Prop Trading Firms - Note On Threatening Regulatory Developments

So.....as I switch firms, should I be concerned if my new firm requires the usual capital as a risk deposit? I am doing the paperwork now. I have been doing this for 7 years, and it hasn't been an issue.

I spoke with Bright last week, they required like a min 15K, some firms less, some more. My last firm, however, mentioned that very quickly they would want the account up to 25K, which is beginning to smell like retail or covering one's backside. No more withdrawing at a certain amount. That before was my protection against firm blow up. In other words, trade a 10K account, withdrawal everything upwards of 10. Firm gives you more leverage as a function of trading there for a while.


Now if I have to keep 25K in a prop accnt, I may as well trade retail with sipc protection. I can keep more $$$ in there with less firm risk. I could keep up to 100K and be covered. That gives me 400K buying power on retail which is enough for me.

Any thoughts?

So is anyone saying that a BRight, ASsent, Echo will now be requiring 25K...or NO capital...I am still unclear. Anyone?
 
Hopefully, the SEC/NASD will decide that the traders at REFCO are considered employees. That will set the precedent and we can move on. It's a risky business. We all know that. If its too hot in the kitchen...
 
The highest retail rate I have seen is $.005 per share as well. I currently pay .004. So the commish at retail joints isn't really much higher than prop. And the retail guys even come down with volume too.

I guess my question is, what will happen to the firms such as Bright, Assent Echo if the new ruling will prevent firms from taking trader deposits.
 
to the firms if SEC cracks down hard ? They will morph into a Schonfeld and ETg business model. This is what Bob Kanter of ETG has been railing about for years since 1992. ETG trained and paid their traders a draw, no deposit in return for expensive commish, desk fees but they took no deposits, same with Schonfeld as well.
 
Quote from MushinSeeker:

to the firms if SEC cracks down hard ? They will morph into a Schonfeld and ETg business model. This is what Bob Kanter of ETG has been railing about for years since 1992. ETG trained and paid their traders a draw, no deposit in return for expensive commish, desk fees but they took no deposits, same with Schonfeld as well.
More...

That's a shitty business model, pardon my french. Would you back that model with your money?
 
September 26, 2006
Dear trader,
NASD and SEC contacted us today and informed us that according to the SEC interpretation of prop trading, the way your trading is set up with XXXXXX does not qualify for prop trading.

What this means:
- Your deposit is subject to Regulation T (4:1 intraday 2:1 overnight Buying Power)

- Your deposit has to be segregated from firm capital

- Your deposit may be covered by SIPC since it is considered a customer account.

- There is no real benefit of being licensed since there are no privileges of trading a licensed account.

In order to trade prop the following conditions have to be met:
- Licensed S7 and S55

- No deposit/assurance bond/any capital of the trader can be with the firm. Trader needs to trade firm capital

- There has to be a sharing of profit between the firm and the trader.

Actions we are taking:
- we will tally up the account balance in your account in the next few days

- effective tomorrow, a considerable portion of your deposit will be returned to you

- effective tomorrow, your account will be set to comply with Reg T.

On a case-by-case basis we will have to determine which traders we wish to employ by XXXXXX for trading its prop account. In effect, we will have to bear the risk on any losses on these accounts and thus our qualification criteria will be rigid. This affects every prop trader at XXXXX

What can you do:
- Let us know, in written form please, if you wish to be considered for prop trading with XXXXX

- Opt to select to open a regular retail / customer account

- Request that we temporarily do not send back your funds and trade under Reg T margins until you can make a final decision.

We know these are big news and changes and we apologize for this inconvenience, but we have to follow SEC and NASD regulation. We were contacted today and we have to take immediate action.

If you have any further questions, please do not hesitate to contact us.

Thank you.
Cordially,
 
Quote from ang_99:

So why is the firm name a secret?
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The memo is legit. The source asked that I remove any reference to firm name. That's it. I have quite a few friends that trade prop, and I take no pleasure in seeing the SEC phuck with a trader's livelyhood.
 
Riskarb, post the name of the firm, please. It can't hurt them and can only lend credibility to this thread.

Second, this whole thread was started by a moderator quoting an accounting service. "Some" firms have been targeted. Then, if you read the article, then Robert Green throws this at you and asks if you have yet signed up for an hour of thier accountants time to look over your agreement. Hmmmmmm...............

Does this smell ? I have seen this Green character (firm) attempt to tell people that they can't read their own LLC
agreements, and can't do their own trader taxes. So perhaps this is round three of that with the endorsement by a moderator or the Green service, and the scare tactics I think I am smelling now. It's all conjecture so far, and so far none of it is substantiated by facts, as in names of firms.

Given the initial post, I think this whole thread should be viewed now with considerable skepticism.
 
Quote from Don Bright:

As in any business, those who choose to make profits, must risk something...we take the risk of anything lost over the basic token deposit money, while using $millions of ours.

The "deposit" money still belongs to the trader unless they happen to lose it, and it "grows" as they make it without us taking any of the profits. Sounds pretty fair to me (and all the traders).

All the best,

Don
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Don, when I called your firm, a rep from your remote division said that you payout only 75% when a trader's equity drops below 15K. If that is true, than surely you take a percentage of their profits, correct?
 
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