1 yr Lockup of Funds at Prop

Discussion in 'Prop Firms' started by JamesL, Feb 7, 2010.

  1. JamesL


    All these CBSX firms require 1 yr lockup of funds and they reference SEC 15c3. Where does it say that a trader's deposit is locked up for a year? If one puts money up with one of these firms, does the money stay there for a yr even if you quit the firm? Do Series 7 firms have lockup periods for deposits? If not, why would CBSX firms require it but Series 7 firms not?

  2. While I'm not familiar with the rule, the very act of registering as a prop trader is merely a declaration to the SEC of your intention to earn most of your revenue from trading profits. Prop firms take your deposit as "contributed capital", and essentially flow directly to the firms net assets and increase their leverage capabilities. Mainly money to the firm is made through excessive trading. It wouldn't surprise me that they'd tell you to committ at least a year to the firm. It's really for your success as well as training purposes.
  3. JamesL


  4. no, its not a rule, its a gimmick to tie up your capital. No prop desk at any investment bank ties up your base salary (they nowadays may pay out the bonus over a longer period of time). If you already contribute capital then I would only go for deals that guarantee not to lock up any of your capital....

    just my 2 cents

  5. I see nobody has an answer, ya' gotta love this site!

    There must be a reason, somebody anybody, does anybody have a clue?

    Ask Don Bright, he is one of the few people that have a clue on this site.

    WHO DAT?
  6. bigpapi


    Not all, there are firms that do not lock up your capital, and others that lock it up for short periods, it's up to you to find them.
  7. jumper


    No, it's not a gimmick. From my understanding, if the firm uses the trader's capital for net cap, it is subject to a one year lock up. If the capital is segregated and not used for net cap, then there's no lock up. It really depends on the capitalization of the firm. Some firms will and some firms won't use/need it.
  8. of course its a gimmick. A prop firm which is trying to pick newbies on ET and has the need to utilize their "capital contribution" in order to increase their own leverage capabilities is by any account a shady outlet, a gimmick. I would never even talk to such firms, they may close shop tomorrow because the their risk manager had a beer too much over lunch and my capital is gone, whatever it may be....no, thanks


  9. not necessarily.

    the larger the company grows the more capital it needs to provide leverage to clients.
    do not forget - you are trading prop - so many firms will require you to lock up the capital (has nothing to do with CBX members - NASD/NYSE (now FINRA) used to do same thing (assent, etc).
    A firm i was registered with did not - but only by choice .

    the lock up of capital has nothing to do with firm viability - just consider that a + / -

    AND i would feel safer with a lock up with a registered firm then NO LOCKUP with a non-registered firm.
    Just look at recent prop threads with people's money disappearing.

    net net - u can get burned anywhere.
  10. JamesL


    So how exactly does a lock up deposit at a firm which uses this deposit for capitalization, that then blows up due to one or two traders, safer?
    #10     Feb 8, 2010