what's the benefit of prop vs retail?

Quote from Don Bright:

Hmm, let me try to respond to a couple of "retail trading myths" --

Security is determined by how much due diligence you do, not a matter of retail vs. proprietary (IMO).

Yes, a trader must pass an exam.

Retail does not receive interest on their short sale money...who do you think keeps it?

And, yes, our traders receive interest on all cash balances.

All traders who trade 200K shares per month pay for no data feees...they use their rediplus computer, along with spreadsheets for everything from charts to automated order entry and pure black box operations. (If someone wants to get some outside vendor's service, that's up to them).

All in all I agree - there are benefits to both, depending on what your amount of participation in the markets is. Not everyone "should" be a licensed trader, I freely acknowledge that.

All the best,

Don
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Don, Don, Don... Where to begin? Not everything here needs to be a Bright Trading advertisement.

The OP question was "what are the benefits of prop versus retail?". Not "what are the benefits of Bright Trading versus some worst case retail firm?"

More specifically, my reply was directed at the followup question from the OP specifically asking for any other advantages of retail, which I provided.

Since you made various misleading comments to my reply (referring to them as 'retail trading myths'), I am now forced to comment.

1) Security: Contrary to what Don states, a retail account has greater security for your capital than a prop account, PERIOD. Retail accounts are SIPC insured (are your traders capital balances insured, Don?). Your funds are also kept in segregated accounts where they are insulated from potential massive losses of other traders at your firm. Among prop traders, you can lessen your risk by comparing various factors that Don mentions. This can reduce (to a manageable level), but not eliminate the higher risk level of a prop firm.

2) Licensing exam requirements => It appears that we agree on this, so I guess it's not one of Don's 'retail trading myths'

3) Interest rates on capital balances. Don falses states "Retail does not receive interest on their short sale money...who do you think keeps it?" => Don, we both know this is a misleading and false statement. The truth is that all prop and all retail firms are different. However, you will generally receive better treatment with interest rates with a retail account than you will with a prop firm. If you care to reply further, Don, please compare Bright Trading with the most commonly used retail firm on this site, Interactive Brokers.

IB currently pays 4.84% interest on capital cash balances above $10k, 5.09% interest on capital cash balances above $100k and 4.09% interest on short balances over $100k. How does Bright compare with each of these?
http://www.interactivebrokers.com/en/accounts/fees/interest.php?ib_entity=llc#shortCredit

4) Cheaper data fees. Again, it's an undisputed fact that 'professional' (i.e. registered) traders are charged a higher rate for various datafeeds by the exchanges. Some firms, such as Bright Trading, absorb this fee themselves and do not pass it along to their clients. If I owned a trading firm, and charged quite high commission rates to my clients, then I would be more than willing to absorb some fees. I do know, however, that if I switched to a prop firm, such as Bright, then my combined commissions/fees would increase dramatically (over $100k per year) versus the all-in rates of a firm like Bright. So, it's misleading to imply that a registered 'prop' trader does not pay higher fees. They <i>DO</i> pay the higher fees, whether directly or indirectly.

I hope this clarifies some of the 'Bright Trading advertising myths.' Certainly, there are advantages of prop trading, advantages of retail trading, and disadvantages for both. The best path is different for different traders.
 
Quote from EricP:

Don, Don, Don... Where to begin? Not everything here needs to be a Bright Trading advertisement.

The OP question was "what are the benefits of prop versus retail?". Not "what are the benefits of Bright Trading versus some worst case retail firm?"

More specifically, my reply was directed at the followup question from the OP specifically asking for any other advantages of retail, which I provided.

Since you made various misleading comments to my reply (referring to them as 'retail trading myths'), I am now forced to comment.

1) Security: Contrary to what Don states, a retail account has greater security for your capital than a prop account, PERIOD. Retail accounts are SIPC insured (are your traders capital balances insured, Don?). Your funds are also kept in segregated accounts where they are insulated from potential massive losses of other traders at your firm. Among prop traders, you can lessen your risk by comparing various factors that Don mentions. This can reduce (to a manageable level), but not eliminate the higher risk level of a prop firm.

2) Licensing exam requirements => It appears that we agree on this, so I guess it's not one of Don's 'retail trading myths'

3) Interest rates on capital balances. Don falses states "Retail does not receive interest on their short sale money...who do you think keeps it?" => Don, we both know this is a misleading and false statement. The truth is that all prop and all retail firms are different. However, you will generally receive better treatment with interest rates with a retail account than you will with a prop firm. If you care to reply further, Don, please compare Bright Trading with the most commonly used retail firm on this site, Interactive Brokers.

IB currently pays 4.84% interest on capital cash balances above $10k, 5.09% interest on capital cash balances above $100k and 4.09% interest on short balances over $100k. How does Bright compare with each of these?
http://www.interactivebrokers.com/en/accounts/fees/interest.php?ib_entity=llc#shortCredit

4) Cheaper data fees. Again, it's an undisputed fact that 'professional' (i.e. registered) traders are charged a higher rate for various datafeeds by the exchanges. Some firms, such as Bright Trading, absorb this fee themselves and do not pass it along to their clients. If I owned a trading firm, and charged quite high commission rates to my clients, then I would be more than willing to absorb some fees. I do know, however, that if I switched to a prop firm, such as Bright, then my combined commissions/fees would increase dramatically (over $100k per year) versus the all-in rates of a firm like Bright. So, it's misleading to imply that a registered 'prop' trader does not pay higher fees. They <i>DO</i> pay the higher fees, whether directly or indirectly.

I hope this clarifies some of the 'Bright Trading advertising myths.' Certainly, there are advantages of prop trading, advantages of retail trading, and disadvantages for both. The best path is different for different traders.
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Don't forget the lower commission at IB vs Bright.

Also don't forget that passthroughs hit your account immediately at IB vs end of the month at Bright.
 
The safety issue is basically moot, I think I explained the difference.

Prop trading allows for use of capital. This is probably the most significant factor.

I have not found many retail firms that pay short stock interest, I know IB does (that's why they are the only firm I ever recommend to anyone, and may be opening up with a group account there). GS pays our traders 5% currently, FWIW.

I stand by the fact that at only 200K shares your Redi is free, and many spreadsheets run directly off the DDE link.

Yes, a professional traders pays exchange fees for "outside" data vendors (but, many firms are given large discounts to help offset those fees).

This whole thing doesn't have to be a big dispute, most people can understand the difference. And some people probably are better off to stay retail.

Don
 
Quote from Don Bright:


Prop trading allows for use of capital. This is probably the most significant factor.

This whole thing doesn't have to be a big dispute, most people can understand the difference. And some people probably are better off to stay retail.

Don
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Don,

You continue to miss the point, however. The specific question was "What are the advantages of retail"

I provided four answers, and still stand by each answer. My answers were not "retail trading myths" as you suggested.

Retail and prop trading each have their own advantages and disadvantages, and prop or retail might be more appropriate for a trader, depending on their specific needs.

I agree that there is no need for this to be a 'big dispute'. If you agree to stop misleading readers with your slanted and incorrect comments about my posts, then I'll agree to stop pointing it out. :-)
 
Question for Don Bright:

If a trader goes 3-4 mos without any earnings (net) or even has a small loss, what are the chances of remaining with your firm (assuming he puts funds in his account in case of loss)?

Do you have time limits for people to be profitable?

Can one go on a 6 month hiatus/vacation and come back without any hassle like at a retail broker?
 
Quote from EricP:



I agree that there is not need for this to be a 'big dispute'. If you agree to stop misleading readers with your slanted and incorrect comments about my posts, then I'll agree to stop pointing it out. :-)
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Gee, I guess with such a conciliatory request as that, I'll have to cave in, LOL.

With a smile, I'll just let it go - readers can certainly tell the differences by now.

Have a good day,

Don
 
If you are trading your own capital and losing money then you are losing your own money so I doubt you will be asked to leave. Like a brokerage account you can keep trading as long as you have money and your losses are covered.

Also what retail broker is gonna give you a hassle for taking 6 months off. Most brokers that are good do nto have inactivity fees, if yours does then switch.

Quote from risktaker:

Question for Don Bright:

If a trader goes 3-4 mos without any earnings (net) or even has a small loss, what are the chances of remaining with your firm (assuming he puts funds in his account in case of loss)?

Do you have time limits for people to be profitable?

Can one go on a 6 month hiatus/vacation and come back without any hassle like at a retail broker?
More...
 
That was my point. Retail brokers *don't* usually care or close your account due to 6 mos of inactivity. What about prop trading in general? They don't kick you out?

Quote from optioncoach:

Also what retail broker is gonna give you a hassle for taking 6 months off. Most brokers that are good do nto have inactivity fees, if yours does then switch.
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