Prop & Series 7

smbcapital · Jul 25, 2006

It is unnecessary to have a Series 7 to be a member of an LLC and trade your own subaccount. A lot of firms require a series 7 because it is easier/cheaper for the firm to obtain intraday leverage for a licensed trader. LLC's that have deep pockets don't require traders' to have licenses because they have sufficient capital to provide the necessary buying power for their traders.

Surdo · Jul 25, 2006

What do deep pockets and the law have to do with one another?
If you are trading OPM you need a license period.
If it is your money then there is no need for a license.

Why do people make this shit up?

Don Bright · Jul 26, 2006

Quote from smbcapital:

It is unnecessary to have a Series 7 to be a member of an LLC and trade your own subaccount. A lot of firms require a series 7 because it is easier/cheaper for the firm to obtain intraday leverage for a licensed trader. LLC's that have deep pockets don't require traders' to have licenses because they have sufficient capital to provide the necessary buying power for their traders.

This is not exactly true either (I'm not saying you're wrong, bear with me)...a Broker Dealer (exchange member or NASD member) has the requirement for the S7 to allow traders to use the Firm's capital. For example, we don't need our traders capital for our Net capital calculations (which determines how much $$ all our traders can use)...and yet the Exchange requires a S7 license.

Unregulated firms can simply have traders mingle capital with some of the firm's and have the traders sign waivers, and then give a POA or similar allowing to enter trades.

As with most business ventures, some of these firms are fine, and some deserve some scrutiny. As always, due diligence is obviously more important with the non regulated firms (since there is no recourse to a governing body).

(This is no reflection on SMB, since I haven't done my due diligence on them, I assume you're an exchange member).

Don

Murthyy · Aug 2, 2006

Can I carry forword the K1 losses to next year as investment losses?
Can I adjust my previous investment losses against the K1 income?

trader1966 · Aug 2, 2006

Surdo are you an idiot or what ? You don't need a Series 7 to trade Other Peoples Money. Do you actually think Hedge or Fund Managers and their traders are NASD regulated. Get a clue before you post.

shorty_mcshort · Mar 22, 2008

Quote from optioncoach:

You guys need to do just a tad of research on your own . A K-1 is a tax form, not a trading specific thing.

A k-1 is just a tax form for income from partnerships or other pass through entities like an LLC. Your trading income as a member of the LLC is filed as a pass through to you and you include it in your personal income taxes.

This is my first year as a Prop trader with CyGroup and I just received my K-1. My question is do also have to break out my trades on a sched D along with entering the K-1? Should I do one over the other or both?

Thanks
Eric

wenzi · Mar 22, 2008

Quote from trader1966:

Surdo are you an idiot or what ? You don't need a Series 7 to trade Other Peoples Money. Do you actually think Hedge or Fund Managers and their traders are NASD regulated. Get a clue before you post.

They may not have a series 7 but a lot are registered as RIA's with FINRA depending on the state they are in.

It depends on how you are compensated and who is the 'client'

Diego11 · Mar 22, 2008

Quote from Don Bright:

Back in 1998, when all the SOES bandits and other questionable practices and firms were all around, and people were shooting at one another and "day trading" was a new thing (LOL, day trading has been going on for 200 years)....the regulators were concerned, and were closing down shops right and left. There was talk on Capitol hill about classifying exchange member firms trader's as customers, which would have left a couple of thousand families without a way to make a living. We, and other professional firms, lobbied hard to keep our exchange status for our traders.

The regulators agreed to do so, but they needed a way to distinguish between retail and pro, so they came up witha S7 license...we were happy to comply so that our traders could continue to have all the benefits available to exchange members.

That's pretty much it.

Don

Bravo, Well Said

Diego11 · Mar 22, 2008

Quote from shorty_mcshort:

This is my first year as a Prop trader with CyGroup and I just received my K-1. My question is do also have to break out my trades on a sched D along with entering the K-1? Should I do one over the other or both?

Thanks
Eric

What has been your experience?

shorty_mcshort · Mar 24, 2008

Quote from Diego11:

What has been your experience?

They are pretty good to respond to your questions pretty fast and overall I thought they were good. Just don't expect much support on trying to figure out Laser. (not that I expected alot of help)

Overall good.