Prop firms-what questions to ask?

G

get even TT

Ok, trying to find a new firm, here's my list, let me know if I'm missing something?

Is your firm licensed?(I assume this would mean my funds are insured).
What are your commission rates?

Fees(software, exchanges, what other fees should I ask about?)

What is the payout percentage?

What is the leverage?

Is there a lockup of funds?

Min. deposit.

Does Bright, Echo or JC trading lock up your money for any time period, I read that JC locks it up for 1 yr? Is this your entire deposit or just part of it?
 
Quote from get even TT:

Is your firm licensed?(I assume this would mean my funds are insured).
More...

No prop firms insure your prop deposit. Not Bright, not Echo, not Assent.

SIPC insurance protection only applies to retail accounts.

Licensed firms are regulated, therefore there are better safeguards for your funds on deposit, but your fund with one of these firms is not insured. Been discussed at length before. Do a search.
 
(Easier to cut and paste from many responses over the years)

02-27-09 05:49 AM

The same questions have been asked many times over the years. Here are some suggestions from previous posts:



Before choosing any Firm, and putting your own money OR valuable time at risk, be sure to ask for this basic information:
1. Financial Statements (Don't ever go into business with anyone who won't share their balance sheets with you!).
2. Clearing Firm affiliations. Be sure that the Trading firm is aligned with solid Clearing Firm(s).
3. Exchange memberships. Be sure that your chosen Firm is a member of a Stock Exchange and has it's own Broker Dealer.

This is only common sense, and applies to any business, whether you are trading or not. Know who you are associated with!

We do not lock up your deposit.


FWIW,

Don
 
JC does have a lock-up on your deposit, not profits. However, they have a lower minimum initial deposit.

I can confirm that Echo does not have a lock up, but their rates were pretty high for Sterling.

Here is a thread about the lock-up and why some firms have them:

http://www.elitetrader.com/vb/showthread.php?s=&threadid=194344&perpage=6&pagenumber=1



Quote from get even TT:

Ok, trying to find a new firm, here's my list, let me know if I'm missing something?

Is your firm licensed?(I assume this would mean my funds are insured).
What are your commission rates?

Fees(software, exchanges, what other fees should I ask about?)

What is the payout percentage?

What is the leverage?

Is there a lockup of funds?

Min. deposit.

Does Bright, Echo or JC trading lock up your money for any time period, I read that JC locks it up for 1 yr? Is this your entire deposit or just part of it?
More...
 
Here's something I don't understand, if these firms are all regulated by SEC, why does some require a lock-up and some doesn't.

Also, Don, if these people are bad, how would u trust their financial statements?
 
Quote from get even TT:

Here's something I don't understand, if these firms are all regulated by SEC, why does some require a lock-up and some doesn't.

Also, Don, if these people are bad, how would u trust their financial statements?
More...

Answer:

Quote from Itrade2009:

It is an SEC rule...you can call them instead of calling people names....people really respect that!

When i called the SEC this is what they told me....I want to preface this by saying that I didn't fully understand all the SEC codes and regulations so if I butcher this I apologize.

Basically if a broker dealer books your money as "firm capital", it must stay in the firm for 12 months. When it becomes firm capital the BD can use the funds for additional buying power.

Again, please call the SEC yourself for an explanation if you don't like mine. They can give you the exact codes.
More...

http://www.elitetrader.com/vb/showthread.php?s=&postid=2777707#post2777707
 
read into the above referenced quote:

if a b/d uses your deposit as part of it's minimum capital requirements (which most of these CBSX firms do since their capital base is relatively small compared to a Bright or Echo) then the money has to stay with the broker for the lockup period to avoid the look of a retail depoisit. If the firm is well capitalized, then it shouldn't need your funds to book as firm capital. This is why some don't lock up your funds.
 
Quote from get even TT:

Here's something I don't understand, if these firms are all regulated by SEC, why does some require a lock-up and some doesn't.

Also, Don, if these people are bad, how would u trust their financial statements?
More...

I'm not saying anyone or any firm is "bad" - but as for financials, if they're audited, then they are as good as you can expect. As far as the lock-up I think it has something to do with whether the Firm needs to use their traders money to satisfy their net capital requirements.

Don
 
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