Registered: Apr 2011
03-06-12 11:12 AM
Quote from NegativePips:
I'm looking at a prop firm that's relatively well known in my area but was surprised to hear they do their own clearing. Is this normal? I started wondering about it after I stumbled on this link listing things to look for in prop firms and they mention having a reputable clearing firm. Why would a prop firm do their own clearing? Is this reason for concern?
If a prop firm is self clearing, they can have larger margins if they are big enough to pay for the infrastructure. Sometimes, they outsource some functions like stock loan if they can't handle it. Remember, as a member of a broker dealer, you're not protected by SIPC. If your prop firm is taking the added risk of being the prime broker, that may not be in your best interest.