they can only be exempt if they DO NOT collect a commission (transaction-based or trader-based or similar) but rather make profits through PnL made through accounts with a registered broker-dealer with proper supervision. The oversight then falls on the B/D and not the firm. In Nonko and Lewis Firm Trading and Titan Equity Trading and all these other places, the exemption does not apply. They make commission on your trades as their revenue and your money is in your personal account. You guys need to understand the difference. If you are paying commissions to the firms, they must be registered as a broker-dealer. If you are only paying a profit split and the commissions are pass-through, the firm does not need to register but the accounts do need to be at a registered broker-dealer for supervision.
I couldn't agree with this more. I had an account with Lake Street (which wasn't offshore...was out of Chicago). I closed in late last year when I got nervous about the sec shutting down those firms. I now trade through JC Trading Group (WTS). They sponsored me for the 56 and even gave me access to a live webex review class (they offer the class monthly). I studied about 2 weeks and then sat through the class for a week. I passed easily with an 84. I have been trading there a for a few months and couldn't be happier. Great platform, great routes, great trader support.
Evo, We are obviously on the same side about trading with offshore firms, but you are wrong on this. A broker by definition collects commissions! The SEC specifically list criteria which brokers (and dealers) might be exempt from registering ( I posted the link from the SEC website in previous post...it is very clear). The simple fact that a firm charges a commission does not mean it has to register in the US. There are numerous retail firms in Canada for example that are 100% legit and trade US stocks and are not registered with the SEC (I believe Quest Trade is one). By your logic and statement that "they can only be exempt if they DO NOT collect a commission (transaction-based or trader-based or similar) but rather make profits through PnL", are they allowed to collect a commission that at least covers their cost to clear a trade? Or are they supposed to let traders trade with no clearing fee at all? Or is your logic that they can only charge their traders the exact cost they are being charged? Please explain. Also, please post links to the SEC rules that your are quoting, for example "If you are paying commissions to the firms, they must be registered as a broker-dealer". Again, not trying to be confrontational but traders should know the facts, not just opinions. Posting a link from the SEC website goes a long way to do that.
Thanks for the info, obviously there is a different understanding of the rules, but it's good to have t all out there. I can't imagine it will be too difficult to shut these firms down, how many of them are there? 10-20? In October I will probably open an account offshore, but keep it small while I study for the exam. Hopefully next year I can move to a us based firm.
To EvoTrader or anyone else: Why do people open accounts with offshore entities instead of regulated entities like Bright, Echo etc. where your deposit is 100% sure? What are the advantages offered by these offshore firms over Echo/Bright/T3 etc.?
I think most of the people who fall into the offshore prop catagory are probably in my situation. They dont really have enough capital to daytrade in a retail firm, they do not have the series 7 or 56 licence. So we are kind of stuck in this situation of trying to get margin accounts to activly trade, but we cant get the license at the moment for whatever reason. Question for Evo......is it true that US prop firms do not accept people from outside of the USA? If they don't accept traders who are not US citizens, traders from other parts of the world probably also are stuck with offshore firms.
The clearing costs is charged to the firm as a fee from their broker. There is a difference between marking it up and it being charged to your firm. If a firm pays .003 per share and charges their traders .003 per share and don't markup any ECN or other fees, they are exempt. If they markup fees, they have to register. If a firm is operating a private equity firm they don't have to register but if they are marking up fees, they are acting as a broker-dealer. I'm not saying the SEC will interpret it this way but they can if they choose to according to the current code.
Evo, Until you post a link from the SEC website (like I did) defending your opinion I don't think anyone should believe your opinion. There are rules about who must register. There are rules about who is exempt from registration. These firms are relying on the specific rules about foreign firms. I am not defending Nonko. I have no opinion of them or have any knowledge if they are exempt or not based on the link I posted earlier. I have given many examples and all you keep doing is saying the same thing over and over again without anything backing it up. Do you purposely not post links, can't find them, or do they just not exist?
This is the best post in this thread! Just take the 56 and you won't have to worry who is exempt and who must register.