What names come to mind when looking globally?
WTS alliance with T3 Trading
- Thread starter Alpha Trader
- Start date
What names come to mind when looking globally?
Yes, very good point. Also, with T3 according to their last SEC focus report, has THREE classes of members, "A" "B" and "C". The Class A members are the owners. Class B are those who run a coordinated trading group, and Class C are individual prop traders. Those who join T3 can either join a group or directly to T3. Trading through a "Coordinated Trading Group" (Class B) may or may not be an advantage than going to the firm directly. Also, as a Class C, your losses are capped by your own capital contribution.
With the exception of Bright, the other prop firms don't seem to disclose the difference between owners (Class A) vs. traders (Class C) capital in the focus report, for whatever reason. However, if you want to know it's probably wise to get this info from the firm directly, so you are aware of how much capital the actual owners have put up to maintain the firm's operation.
Since most traders register with smaller amounts (5k or so), it's not really an issue if the total member's equity is in the millions. However, if you're putting up a larger amount, then it's probably a good idea to have this info, especially if you're going to trade within a Class B group.
More from T3's SEC filings (SEC.gov).
T3 loses money year after year. Their own filings show their company (Class A represents their ownership's capital) lost money in 2010, 2011 and 2012. (They did not post a breakdown of earnings by member classes for 2013.)
http://www.sec.gov/Archives/edgar/vprr/13/9999999997-13-001763 (page 8 of the PDF, which is page 4 printed on the document due to the cover letter).
In 2012, the most recent year they show the breakdown of losses by member class, T3 lost over 30% of the amount of their company's capital base as of the end of that year. (Finished 2012 with $670,000 of Class A loss, and they left the year with only $1,931,000.) Looking at their previous years, this seems to be a pattern, not an anomaly.
The $10 million total capital (versus only $1.93 million of their own) on 12.31.2012 shows they are highly leveraged and running the firm mostly off trader and group leader capital contributions (5 times leveraged by using Class B and C capital contributions).
Be aware when making a capital contribution to T3 of their financials. Scrutinize them and ask questions, and require answers, preferably in writing. You have the right to ask. The SEC forces these public disclosures for a reason! Your capital contribution is NOT a deposit. It is subject to the losses of the firm including their operating expenses (read any prop firm's operating agreement).
Adding WTS's traders may only exacerbate what wasn't working beforehand. WTS's capital base is minuscule, especially for the amount of traders they supposedly have. Their recent years Class A results aren't disclosed on their financials on SEC.gov like T3's (although there is plenty of information in their filings if you look), but it is very possibly more of the same (and even if it isn't, the full capital isn't material enough to change the way T3 looks).
But wait! There are kickers! All from publicly available regulator websites.
Check out their clearing firm, ETC (full name is Electronic Transaction Clearing), on SEC.gov and Finra's brokercheck.
The SEC site shows their whole clearing firm only has $2.023 million dollars! That is smaller than many of the single, solo accounts of active trader's retail portfolio margin accounts. Repeated, the whole clearing firm is run off of a capital base of $2,023,000!
And yet more public information from the regulators websites! Check this out. Read through but make sure you get to the end, #17 in the notes.
http://www.sec.gov/Archives/edgar/vprr/14/9999999997-14-004554 (also detailed on finra.gov).
So to top it all off, ETC received a $1,000,000 fine from the regulators last year (and is appealing), along with a regulatory suspension of their CEO, the COO and the CEO of their parent company. They are also dealing with charges from Finra and subpeona's of their management by the SEC a another matter, of which they say there is 'uncertainty' about the outcome.
So to sum up, all from public filings, T3:
- lost money in 2010, 2011 and 2012 (and stopped disclosing it in 2013 thank gosh)
- runs their firm at 5 to 1 leverage off of trader capital
- plays Russian roulette with their firm's money ($10 million plus, much of it which looks like trader capital contributions) by putting it in a clearing firm with only $2 million capital base
- and does business with a clearing firm which was already punished with a $1 million dollar fine, along with its CEO and its COO/President being suspended for 6 months, which, if it loses its appeal, or one of the other pending regulatory matters it outlines in note 17 (with each of FINRA, the SEC and CBOE), will be down to $1,000,000 and lose its leadership (who is one of the guy's signing off on their SEC submitted financials!)
All these warning signs from just their public filings. Can check them out yourself.
http://www.sec.gov/Archives/edgar/vprr/13/9999999997-13-001763
http://www.sec.gov/Archives/edgar/vprr/14/9999999997-14-004554
http://www.sec.gov/edgar/searchedgar/companysearch.html
Finra.org
T3 loses money year after year. Their own filings show their company (Class A represents their ownership's capital) lost money in 2010, 2011 and 2012. (They did not post a breakdown of earnings by member classes for 2013.)
http://www.sec.gov/Archives/edgar/vprr/13/9999999997-13-001763 (page 8 of the PDF, which is page 4 printed on the document due to the cover letter).
In 2012, the most recent year they show the breakdown of losses by member class, T3 lost over 30% of the amount of their company's capital base as of the end of that year. (Finished 2012 with $670,000 of Class A loss, and they left the year with only $1,931,000.) Looking at their previous years, this seems to be a pattern, not an anomaly.
The $10 million total capital (versus only $1.93 million of their own) on 12.31.2012 shows they are highly leveraged and running the firm mostly off trader and group leader capital contributions (5 times leveraged by using Class B and C capital contributions).
Be aware when making a capital contribution to T3 of their financials. Scrutinize them and ask questions, and require answers, preferably in writing. You have the right to ask. The SEC forces these public disclosures for a reason! Your capital contribution is NOT a deposit. It is subject to the losses of the firm including their operating expenses (read any prop firm's operating agreement).
Adding WTS's traders may only exacerbate what wasn't working beforehand. WTS's capital base is minuscule, especially for the amount of traders they supposedly have. Their recent years Class A results aren't disclosed on their financials on SEC.gov like T3's (although there is plenty of information in their filings if you look), but it is very possibly more of the same (and even if it isn't, the full capital isn't material enough to change the way T3 looks).
But wait! There are kickers! All from publicly available regulator websites.
Check out their clearing firm, ETC (full name is Electronic Transaction Clearing), on SEC.gov and Finra's brokercheck.
The SEC site shows their whole clearing firm only has $2.023 million dollars! That is smaller than many of the single, solo accounts of active trader's retail portfolio margin accounts. Repeated, the whole clearing firm is run off of a capital base of $2,023,000!
And yet more public information from the regulators websites! Check this out. Read through but make sure you get to the end, #17 in the notes.
http://www.sec.gov/Archives/edgar/vprr/14/9999999997-14-004554 (also detailed on finra.gov).
So to top it all off, ETC received a $1,000,000 fine from the regulators last year (and is appealing), along with a regulatory suspension of their CEO, the COO and the CEO of their parent company. They are also dealing with charges from Finra and subpeona's of their management by the SEC a another matter, of which they say there is 'uncertainty' about the outcome.
So to sum up, all from public filings, T3:
- lost money in 2010, 2011 and 2012 (and stopped disclosing it in 2013 thank gosh)
- runs their firm at 5 to 1 leverage off of trader capital
- plays Russian roulette with their firm's money ($10 million plus, much of it which looks like trader capital contributions) by putting it in a clearing firm with only $2 million capital base
- and does business with a clearing firm which was already punished with a $1 million dollar fine, along with its CEO and its COO/President being suspended for 6 months, which, if it loses its appeal, or one of the other pending regulatory matters it outlines in note 17 (with each of FINRA, the SEC and CBOE), will be down to $1,000,000 and lose its leadership (who is one of the guy's signing off on their SEC submitted financials!)
All these warning signs from just their public filings. Can check them out yourself.
http://www.sec.gov/Archives/edgar/vprr/13/9999999997-13-001763
http://www.sec.gov/Archives/edgar/vprr/14/9999999997-14-004554
http://www.sec.gov/edgar/searchedgar/companysearch.html
Finra.org
Wow, that's a lot of homework you did. Although I'm not a lover of prop firms in general, I think T3 only uses ETC for execution. I think they clear though another PB. To establish the JBO relationship, when you can get the real leverage that is required here, the PB has to have over $25M in capital.
Nice work...1245
Nice work...1245
@SgtSlottter That's some good work there.
What are the possible scenarios that could unfold with T3 based on the information you have provided? Do you think that the WTS buyout/"merger" is an instrument used to "buy time" and hope for the best?
What are the possible scenarios that could unfold with T3 based on the information you have provided? Do you think that the WTS buyout/"merger" is an instrument used to "buy time" and hope for the best?
Yet they couldnt manage to call me back...
You have any references or even anecdotes for this? Intraday real-time margin requirements are lifted at 5M PMA. Why would any of these firms deal with a JBO setup if they can just use the FINRA PMA limits?
You are correct. If they were a customer, and had a PM account, they could get excess leverage if their capital were over $5M. However, in a customer account they may not mark up commissions and would be restricted to making money from your profits.
Look at page 30 for the ref, you asked for: http://www.finra.org/web/groups/industry/@ip/@reg/@rules/documents/industry/p122203.pdf
/01 Margin Basis
A member may carry the proprietary account of another broker-dealer upon a
margin basis which is satisfactory to both parties, provided the requirements are
not less than that which is required pursuant to SEA Rule 15c3-1.
(B) Joint Back Office Arrangements
An arrangement may be established between two or more registered
broker-dealers pursuant to Regulation T Section 220.7, to form a joint back office
(“JBO”) arrangement for carrying and clearing or carrying accounts of
participating broker-dealers. Members must provide written notification to
FINRA prior to establishing a JBO arrangement.
(i) A carrying and clearing, or carrying member must:
a. maintain a minimum tentative net capital (as such term is defined in
SEA Rule 15c3-1) of $25 million as computed pursuant to SEA Rule
15c3-1 and, if applicable, FINRA Rule 4110(a), except that a member
whose primary business consists of the clearance of options market-maker
accounts may carry JBO accounts provided that it maintains a minimum
net capital of $7 million as computed pursuant to SEA Rule 15c3-1 and, if
applicable, FINRA Rule 4110(a). In addition, the member must include in
its ratio of gross options market maker deductions to net capital required
by the provisions of SEA Rule 15c3-1 and, if applicable, FINRA Rule
Look at page 30 for the ref, you asked for: http://www.finra.org/web/groups/industry/@ip/@reg/@rules/documents/industry/p122203.pdf
/01 Margin Basis
A member may carry the proprietary account of another broker-dealer upon a
margin basis which is satisfactory to both parties, provided the requirements are
not less than that which is required pursuant to SEA Rule 15c3-1.
(B) Joint Back Office Arrangements
An arrangement may be established between two or more registered
broker-dealers pursuant to Regulation T Section 220.7, to form a joint back office
(“JBO”) arrangement for carrying and clearing or carrying accounts of
participating broker-dealers. Members must provide written notification to
FINRA prior to establishing a JBO arrangement.
(i) A carrying and clearing, or carrying member must:
a. maintain a minimum tentative net capital (as such term is defined in
SEA Rule 15c3-1) of $25 million as computed pursuant to SEA Rule
15c3-1 and, if applicable, FINRA Rule 4110(a), except that a member
whose primary business consists of the clearance of options market-maker
accounts may carry JBO accounts provided that it maintains a minimum
net capital of $7 million as computed pursuant to SEA Rule 15c3-1 and, if
applicable, FINRA Rule 4110(a). In addition, the member must include in
its ratio of gross options market maker deductions to net capital required
by the provisions of SEA Rule 15c3-1 and, if applicable, FINRA Rule