What defines a "Professional" trader (vs Non-Professional/Amateur)?

[buttermarket]

A professsional by the definition of the 'exchange' is someone who trades for other people money or works for a company that trades for other people money.

The IRS or taxman don't really if you are a 'professional' or 'amateur' or retail' they just tax you differently. you pay more in 'income' if you have any and can use tax deductions like data fees or even office fees. if you designate yourself as a 'professsional' non-professional cannot use office fees, subscxription fees as tax deductible .and pay LESS tax as your are tax on capital gains which is way less than INCOME tax or business income.
for business income you can use your car expense, sport expense or any 'business expense' advertising clothing etc. as tax deductible if you have clients to visit . you have to buy a suit and dry cleaning if you are professional.

if you trade your own money,,,than it may not be a professional. and those business expenses well IRS will be on your back if you don't have clients . a car is not a business expense if you trade your own money

 

[buttermarket]

amateur is a untrained mechanic trying to fix his own car like doing transmission work or vavles and don't know what he is doing. using a DIY manual and screws up his car. and takes a day to do somethign whereas a professional can fix it in a hour. or less
like amateur photograghers or musicians. lots people play basketball and are not pros.

 

[kmiklas]

So, there's (at least) three perspectives on this question:

1. Pro/Non-pro as the TaxMan sees it; is the U.S.A., commonly referred to as the IRS
2. Pro/Non-pro as regulators (FINRA) and our brokers see it. This can affect fees charged, market data usage, etc.
- Note that we have to fill out these prying questionairres on a regular basis.
3. Pro/Non-pro as ET sees it for the "Professional Traders" forum.

I seek a dividing line for all three cases, with the third being most important.

Can I post in this forum without being fined?

 

[stochastix]

What is a "Professional Subscriber"?
Nasdaq charges additional fees for the usage of their data by "Professional Subscribers". This is why we have to pass additional charges to Professional Subscribers. The phrase "Professional Subscriber" means any natural person, proprietorship, corporation, partnership, or other entity whatsoever who is:
(a) registered or qualified in any capacity with the SEC, the Commodities Futures Trading Commission, any state securities agency, any securities exchange or association, or any commodities or futures contract market or association; OR
(b) engaged as an "investment advisor" as that term is defined in Section 201 (11) of the Investment Advisors Act of 1940 (whether or not registered or qualified under that Act); OR
(c) employed by a bank or other organization exempt from registration under federal or state securities laws to perform functions that would require registration or qualification if such functions were performed for an organization not so exempt.


See
https://www.sec.gov/rules/sro/nms/2017/34-82071.pdf

As defined in Exhibit B to the Agreement for Market Data Display Services, a Non-Professional User is “any natural person who receives market data solely for his/her personal, non-business use and who is not a ‘Securities Professional,’” meaning that the person is not (1) registered or qualified with the SEC, the CFTC, any statesecurities agency, any securities exchange/association, or any commodities/futures contract market/association, (2)engaged in the functions of an investment advisor as those are described in Section 202(a)(11) of the Investment Advisers Act of 1940, or (3) employed by a bank or other organization exempt from registration under Federal or state securities laws to perform functions that would require them to be so registered or qualified if they were to perform such functions for an organization not so exempt. The CTA’s Non-Professional Subscriber Policy can be found at https://www.ctaplan.com/policy



So, if one has a Series 57 license, does that automatically make one a professional? With a series 57 one is registered with FINRA, not the SEC, which is different.

 

[Same Lazy Element]

It’s like asking what defines a “professional sex worker”. If you are one, you usually know.

 

[RRY16]

So, there's (at least) three perspectives on this question:

1. Pro/Non-pro as the TaxMan sees it; is the U.S.A., commonly referred to as the IRS
2. Pro/Non-pro as regulators (FINRA) and our brokers see it. This can affect fees charged, market data usage, etc.
- Note that we have to fill out these prying questionairres on a regular basis.
3. Pro/Non-pro as ET sees it for the "Professional Traders" forum.

I seek a dividing line for all three cases, with the third being most important.

Can I post in this forum without being fined?

If anyone gives you $ to invest or trade, consider them a professional dope smoker.

 

[stochastix]

Well, that's what people who put their money in 401ks do I guess

 

[Brightbreaker]

If the trader is lucky at first and he manages to conclude a profitable deal, then this is only worse, because there will be thoughts that he is already a professional trader, which means that there is nothing small and the following positions will be opened by big sums

 

[stochastix]

No, the rules about what is a professional vs. not are very clear, the market data vendors are just unilaterally deciding not to allow anyone to register as a non-professional, since in the past they had people lie and the exchanges retroactively stuck the vendor with the bill. The text of the rule can be found at https://www.nasdaqtrader.com/content/AdministrationSupport/AgreementsData/subagreemstandalone.pdf , there is almost the exact same terms for the NYSE and AMEX. I was told by my broker than its the data vendor not wanting to "take the risk" of being reclassified from non-professional to professional. But here is the kicker,
1) if you are not registered with a FINRA/SEC license
2) you are not an investment advisor

it doesnt even matter if you are a "Large Trader" or how much money you have, it has everything to do with the business structure. SO my question is, are the data vendors allowed to discriminate in this manner? Should I hire A lawyer, or is he just gonna do some calculus and say "hurr durr they have more money so they are correct"

 

[pinetboltz]

What distinguishes a Professional from a Non-Professional (amateur) trader?

- Licenses?
- Time spent trading?
- Trading the money of others?
- Being employed or sponsored as a trader by an institution/hedge fund?
- Employment status?
- Profit or loss threshold?

tyvm
--Miklas

imho simplest way is probably by income and % income derived from trading-related activities

eg.
a) large mutual fund execution trader who makes 350k, representing 100% of his income
b) physical commodity trader who makes 1m
c) day trader in Chicago who makes 500k
==> all professional traders

as compared to
x) athlete who gets in on bitcoin and tech stocks a few times a year, makes 500k from it, representing 20% of his income
y) trust fund beneficiary who makes 800k from dividends and bond payments, not truly a trader in the sense that they are only holding onto a portfolio, but nonetheless still faces market movts
z) college kid who makes 20k trading penny stocks in the summer
==> non professional traders

ultimately maybe the designation itself of professional vs. non-professional is not as important as the actual increase in capital, because arguably (y) above is still doing better than (a) and (c)