I was speaking to a friend today and we were talking about the expectations that traders have regarding commissions, payouts, and just general entitlements. The traders that I refer to are of the so-called 'independent traders', 'day-traders' or whatever other term you would like to use catagory. Basically referring to traders that either trade prop. with someone else's money, trade with a deposit or trade fully backed with their own money. I have to say that this subject really irks me and I feel that things will be changing very soon and changing dramatically. When I say that it irks me, I mean that these traders that I am referring to are simply whacked out of their mind as far as their expectations are concerned. Frankly, I have no agenda with this post whatsoever other than to voice my controversial opinion, get bashed a bit and see if anyone agrees with me. I am confident in my opinions and believe in what I am saying. Things will change and they will change dramatically. Anyway, let me get to the point.
Seems to me that traders are now expecting (and in fact demanding) sub- .5c per share commission rates, 80-100% payouts (depending upon their capital contributions), office space, systems, support services (processing, accounting, etc.), substantial leverage, and even training. In return, they are willing to offer their hard-work (of course on their time and schedule because they essentially view themselves as independent contractors- ie. unlimited vacation, etc.). What irks me the most is when these traders expect the firms to back their losses and give them a very handsome (50%+ payout). For what? Their hard work and "skill"? Truth is, most traders are losers! Simply put, there is a very small minority of truly skilled traders with a legitimate edge. What gives these traders their cojones? I mean does one actually think that a firm is going to risk capital, take 100% of the losses (or even 50% of the losses), cut commissions to the absolute bear minimum just so they can be graced with your wonderful 'skill-set' which in most cases has been honed if at all, within the last 3-5 years? Get real! George Soros only asks for 20% of his trading profits! Stevie Cohen (after proving himself for multiple decades delivering substantial returns) had the audacity to ask for 50% of the profits. What makes a trader now think that he's got a big whopping 5k and he should be entitled to leverage and a 100% payout with sub .5c commissions?
Let me tell you, for decades, traders/investors paid $300-500+ to make a 1,000 share trade through retail brokers. When I started in the business over a decade ago, institutional commissions were 6c per share. You had a better chance of hitting the lottery than becoming a trader. You had to have a Harvard MBA, plus have a family member in the business. Even then, you had to work as an assistant for 5+ years to just get your own book! Nowadays, every person with a dollar and a dream thinks they are a trader and have all kinds of entitlments.
By the way, nothing negative has precipitated this email, I am not mad in any way, I just felt compelled to air my feelings, albeit controversial and wait for some fireworks. Anyway, let me tell you something, what we are witnessing now is a left over by-product of the late 90s when you could put a monkey in a chair and he could make money. That's why the Schonfelds, Worldco's, etc. of the world could afford such high payouts. Don't you see the writing on the wall? Firms backing traders are falling left and right. Why? Because unless you are riding the wave of the greatest bull market in history, trading is not an easy game for the 'unskilled' and no investor can survive by taking 100% of the losses and paying out over 50% of the gains. It's absurd to expect that. The mid-late 90s were the most unusual times in the history of the markets that may EVER be experienced. This time period will be spoken about 500 years from now. This makes the Tulip mania and the Gold bubble, Nikkei bubble, Oil price spike, etc. look like child's play. You could close your eyes buy something and collect an enormous check. Add in the IPOs and it was mind-boggling. Firms were salivating to put as many people in seats that they could cram in. Anyway, this is not reality. From the traders perspective, ride this gravy train as long as you can. It will be ending soon. I can't blame you for doing that. As for the trading firms, grow some balls and stop responding to the pressure of ever increasing demands from traders who are having more difficulty making money and thus are trying to negotiate unfathomable deals. Don Bright, I applaud you. You seem to run a credible firm offering a more than attractive deal. I doubt you can keep it up. I don't think that you will need to.
Anyway, my hand is tired. I just wanted to air some of my thoughts. My training and nature, I am an independent thinker (Global Macro trader) who tries to foresee the long-term future of certain situations. I welcome all responses, good, bad or ugly. No harm intended, no personal axe to grind, just a very honest and thought out observation of the current state of the 'semi-independent trading world'. Best. Neal.
Seems to me that traders are now expecting (and in fact demanding) sub- .5c per share commission rates, 80-100% payouts (depending upon their capital contributions), office space, systems, support services (processing, accounting, etc.), substantial leverage, and even training. In return, they are willing to offer their hard-work (of course on their time and schedule because they essentially view themselves as independent contractors- ie. unlimited vacation, etc.). What irks me the most is when these traders expect the firms to back their losses and give them a very handsome (50%+ payout). For what? Their hard work and "skill"? Truth is, most traders are losers! Simply put, there is a very small minority of truly skilled traders with a legitimate edge. What gives these traders their cojones? I mean does one actually think that a firm is going to risk capital, take 100% of the losses (or even 50% of the losses), cut commissions to the absolute bear minimum just so they can be graced with your wonderful 'skill-set' which in most cases has been honed if at all, within the last 3-5 years? Get real! George Soros only asks for 20% of his trading profits! Stevie Cohen (after proving himself for multiple decades delivering substantial returns) had the audacity to ask for 50% of the profits. What makes a trader now think that he's got a big whopping 5k and he should be entitled to leverage and a 100% payout with sub .5c commissions?
Let me tell you, for decades, traders/investors paid $300-500+ to make a 1,000 share trade through retail brokers. When I started in the business over a decade ago, institutional commissions were 6c per share. You had a better chance of hitting the lottery than becoming a trader. You had to have a Harvard MBA, plus have a family member in the business. Even then, you had to work as an assistant for 5+ years to just get your own book! Nowadays, every person with a dollar and a dream thinks they are a trader and have all kinds of entitlments.
By the way, nothing negative has precipitated this email, I am not mad in any way, I just felt compelled to air my feelings, albeit controversial and wait for some fireworks. Anyway, let me tell you something, what we are witnessing now is a left over by-product of the late 90s when you could put a monkey in a chair and he could make money. That's why the Schonfelds, Worldco's, etc. of the world could afford such high payouts. Don't you see the writing on the wall? Firms backing traders are falling left and right. Why? Because unless you are riding the wave of the greatest bull market in history, trading is not an easy game for the 'unskilled' and no investor can survive by taking 100% of the losses and paying out over 50% of the gains. It's absurd to expect that. The mid-late 90s were the most unusual times in the history of the markets that may EVER be experienced. This time period will be spoken about 500 years from now. This makes the Tulip mania and the Gold bubble, Nikkei bubble, Oil price spike, etc. look like child's play. You could close your eyes buy something and collect an enormous check. Add in the IPOs and it was mind-boggling. Firms were salivating to put as many people in seats that they could cram in. Anyway, this is not reality. From the traders perspective, ride this gravy train as long as you can. It will be ending soon. I can't blame you for doing that. As for the trading firms, grow some balls and stop responding to the pressure of ever increasing demands from traders who are having more difficulty making money and thus are trying to negotiate unfathomable deals. Don Bright, I applaud you. You seem to run a credible firm offering a more than attractive deal. I doubt you can keep it up. I don't think that you will need to.
Anyway, my hand is tired. I just wanted to air some of my thoughts. My training and nature, I am an independent thinker (Global Macro trader) who tries to foresee the long-term future of certain situations. I welcome all responses, good, bad or ugly. No harm intended, no personal axe to grind, just a very honest and thought out observation of the current state of the 'semi-independent trading world'. Best. Neal.
