Prop Trading Firms - Note On Threatening Regulatory Developments

Quote from MiamiHurricanes:

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...
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Noticed the same thing. The problem is lack of info either way. I dont even think the managers of most prop firms even know whats next to come. Just my guess..
 
Does anyone have an actual copy of any letter that was sent to said firms by the NASD/SEC regarding this issue that they can post or pm me?
 
Quote from listedguru:

Anyone have anything new to report on this issue? It seems to have kind of died. The calm before the storm? LOL

-Guru
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It died because it was non-event. The SEC took action against one firm. It was only ET that blew this whole thing way out of proportion as usual.
 
Maverick74, thx for the update.

I can go outside tomorrow because the sky is not falling!

BTW, SEC and CFTC should merge and start watching real issues like the CDS market and black box muni bond underwriting...
 
Think cos in prime broker, they follow Reg T off real notional $'s deposited.

Quote from Maverick74:

Here is a question for everyone. Why should a prime broker exist if prop firms are shut down? Do prime brokers not take deposits from an account and provide leverage? Do they not charge commissions? Do they not hold the account responsible for losses? Are they not retail customer accounts? Anyone? Bueller?
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Yes, but there are real notional dollars deposited to provide the leverage. If XYZ bank wants to finance me, fine.. they will do that and deposit $X million financed dollars at the prime broker which is then leveraged Reg T. I pay finance charges. Point is, there are real $'s deposited there.

Quote from Maverick74:

No, they provide leverage and creative financing.
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Quote from Lights:

Yes, but there are real notional dollars deposited to provide the leverage. If XYZ bank wants to finance me, fine.. they will do that and deposit $X million financed dollars at the prime broker which is then leveraged Reg T. I pay finance charges. Point is, there are real $'s deposited there.
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Again, this is not true. I suggest you read "When Genius Failed" about the story of LTCM. UBS was one of their prime brokers. They created a scheme to do overnight reverse repo agreements that created phantom cash balances in which they used to leverage their fixed income portfolio 30 times over. There are many creative things just like this that prime brokers can do that can extend leverage without real "cash" behind the trades. That's the beauty of derivatives and one of the reasons why regulators are trying to get their hands on the OTC market. You can engage in any number of cash swaps that will create funding of a derivative that has NO value!!!!!
 
Well, I think you hit the nail on head. "schemes" as you accurately put it.. is why regulators come knocking at the door. This leveraged product is not reflective of the majority of PB accounts that I know of. I'm sure there are exceptions tho.

Quote from Maverick74:

Again, this is not true. I suggest you read "When Genius Failed" about the story of LTCM. UBS was one of their prime brokers. They created a scheme to do overnight reverse repo agreements that created phantom cash balances in which they used to leverage their fixed income portfolio 30 times over. There are many creative things just like this that prime brokers can do that can extend leverage without real "cash" behind the trades. That's the beauty of derivatives and one of the reasons why regulators are trying to get their hands on the OTC market. You can engage in any number of cash swaps that will create funding of a derivative that has NO value!!!!!
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