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Prop firms in London
- Thread starter Maverick74
- Start date
Couple of points.
There are every few places in London or the surrounds that really cater for fx traders. I believe you have a misconception here. Most of the prop shops or arcades cater for futures traders.
As to the tax question - most traders in the UK who are full time would trade via a company structure rather than in their own name. This is not only for reasons of limited liability but also a company in the UK only pays 19% tax on the first £300k whereas an individual pays 40% tax above £30k. Plus a company allows you to offset more costs against revenue.
There are every few places in London or the surrounds that really cater for fx traders. I believe you have a misconception here. Most of the prop shops or arcades cater for futures traders.
As to the tax question - most traders in the UK who are full time would trade via a company structure rather than in their own name. This is not only for reasons of limited liability but also a company in the UK only pays 19% tax on the first £300k whereas an individual pays 40% tax above £30k. Plus a company allows you to offset more costs against revenue.
Quote from Lon Eagle:
Couple of points.
There are every few places in London or the surrounds that really cater for fx traders. I believe you have a misconception here. Most of the prop shops or arcades cater for futures traders.
As to the tax question - most traders in the UK who are full time would trade via a company structure rather than in their own name. This is not only for reasons of limited liability but also a company in the UK only pays 19% tax on the first £300k whereas an individual pays 40% tax above £30k. Plus a company allows you to offset more costs against revenue.
Thanks for the info. I have another question for you regarding taxes. If we set up remote traders in London, I was told they would need to get a US tax ID number. Would that mean they are liable for both US and UK taxes? The only way around this I hear is if I set up an entity myself that is domiciled in the UK and then they trade out of that entity which would be a member of the JBO here in the US.
Quote from Maverick74:
Thanks for the info. I have another question for you regarding taxes. If we set up remote traders in London, I was told they would need to get a US tax ID number. Would that mean they are liable for both US and UK taxes? The only way around this I hear is if I set up an entity myself that is domiciled in the UK and then they trade out of that entity which would be a member of the JBO here in the US.
I don't know the answer as have never come across this issue.
However I can't help but feel the advice you have been given is wrong. If someone is a UK resident, a UK national, and works here I fail to see why they need anything like a US tax number or be liable for any US taxation.
(Whenever I have traded vis a US based operation I have always signed a form that ensures I do not pay US tax on my profits).
You can rest assured that there are many many JBO's and L.L.Câs who are doing the exact same model as the firm you're associated with is doing. Just gotta ask around to find them.
The reason they don't appear to be ubiquitous to you or others is that most managing members keep it under their hat as not to attract the rabble..(i.e. the internet crowd.) No mass marketing....due to the inherent pooled risk and the cost assocaited with mitigating that risk. I personally know of at least 12-15 groups who do this in the U.S. alone. None of them have more than 5-15 alternative members.
Pooled risk sucks. Most promoters realize this ...yet few class B or C or D members do. Itâs all fun and games until someone loses an eye.
Plus, the model won't scale with anything but tini-tiny accounts(less than 500K).
Any successful member is going to opt out ASAP to go it alone with his own Clearing Deal or with someone like GSCE or another clearing firm who does deals like yours (with better technology) all day long. Or theyâll demand an entirely new JBO (non-pooled risk) entity be formed to segregate their and their coustomer's risk.
But you know all of this...and you know that I know all of this.
Seriously though....Best of Luck Regardless.
BTW: Contracts for Differences is the tax-free vehicle of choice in the U.K. Additionally, Stamp duty is a tough hurdle in attracting warm bodies in the U.K. This is why London has the biggest OTC market on the planet and they welcome smaller accounts.
The reason they don't appear to be ubiquitous to you or others is that most managing members keep it under their hat as not to attract the rabble..(i.e. the internet crowd.) No mass marketing....due to the inherent pooled risk and the cost assocaited with mitigating that risk. I personally know of at least 12-15 groups who do this in the U.S. alone. None of them have more than 5-15 alternative members.
Pooled risk sucks. Most promoters realize this ...yet few class B or C or D members do. Itâs all fun and games until someone loses an eye.
Plus, the model won't scale with anything but tini-tiny accounts(less than 500K).
Any successful member is going to opt out ASAP to go it alone with his own Clearing Deal or with someone like GSCE or another clearing firm who does deals like yours (with better technology) all day long. Or theyâll demand an entirely new JBO (non-pooled risk) entity be formed to segregate their and their coustomer's risk.
But you know all of this...and you know that I know all of this.
Seriously though....Best of Luck Regardless.
BTW: Contracts for Differences is the tax-free vehicle of choice in the U.K. Additionally, Stamp duty is a tough hurdle in attracting warm bodies in the U.K. This is why London has the biggest OTC market on the planet and they welcome smaller accounts.
Quote from Maverick74:
I really don't think anyone in London is doing what we are doing only because there is really no one in the US that is doing what we are doing. Trust me, I have looked far and wide. I have worked in New York and Chicago and have been involved with 4 prop firms and have traded on the floor of the exchanges. I know a lot of people in this business on the east and west coast and the midwest. It is my opinion that firms simply do not want to take the risk associated with this and would prefer to go after the quick buck that scalpers and daytraders indulge them with.
Quote from Lon Eagle:
I don't know the answer as have never come across this issue.
However I can't help but feel the advice you have been given is wrong. If someone is a UK resident, a UK national, and works here I fail to see why they need anything like a US tax number or be liable for any US taxation.
(Whenever I have traded vis a US based operation I have always signed a form that ensures I do not pay US tax on my profits).
Do you know what the form is? Is it a UK government form or a form that the US company provided? From what I understand, if the entity that you are trading out of, is based in the US, then you need to have a tax ID number. I have heard this from several people but it's possible they could be wrong.
See, there is a difference if you are trading with a US firm that is actually registered in the UK I believe. But if you have a US firm that simply has an office there, I think you need a US tax ID number because your income is K1 income from the firm. I will look into this more. Thanks for your help.
Quote from Dr. Zhivodka:
You can rest assured that there are many many JBO's and L.L.Câs who are doing the exact same model as the firm you're associated with is doing. Just gotta ask around to find them.
The reason they don't appear to be ubiquitous to you or others is that most managing members keep it under their hat as not to attract the rabble..(i.e. the internet crowd.) No mass marketing....due to the inherent pooled risk and the cost associated with mitigating that risk. I personally know of at least 12-15 groups who do this in the U.S. alone. None of them have more than 5-15 alternative members.
Pooled risk sucks. Most promoters realize this ...yet few class B or C or D members do. Itâs all fun and games until someone loses an eye.
Plus, the model won't scale with anything but tini-tiny accounts(less than 500K).
Any successful member is going to opt out ASAP to go it alone with his own Clearing Deal or with someone like GSCE or another clearing firm who does deals like yours (with better technology) all day long. Or theyâll demand an entirely new JBO (non-pooled risk) entity be formed to segregate their and their customer's risk.
But you know all of this...and you know that I know all of this.
Seriously though....Best of Luck Regardless.
BTW: Contracts for Differences is the tax-free vehicle of choice in the U.K. Additionally, Stamp duty is a tough hurdle in attracting warm bodies in the U.K. This is why London has the biggest OTC market on the planet and they welcome smaller accounts.
Yes Todd, I'm aware of this, thanks. I have been in this business awhile too, thanks.
And no, there really are not a lot of firms doing this. There are a lot of individuals doing this, big big difference.
Anyone on ET with enough capital can go straight to a clearing firm, such as Goldman or Merril and set up a JBO. That's like saying the sky is blue. You are stating the obvious.
And that is not true that any successful member will opt out and start his own JBO. Some do and many others simply don't want to deal with the BS of actually running their own JBO. It's not like running a web site. It's a little more difficult.
I appreciate your feedback here Todd, but I'm afraid it's a little off the mark. BTW, your talking to a guy that spent a lot of time at the CBOE and CBOT and I know all about pooled risk capital and small groups.
Quote from Maverick74:
Do you know what the form is? Is it a UK government form or a form that the US company provided? From what I understand, if the entity that you are trading out of, is based in the US, then you need to have a tax ID number. I have heard this from several people but it's possible they could be wrong.
See, there is a difference if you are trading with a US firm that is actually registered in the UK I believe. But if you have a US firm that simply has an office there, I think you need a US tax ID number because your income is K1 income from the firm. I will look into this more. Thanks for your help.
To try and help.
If you work in the UK and are a UK resident then the nationality of the firm you work for is irrelevant, I am sure.
I think the form was a W-8BEN form. Where this has arisen is that when I have contacted a US firm based in the States and traded online via them. To ensure I am free of US taxes I have needed to complete the form saying I am a UK resident. The form is a US govt one - not a Uk one. I have certainly never been told a US tax ID number.