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Prop firm deposits.
- Thread starter DEM BONES
- Start date
If your deposit is large even and you are willing to take a little less leverage what you could do is ask them to open a sub account with their Clearing firm, then your deposit will be SIPC insured. I had this offered to me the other day problem was I needed at least 10-1 if not 20-1 so it didnt work for me
Pick a reputable firm. Many firms are running into capital issues and enforce the 1-year lockup. Other firms that are very well capitalized and have traditionally waived the 1-year lockup would be better to look at.
As with anything else - just because a firm WAS well capitalized does nto mean they always will be. You really need to understand how well capitalized the firm is and have a good feel for their trader base.
The 1-year lockup is designed to keep the firm/your deposit safe. It exists essentially to prevent a run on the firm's deposits. It allows the firm time to go out and seek new capital rather than fold under pressure from withdrawals, etc.
As with anything else - just because a firm WAS well capitalized does nto mean they always will be. You really need to understand how well capitalized the firm is and have a good feel for their trader base.
The 1-year lockup is designed to keep the firm/your deposit safe. It exists essentially to prevent a run on the firm's deposits. It allows the firm time to go out and seek new capital rather than fold under pressure from withdrawals, etc.
Quote from DEM BONES:
I want to join a prop firm but am concerned with getting the deposit back if the firm should run into trouble.Any creative ideas on how to negotiate with a firm to ensure the deposit is returned?
You can ask a CBSX firm if they are willing to show you their latest balance sheet as a "creative idea" to help you make a decision before giving them your capital contribution.
CBSX firms maintain a one-year lock up as per SEC rules, and from my understanding this is the norm and no way around it. Your deposit (not really considered a deposit, but rather "firm capital") is subject to how the firm manages its finances.
Quote from trader1523:
If your deposit is large even and you are willing to take a little less leverage what you could do is ask them to open a sub account with their Clearing firm, then your deposit will be SIPC insured. I had this offered to me the other day problem was I needed at least 10-1 if not 20-1 so it didnt work for me
What kind of leverage was offered if you don't mind?
Quote from ScalperJoe:
You can ask a CBSX firm if they are willing to show you their latest balance sheet as a "creative idea" to help you make a decision before giving them your capital contribution.
CBSX firms maintain a one-year lock up as per SEC rules, and from my understanding this is the norm and no way around it. Your deposit (not really considered a deposit, but rather "firm capital") is subject to how the firm manages its finances.
Any idea what SEC rule requires CBSX BDs to place a one-year lock up on capital contributions / risk deposits?
ProTrendQuest quote:
"Any idea what SEC rule requires CBSX BDs to place a one-year lock up on capital contributions / risk deposits?"
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That's a great question. There was a post by "cstfx" on another thread regarding this rule and it seems to correspond with rule SEC 15c3.
However, 15c3 has several sub-sections, and deals with net capital requirements of broker-dealers.
I believe it's regarding how a broker-dealer treats the incoming capital contributions. Perhaps it's to prevent a "run on the bank" type of exodus by traders, however I really don't know how they get the "one year" figure, as it's not concrete within 15c3 from my reading of the section.
If someone with knowledge regarding this rule can add to the post then it would help answer the question.
"Any idea what SEC rule requires CBSX BDs to place a one-year lock up on capital contributions / risk deposits?"
____________________________________________________
That's a great question. There was a post by "cstfx" on another thread regarding this rule and it seems to correspond with rule SEC 15c3.
However, 15c3 has several sub-sections, and deals with net capital requirements of broker-dealers.
I believe it's regarding how a broker-dealer treats the incoming capital contributions. Perhaps it's to prevent a "run on the bank" type of exodus by traders, however I really don't know how they get the "one year" figure, as it's not concrete within 15c3 from my reading of the section.
If someone with knowledge regarding this rule can add to the post then it would help answer the question.