Quote from deviltrader:
It seems most people are listing benefits of prop over retail. What about retail's advantages? I only saw 2 advantages listed.
I think I can speak to some of the advantages. I have supported myself off of trading since the late 1990's and during the past few years have switched from retail to prop trading, and back to retail. Some of the benefits of retail (listed in order of importance) are:
1) Security. You have a greatly reduced risk of losing your capital due to the failure of the firm. With a prop firm, some other trader can potentially blowup, causing the firm, and your capital, to evaporate. Other factors can also cause a firm to implode, resulting in the loss of your money. Worldco and Refco are a couple of examples where traders lost their hard earned capital, through no fault of their own (i.e. not through their own trading losses). With a retail account, this is much more unlikely, and accounts are also insured to some minimal amount (100k cash and 500k securities) with SIPC protection. While these kind of losses are possible with retail, they are much much much less likely.
2) No need to deal with registration hassles. With a prop account, you will typically need Series 7 and 55 registrations. Passing these tests may not be especially difficult, but they do require some level of study and generates a level of nuisance to the professional trader that has better things to do.
3) Interest Income on your capital balances. Not all prop firms pay interest on overnight cash balances. With a retail account, however, you will earn interest on these balances which can amount to significant dollars for larger accounts.
4) Cheaper data fees. While data fees are an insignificant cost to most traders, the prop trader must pay several multiple higher fees for some of the data costs. This might amount to ~$1k over the course of a year, perhaps.
Overall, however, I don't think that retail versus prop is a lopsided choice. There are significant benefits of each and I could be convinced to switch from one to the other if the situation were right.
Compared with commission rates and system reliabilty, the importance between choosing retail versus prop for the success of most traders is much less significant.
