Agreed 100%. I know one firm in particular that is suing a friend right know, again they keep sending the same letters to his lawyers and he gets charged for every letter his lawyer reads. In effect they try and win by default which is just spiteful. They do it frequently too, and it seems to be all that keeps successful people from leaving. I know of at least 5 or 6 other similar past cases involving the same firm, and know of about 3 other past cases at another prop shop. Either way the deal may be non-enforceable but they will still try and tie you up in court out of spite. I think that their real aim is to make examples of defectors so that other less free spirits will fear their wrath and do as they are told. As has been suggested before if you lose lots of money consistently then they will fire you, and then you are free to go wherever you like. I have seen people deliberately piss money away to escape a bad deal, and if they suspect that they may sue you for gross misconduct if they can prove it. However it is near impossible to prove and so they will usually just drop you like a brick, thus allowing you to go elsewhere. Not exactly ethical maybe, but highly effective usually. My advice is if a firm has a non-compete clause then they will usually try and make life hard as FuturesTrader71 has already described.
disagree..most firms contract the traders as independant contractors and thus the trader can leave at any time with no recourse. Secondly most all firms have a period of time that is unforceable as the max is 6 months and very few firms for 6 months will sue.traders and people are able to make a living should they please.I can give you case law after case law so yes the firm can try to make you life miserable but most dont as they can never win in a court of law. momo
i'm another person that can't understand signing a contract that ties you in to one firm. Probably an easy way to get out of a contract is to get yourself fired. Just start buying out of the money calls on the third friday of expiration month at 3.59pm.
Have a good look at your agreement before you take the "suicide pill" advice offered here. It is better to get fired for coming in late and not trading when you show up. Bring a trading book and read or something. You have the possibility of leaving on friendlier terms. Again, provide a bit more detail and I will offer you some sound advice. Spend $200 and have the contract reviewed by an attorney.
If you take a salaried position then you are an employee and they do have a hold over you, I have seen it happen. You can't trade for yourself or a firm and as for saying that they can't do it, well they can and do. Many such firms have a company attorney who will do it as part of his job. Just to clarify for those who say non-competes are worthless as they can't stop you from earning a living, you are all wrong. They are NOT stopping you from earning a living as THEY are employing you already, they are saying that you cannot earn that living with someone else and you agreed to it. If you have a prop deal where you are an independent contractor then sure non-competes are worthless as they have no hold over you. But as a employee you HAVE a job, but you decide thatr you don't want it and they can argue that they want to still employ you so tell a judge to make you quit trading or come back to them where your job still exists. Non-competes do not prevent you from trading or earning your living, they prevent you from doing they job they claim they taught you with someone else, and the fact that you agreed up front and took the salary will bias the judge against you. If they said that they didn't want you then the judge would rule it unfair as then they are just trying to hurt you, but if they say they want you back then the judge could argue that if you still want to trade then you still can, YOU would just need to honour the contract and do it with them. So as Showtime said it is possible to bring people back to a firm after it is ruled that they cannot trade anywhere else, don't believe me then try and leave and they will chase you if you are any good. I know of this to have happened, I have seen it happen, and just the fact that they will try and make your life hell with legal costs it is not worth going down that route, try trading with a law-suit looming over your head, it would just be an added pressure that you don't need. I did know one guy who had a salary at a prop shops and demanded to be fired, sat there read a book, studied for professional exams etc, but then they can apparently sue you for gross-misconduct and deliberately not doing your job and so hurting the firm who has been paying you a salary. Again another bad idea, eventually he caved and started to try again.
I have a question, how can a firm stop you from trading your own account? And how would they be able to even find out your trading on your own account? There are so many ways around this it seems like a non enforcable clause if it is indeed in these contracts. And as far as a firm harassing you legaly and other wise like with the credit rating, if they go to far there are ways to harass others too if the fighting gets personal and they crosss the line. I personally take the easy way out and do my best to avoid battles. At least now that I'm older thats what I do.
I think the laws differ from state to state. Going to another firm may be a problem depending on the laws. However, I doubt any firm could stop you from trading your own account. Mr. Kamikaze what state are you in?
I am in London, England; but I agree some states do vary on their stance, at least that is what I hear from friends in the US. As I said if you are independent or backed but no salary or draw then you will be fine, most of those places don't have non-competes anyway. It is really only if you are employed and take a salary that you need to worry. You could still invest in stock or go through a broker to trade, just don't plan on going to another prop shop. In the UK the way firms usually find out if you are somewhere else is via your new firm requesting your fast-fills from Eurex. To trade on Eurex with fast-fill priority you need to pass the Eurex Trader exam (within 3 attempts; nasty exam but I passed an to trade proprely you will need it). Most European traders trade on Eurex and most firms want you to have theis exam. When you switch firms you new firm contacts Eurex to get your fast-fills registration for you via Eurex, and unfortunately Eurex has to contact your old firm to do this. This is where the problem arises as to get your fast-fills you get stitched up and they know where you trade and the fact that you are still trading.
Just to address a few of the points brought on here: Non-competes cannot be general and unlimited to be upheld in a court of law. Non-competes must state an operating radius and duration (for example, within 50 miles and for 2 years). If left generic, they interfere with the right to earn a living guaranteed to everyone. The firm must also prove that the former trader is using the same or very similar business model and threatens the employer's ability to compete. A firm cannot force you back in the seat after you have left. A person is free to leave, but they must put up with very costly legal battles to defend his property/income from being taken as payment to his former employer. A prop firm will not want an angry trader in the seat anyway. 90% of the time, these cases are done for spite and to warn others from following suit. A firm can find out if you are trading under your own account if they provide a subpoena requesting those records from your clearing firm. It is best to just express your discontent with the firm and try to work out an amicable exit. Most firms would not sue for gross-misconduct, but the cost of fending that off can be a drag.