The Future Of Prop Firms (Marex Up For Sale)

Tommo, my other thought is to look for a give-up agreement for that particular market you are interested in ( PM ). While you will give up a healthy haircut for the courtesy, it's a start and you will save outright capitalization. When you really start banging, you can move up to NewEdge. Besides, the haircut is doable in terms of your product of interest and what you are trying to accomplish.

Let me give you an example. The London Metals Exchange. I would rather pay my existing FCM a 50 cent/RT give-up agreement than finance the minimum account for the LME Seat Holders in Chicago. Just Saying. Short term / Long term.
 
bone said:
There is no doubt in my mind at least that since the advent of HF and automated trading, that manual "point and click" scalpers and futures day traders have had a very tough time of it. So, I would argue that the market dynamics have shaken out more traders than bad management. Just my own observation over a long period of time. Very difficult for a human being with a mouse and a screen to hang on to a short term flat price position when the DOM is constantly getting flipped and gamed and the micro market environment is very choppy and noisy.
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There are plenty of opportunities every day to make good money. Directional traders, which you call 'point and click' scalpers, are doing very well. If a trader sees more opportunity in spreading, go for it. But don't give the impression that spreading is the 'right' way to play the game and directionals are more difficult. They are not.

H.
 
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There is a big need for "pay to play" stock equity firms in the US. One, it is the only way for smaller traders to LEGALLY day trade stocks. All you need to do is pass the series 56 and join a BD. Not everyone has $25,000 to day trade. (yea, I know....you can trade futures blah blah blah). Two, even those with $25,000 will need a lot more than 4-1 (or 6-1 in a portfolio margin account) to successfully day trade. With increased intraday BP, especially for open orders, this allows the trader to implement more advanced trading strategies and opportunities. Also, most BDs have better pricing structure and access to more routes than a retail firm.

Basically if you are a well funded trader and 6-1 intraday works for you than a "pay to play" firm might not be necessary, but for A LOT of wannabe traders it is the only way to legally day trade without the "education" scam. Furthermore, BDs have very transparent balance sheets which can be found on the SEC website so you can sleep better at night as compared to shipping cash to Joe's LLC which started last week and will probably get shut down be the SEC.
 
Texttrader

What you say is all true I am sure. But unfortunately businesses aren't set up with the view of 'what will help out the little guy'. The fact is a lot of the prop firms that encourage small traders to get into the business don't make money and therefore are on the decline.

Focusing on why this is is the question at hand.
 
I am a small trader. I trade about 250,000 shares per month and pay $.004/share. My firm collects $1,000 in commissions from me and I KNOW they make money on my routes. I have no idea what they pay to clear my trades but it's probably pretty low. If it is $.0005/share they are still making $875/month off my trading. If a firm has 100 traders that is $87,500/month or $1,000,000/year they are making just off of "small traders". I'm sure there are 1m+ shares per month traders and traders that they take a % of profits as well. Yes, they have salaries, rent, etc to pay but I am just giving an example of a 100 trader firm with small traders.

Why are they on the decline? I believe it's because traders haven't adapted to the HFT traders and have dropped out. What used to work doesn't work anymore. As traders do figure it out I think you will see more traders coming back into the market. Also, I think the series 56 has had an impact on the amount of traders. I know a lot of people are too damn lazy to take it so they go to these scam "education" firms. It's no coincidence that so many have popped up lately. The funny thing is if you have no discipline to study and pass the series 56 you probably don't have the discipline to be a successful trader.
 
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Fair comment texttrader

In the UK all prop firms..99% of firms are futures only. Very little interest in equity trading. But everything you say is true in the world of futures prop trading and we don't need to take exams so that might not be the issue.

I know a few guys with prop firms and they say they make hardly anything off of commissions. They make about $0.20 off of a round turn. Back in the day when humans did the job of computers a decent sized trader would probably trade 2-3000 round turns a day. Now it's probably a third of that. There just isn't the need to trade that much.

You have to be far more selective. But the algos that took over the role of human traders pay virtually nothing in commission and do tons of volume. I reckon the exchanges would make just as much if they went back to human based trading and eliminated the very very short term HFT. But to be honest I don't think that can or will ever happen.

So now you have prop firms making hardly anything off of commissions and there are less 'edges' for humans to capitalise on and the ones that do make money get 70/80/90% profit splits. So the prop firms get 100% of the downside of a bad trader and on average 20% of the upside.
 
helgen_1 said:
But don't give the impression that spreading is the 'right' way to play the game and directionals are more difficult. They are not.
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On the same token there's nothing preventing people from doing both directional and spread trading either in different instruments or different timeframes.
 
re-route for a couple milliseconds to flash to HFT boys. It goes on everywhere....you just don't know it. Also, not passing on tier rebates....and that is common as well.
 
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