business entity. I.e., does the fact that you can write off business expenses using Schedule C automatically mean you need to sign up for professional data fees?
 
sprstpd said:
If you are an individual trader and you trade under your own name and you want to file for mark-to-market status, then you must have trader tax status. When you have trader tax status, you can write off business expenses on Schedule C and (assuming you have not incorporated) you are naturally considered to be a sole proprietorship. The question is, does a sole proprietorship qualify as a "professional" in terms of these data fees?
More...

I have seen no reference at all to tax status with regard to pro-vs non-pro. In fact, a sole member LLC is a disregarded entity to the IRS. You don't require a K1. Since the exchanges want to charge all entities more, the tax status is not referenced. If it were, a sole member LLC would be like an individual account and would receive an exemption.
 
@JSOP

Look, its not that difficult ! I have no idea why you are so confused.

Its a simple two step process.

(1) Do you fall into one of the primary categories, i.e. from your post :

  • Is registered or qualified with: the Securities and Exchange Commission, the Commodities Futures Trading Commission, any state securities agency, any securities exchange or association, or any commodities or futures contract market or association.
  • Is engaged as an "investment advisor" as that term is defined in Section 201(11) of the Investment Advisor's Act of 1940 (whether or not registered or qualified under that Act).
  • Is employed by a bank or another organization that is exempt from registration under Federal and/or state securities laws to perform functions that would require him or her to be so registered or qualified if he or she were to perform such functions for an organization not so exempt.
(2) Answered "no,no,no" to the above ? Then do you fall-into the "catch-all" clause ? From your post :

Non-Professional - is any natural person and cannot be a corporation, trust, organization, institution or partnership account.

In summary, its simple:
- If you are a natural person involved in the financial sector then you are a "professional".
- If you are not a natural person, then you are a "professional".

"you" being the entity holding the account and who will be paying the bills, and "natural person" means what it says on the tin.

A "sole proprietorship" is not a "natural person" is it !

Ignore the term "professional" and just READ THE TEXT ! :cool:
 
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Robert Morse said:
I have seen no reference at all to tax status with regard to pro-vs non-pro. In fact, a sole member LLC is a disregarded entity to the IRS. You don't require a K1. Since the exchanges want to charge all entities more, the tax status is not referenced. If it were, a sole member LLC would be like an individual account and would receive an exemption.
More...

Just to clarify, you mean that a sole proprietor is a non-professional but a sole member LLC is a professional?
 
Tim Smith said:
@JSOP
In summary, its simple:
- If you are a natural person involved in the financial sector then you are a "professional".
- If you are not a natural person, then you are a "professional".
More...

One of these should be "non-professional", right? I'm assuming the first one.
 
Yes, mtm status can be claimed as individual if one qualifies. But I was referring to many of the tax advantages, limited liability, and other benefits one enjoys when running trading under an incorporated umbrella. The status of being professional then and associated cost may sometimes be miniscule in contrast to the perceived benefits. But in any case is OP considered a non-professional according to his circumstances he described and in the context of exchange agreements and broker accounts.



Robert Morse said:
Off the top of my head:
Limited liability
Ability to right off expenses
Ability to go back three years with losses
Pension plan
Health insurance

You can apply for MTM accounting with either a personal account or an LLC. Green suggests there are less audits with an entity and MTM.
More...
 
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