Why would you pay for a desk at a trading firm in London?

  • Thread starter Thread starter lukas
  • Start date Start date
There is no such thing as financial backing at these firms where they cover your losses. They just simply take your account NLV (net liquidation value), apply a multiple of, say, 3 and that is the money you can use to margin your positions. They take 10% if your deposit is more than £50k usually. Below that it is 20%.
 
Well, the $400 margin is only up to a certain number of contracts, I think. The advantage of arcades is you do not have to hold a CME membership to get reduced exchange fees but again - you can lease a membership that applies to ES for about $300 monthly so not so bad, in comparison.
 
lukas said:
What is the purpose of occupying a seat on a trading floor of an arcade in London which:
- charges you at least £1,200 just to sit there
- takes at least 10% of your profits
- has absolute control over your money
- is not covered by any compensation scheme in case it goes bust.

I see no reason why these traders should not set up on their own, using their own clearer, keeping all their profits, having the same low commissions as in an arcade. So, what is the point?
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lukas said:
Commission examples (0-10,000 sides per month): ES $0.80, 10-Y T-Notes $0.80, Light Sweet Crude Oil $1.11.
80/20 profit split. £1,200 desk fee.
Are these really that rock-bottom rates? You can get that setting up on your own with a clearing firm, assuming you get CME membership
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If the firm(s) you are referring to are registered futures proprietary trading firm(s) - you're really confused and misinformed about their business model and indeed the requirements set forth for those firms to exist by the regulated futures exchanges. There are actually some very good reasons to trade as a proprietary futures trading firm employee - at least in the United States. I'm not sure if the rules are different for European firms.

Here in the United States, you are typically splitting your net profits 50/50 with the firm. But you are only risking the firm's capital. You are paid as an employee on an IRS Form W-2 here in the United States.

It's not easy getting into these firms here in Chicago or New York City. They are looking for sharp traders who they can lever to the maximum. I know most of these firms here in the States and they are very professional well managed trading firms. And they're not looking to train newbies. If you don't have a trading strategy and plan that they like and that they feel they can lever don't even bother.

https://www.cmegroup.com/company/membership/corporate/cme.html

https://www.cmegroup.com/company/membership/files/ECMQA.pdf

https://www.advantagefutures.com/se...mbership/cme-electronic-corporate-membership/

CME Rule 106.R. Electronic Corporate Member

"Eligible Firms: Proprietary trading groups are eligible for ECM. They will receive discounted fees for all electronic trading in the accounts of the proprietary trading firm conducted in accordance with CME Group policies. Please note CME Group may be unable to accept participants located in certain countries. Please contact the CME Group Membership Concierge Team for further information regarding any location restrictions.

5. What guidelines are used to determine if trading is proprietary?
A proprietary account is evidenced through:
• All profits and losses of the account are included in the income of the firm.
• All profits and losses of the account are taxed to the firm.
• The trader (non-owner) does not make any capital contribution to the account.
• Only the firm’s capital is at risk of loss; no traders may make any contributions or payments to the firm nor have any capital at risk.
• All trading activity must be solely for the benefit of the ECM. No other individuals or entities can have any ownership interest in the ECM’s proprietary accounts.
• All funds contributed to and traded under the ECM are subject to loss from any and all trading activity of the ECM."
 
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bone said:
If the firm(s) you are referring to are registered futures proprietary trading firm(s) - you're really confused and misinformed about their business model and indeed the requirements set forth for those firms to exist by the regulated futures exchanges. There are actually some very good reasons to trade as a proprietary futures trading firm employee - at least in the United States. I'm not sure if the rules are different for European firms.

Here in the United States, you are typically splitting your net profits 50/50 with the firm. But you are only risking the firm's capital. You are paid as an employee on an IRS Form W-2 here in the United States.

It's not easy getting into these firms here in Chicago or New York City. They are looking for sharp traders who they can lever to the maximum. I know most of these firms here in the States and they are very professional well managed trading firms. And they're not looking to train newbies. If you don't have a trading strategy and plan that they like and that they feel they can lever don't even bother.

https://www.cmegroup.com/company/membership/files/ECMQA.pdf

"Eligible Firms: Proprietary trading groups are eligible for ECM. They will receive discounted fees for all electronic trading in the accounts of the proprietary trading firm conducted in accordance with CME Group policies. Please note CME Group may be unable to accept participants located in certain countries. Please contact the CME Group Membership Concierge Team for further information regarding any location restrictions.

5. What guidelines are used to determine if trading is proprietary?
A proprietary account is evidenced through:
• All profits and losses of the account are included in the income of the firm.
• All profits and losses of the account are taxed to the firm.
• The trader (non-owner) does not make any capital contribution to the account.
• Only the firm’s capital is at risk of loss; no traders may make any contributions or payments to the firm nor have any capital at risk.
• All trading activity must be solely for the benefit of the ECM. No other individuals or entities can have any ownership interest in the ECM’s proprietary accounts.
• All funds contributed to and traded under the ECM are subject to loss from any and all trading activity of the ECM."
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The arcades that @lukas is mentioning is obviously not the same as you describe. They are more of a proprietary trading/social trading firms where you still trade for yourself with your own funds; the firm just gives you more capital whereas the prop trading firms that you mentioned, you are an employee of the firm and trade 100% the company's funds so you basically are a trader. This is why @lukas is questioning how is it worth it to trade with these arcades. The only thing is you get to keep higher % of the profit when you trade with those arcades. With the prop trading firms you described, aside from the 50/50 net profit, do you also get paid fixed salary if you are on their payroll ?
 
It is very different in London, @bone. Essentially, the deal is: "
- give us control over your money; you win - we take 10-20% of your profits; you lose - tough luck, the losses are only yours to take;
- oh, and we also charge you £1,200 per month plus platform fee plus data feed fee to sit in our office
- you get lower commission rates than on your own, unless you are smart enough to use a calculator and work out you can save huge money by going to a clearer directly, though you would also need CME membership"
 
lukas said:
It is very different in London, @bone. Essentially, the deal is: "
- give us control over your money; you win - we take 10-20% of your profits; you lose - tough luck, the losses are only yours to take;
- oh, and we also charge you £1,200 per month plus platform fee plus data feed fee to sit in our office
- you get lower commission rates than on your own, unless you are smart enough to use a calculator and work out you can save huge money by going to a clearer directly, though you would also need CME membership"
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Yeah, that would not be allowed in the United States for regulated futures. CME, ICE, and probably the NFA wouldn’t allow it IMO.
 
JSOP said:
... With the prop trading firms you described, aside from the 50/50 net profit, do you also get paid fixed salary if you are on their payroll ?
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Yes, they call it a “draw” which counts against your profits. For the new traders it is very modest, but for the heavy hitters they are allowed to “draw” more.
 
lukas said:
It is very different in London, @bone. Essentially, the deal is: "
- give us control over your money; you win - we take 10-20% of your profits; you lose - tough luck, the losses are only yours to take;
- oh, and we also charge you £1,200 per month plus platform fee plus data feed fee to sit in our office
- you get lower commission rates than on your own, unless you are smart enough to use a calculator and work out you can save huge money by going to a clearer directly, though you would also need CME membership"
More...

If you are trading Eurex for example you don't even need the membership (flat fees), have you looked into them already?
 
lukas said:
It is very different in London, @bone. Essentially, the deal is: "
- give us control over your money; you win - we take 10-20% of your profits; you lose - tough luck, the losses are only yours to take;
- oh, and we also charge you £1,200 per month plus platform fee plus data feed fee to sit in our office
- you get lower commission rates than on your own, unless you are smart enough to use a calculator and work out you can save huge money by going to a clearer directly, though you would also need CME membership"
More...

Is there a list of such arcades?

What's their typical commission on options (if they allow you to trade options)?
 
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