The Legal Dilemma with these prop firms

No one is forcing you. firms have to protect themselves

this time about 5=6 years ago there were 20 or "prop" firms...now there is a handful...and those companies quickly learned of the failed companies mistakes (risk management..too cheap commision.... shady practices,... etc etc etc)

If your so worried about prop firm contracts....dont join...
open a retail account...or borrow money from your Lawyer Aunt...and have her give you the leverage ...

no one is forcing anyone to trade prop or be part of an LLC...its a privilage.

d


In full disclosure ... I'm a prop trader and run a group of prop guys so i'm biased
 
Quote from ProgrammerGuy:

The Legal Dilemma with the prop firms...
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I'm shocked that a prop firm would want you to sign a contract.

I mean seriously....all they're doing is giving you millions of dollars worth of leverage to trade with and for that they want a contract???

Next thing you know, they will want to turn a profit!!! :eek:
 
i agree, if your concerned about joining prop, open a retail account, no one expects them to be slanted in the traders favor, its a 2 way street & a trader must take responsibility for their actions all the same, no different then retail, their are hundreds of traders that are with these firms with lots of money on the line, no one hears any horror stories, so i guess its ok for the majority. its a tradeoff, put up 25k plus & trade with no concerns.. most of us like what they offer, regardless of our opinions with the contracts.. as long as our money is safe, then its a good deal for most of us..
 
You know, the truth is I probably shouldn't post in this thread, because I've never been part of a prop firm, and never seen one of their contracts. That said, I've been around the business world for quite a while, so I thought I would offer a few observations:

First, lawyers are notorious for being deal breakers. You ever don't want to do a deal, just show your contract to a lawyer. Now, that isn't to say that you shouldn't have your contract reviewed. You should. But have it reviewed with some view toward where the risks in the contract lie. What risk are you taking, and what will that cost you. Now, add one other thing, just for fun, you ought to show your Aunt a customers agreement from one of the more prominent retail trading firms...lets say IB. Chances are she won't like that either. So now what?

As I understand the workings of a prop firm...you put up next to no cash, they let you trade their cash and credit, and you get a large chunk of the profit on that...maybe all of it in some cases. Now let me tell you something son....I would have loved a deal like that when I was a young guy....but as far as I know it didn't exist. You put up a little money, you trade outsized positions relative to your capital...giving you a great opportunity.

Now, can they really go out an buy a building for instance, and ask you for a contribution? You know, I gotta question that. I'd have to see that clause. I would not want to sign something that gave someone else the power to obligate me in that way, without my approval. And frankly, the Brights don't strike me as that type of organization from what I've read about them. It seems there are a large number of people trading with them that have never had that happen. Just draw down your capital if you're concerned.

I'd be concerned about what other members of the LLC could do financially that could hurt me. For that reason, I'd be concerned about their financial condition and safeguards in place to control errant traders and/or trades.

In the end, lawyers properly used should point out risks, not make your decisions for you.

OldTrader
 
Bottom line programmerguy
No ones holding a gun to your head to sign it.
Its their money and if you want to use it,
you'll have to agree to their rules by signing the dotted line.
Its just that simple.
But where else will you get that kind of capital access, almost nowhere.
You could always Take 30 grand to your local bank tell them you want to borrow 500k for the day c what they say.
Remember programmerguy No invisible inkpen tricks
please use standard black or blue ink.
Good luck
 
"Remember programmerguy No invisible inkpen tricks"

I read about a con artist used invisble ink to alter a check. Cashed it at a bank on Friday, by the time the teller's account was reconciled on Monday the check was back to it's original condition.
 
as i said before,the only reason a trader uses a prop/llc is for leverage and of course the low deposit. if a prop/llc demanded any more than 5k they would all go under. remember,your money is not sipc insured with an llc.
 
Quote from NY_HOOD:

as i said before,the only reason a trader uses a prop/llc is for leverage and of course the low deposit. if a prop/llc demanded any more than 5k they would all go under. remember,your money is not sipc insured with an llc.
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There are a number of props that require way more than $5k. They want bigger traders and they want to last so they avoid $5k newbie land mines.

Most of you guys generalize about props thinking they are all the same.
 
The contact shouldnt be tilted in the favor of a newbie. The fact is if I hire and back 10 newbs Ill be very lucky if 50% of those people are still in the buisiness after 24 months let alone making any money.

If I am risking capital, not only trading capital but my lost income for training Im certainly not doing it for free.

The deals are crappy but nothing in life is free. Train and you can leave, non competes arent worth anything if you arent a fool and didnt develop anything proprietary.

Ive never had a lawyer tell me any contract was fair and this ranges from a fortune 100 company to a prop deal.
 
I really don't know why all the fuss in the first place. Traders are running their own business within (in our case) our structure, using our money to trade with, risking only a relatively small amount and keeping all their profits. Do the due diligence, meet the people in charge, start slow with training, develop a comfort level, and proceed.

I am the first to point out that there are obvious questionable firms (I even keep a list as I'm told about them), and I am aware of other excellent firms, some that may follow a slightly different business model, but honest nonetheless.

Treat trading just like you would if you were to open a Franchise of some sort, or perhaps a restaurant, any other business. Develop a business plan, become comfortable with you partner(s), do the "due" diligence.

Being an entrepreneur, running a business on your own, can be a tough life decision.

I honestly feel that merely moving some $$ from one account to another (it's still your money, not down the toilet as a "franchise" fee or long term lease committments, etc.), and starting a trading business with a reputable firm, has a far more likely and bigger upside, with such a small initial risk deposit, that it can certainly be done by those who possess the desire and spirit of an independent businessman/woman.

(enough soapbox, just how I feel, and yes I may be bias, but we have been on both sides of the equation, and am glad we did it).

All the best,

Don
 
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