Prop Trading Firms - Note On Threatening Regulatory Developments

riskarb · Oct 10, 2006

Quote from Don Bright:

If a trader has their account running below $15K for 30 days or longer (which would mean they are not profitable anyway), and they "hit it big" one month, they "subject" to sharing profits....but if they are net "down" for the year, they don't have to share anything.

We have, maybe, 2 occasions over the last decade where this came into play at all. Traders can choose to bring the account back up over $15K anytime within 30 days (most tend to make enough to bring the account back up anyway). This is just a way to prevent someone from running real low, putting the Firm at risk for months, and "taking a shot" in December and then withdrawing all the money again in January.

overall, a "non-event"

Don

Ok, understood. What about all those Brighties who start with $5-10k? Are they immediately subject to a 75/25 split?

TM_Direct · Oct 10, 2006

Quote from Maverick74:

This is not true. Prime brokers can grant a lot of leverage, just look at what they allowed for LTCM. I know a lot of prime brokers that use the VAR model to margin accounts which is not REG T!!!!

And it does not matter if the prime broker is used for prop trading. You need to understand, that when you change the law, there is something called the law on unintended consequences. It affects everyone, the ripples. It doesn't matter what the prime brokers intent is. Under what many are proposing on this thread, prime brokers would be no more. That is a fact. Otherwise all prop firms would just set up prime brokerage accounts at Goldman. Think about it.

I have thought about it....Im not saying that they don't give leverage out...but most clearing firms use Prime broker for LARGE institutional accounts....which is what was intended in the first place....re: goldman....they charge A LOT of $$ and A LOT of Deposits...thats why people use other firms.

Don Bright · Oct 10, 2006

Quote from riskarb:

Ok, understood. What about all those Brighties who start with $5-10k? Are they immediately subject to a 75/25 split?

The very few who come in "light" simply don't withdraw any money until the account gets above $15K...or they can take a "return of deposit" if they "need" some money with no split.

If no money is taken out, then no "split" regardless. If not profitable (even if moey is taken out), no "split" regardless. As I said, pretty much a non event.

Don

giggollo · Oct 10, 2006

Quote from TM_Direct:

I have thought about it....Im not saying that they don't give leverage out...but most clearing firms use Prime broker for LARGE institutional accounts....which is what was intended in the first place....re: goldman....they charge A LOT of $$ and A LOT of Deposits...thats why people use other firms.

I think I know the word for this. Double standard?

libertad · Oct 10, 2006

A proper term for prime broker lending is called notional dollars...which would mean that the house covers the securities nominal securities requirements although there are a number of different accounts even in different asset classes...Fund of funds setups often use this...and is no way related to the common fractional SEC NASD impositions on leverage...ie the supposed market neutral strategies involving converts etc..

Hydroblunt · Oct 10, 2006

Quote from Maverick74:

Otherwise all prop firms would just set up prime brokerage accounts at Goldman. Think about it.

I stand behind my idea that this is being pushed by Goldman, Merrill Lynch, Bank of New York and whichever other Wall Street bandit entity has grabbed a clearing firm. They want to knock out the self-clearers and make everyone take LLC status. They want the Mavcos, where someone like Maverick puts up straight cash to back his traders and takes that risk while they sit there, collect the revenues and interest on the leverage..

Clearing firms use credit and banks have plenty of that. Also, guys like GS and Merrill definitely oversee orderflow and can run bucket shop operations against the numerous daytraders. I'm sure it's happening as we speak.

I had a feeling this was going to become a slow transition when Merrill bought Pax.

TM_Direct · Oct 10, 2006

Quote from Hydroblunt:

I stand behind my idea that this is being pushed by Goldman, Merrill Lynch, Bank of New York and whichever other Wall Street bandit entity has grabbed a clearing firm. They want to knock out the self-clearers and make everyone take LLC status. They want the Mavcos, where someone like Maverick puts up straight cash to back his traders and takes that risk while they sit there, collect the revenues and interest on the leverage..

Clearing firms use credit and banks have plenty of that. Also, guys like GS and Merrill definitely oversee orderflow and can run bucket shop operations against the numerous daytraders. I'm sure it's happening as we speak.

I had a feeling this was going to become a slow transition when Merrill bought Pax.

BINGO!!!!! tell em what he's won JOHNNY!!!

check out this site.....they are dedicated to fighting for the small firms and are currently in a huge war with the NASD and the top 20 firms it basically represents...

www.financialIndustryAssociation.com

syswizard · Oct 10, 2006

Quote from Rearden Metal:

Well, of course they wrap their oppression in pretty (but empty) words. Bad goverments <b>always</b> do that. Just because they call it the Ministry of Love, doesn't mean you should go there expecting group hugs.

EXACTLY....the SEC is interested mainly in it's OWN WELL BEING as a government entity....NOTHING LESS.
It does NOT want to DIE....so it will take any action, make any decisions towards that goal.

TM_Direct · Oct 10, 2006

Quote from syswizard:

EXACTLY....the SEC is interested mainly in it's OWN WELL BEING as a government entity....NOTHING LESS.
It does NOT want to DIE....so it will take any action, make any decisions towards that goal.

Yet another BINGO award!!!....but you failed to mention the NASD in that equation as well....I saw on that web site that Chairman Cox of the SEC makes 152K per year......The head of the NASD make about 2.5 million!!!:eek:

Glauber got an 8 million dollar bonus last dec. form the NASD!!!

who controlled him? the largerst firms!

MiamiHurricanes · Oct 14, 2006

So that's it? We have now reached the universal equilibirum point in discussion on this? (Yes I acknowledge I have absoluteley nothing to add at this time either).

Interesting to see a @#%load of fury of doom reported by some and then, poof, nothing...