Becoming a backed trader

Discussion in 'Prop Firms' started by thetraderprofit, May 7, 2002.

  1. I'm throwing this out for everyone to knaw on.

    I've had a measure of success as a prop trader. I'm willing to
    teach my strategies to the right person(s), and to back them in implementing those strategies.

    I'll put up $25,000- $50,000 per trader; they can have leverage of at least 10-1 overnight on hedged positions.
    They cannot trader any hedge without my approval, and can only trade my strategies.
    They will have access to bullets, and be charged a reasonable (1
    cent/ share ) commission. They can only trade in my office (I'm not a broker/dealer), must move to my location, and take securities exams.

    They will have no risk.

    What's a fair split, considering I'll be earning a significant piece of the commission?
  2. From my experience, I'd say 60/40 or 70/30 (the trader gets the higher percentage) is highly competitive. Other companies use a sliding scale payout based on your ticket average (with a max payout of 50-55%) and super low transaction costs ($6-7 all in, including ECN, SEC tax, etc.), but even then it's tough for the trader to make decent cash in this market. If your transaction costs are around $10 or above (all in), then I'd max out the payout percentage to 60 or 70% straight up with no ticket average.
  3. My transaction costs are based on 1000 share blocks. If you charge 1 cent per share (which is a bit steep), then you're already looking at $10 per 1000. If you tack on ECN fees, SEC tax, etc. for Nasdaq stocks, then your transaction cost is around $12-14 per thousand shares. It's cheaper to trade through an online broker...
  4. 50% is typical in the private trading groups I know.
  5. liltrdr


    I'm interested in becoming backed. Please check your PM when you get a chance.
  6. 60% with the 50k capital seems reasonable. Not many firm's backing traders these days. Does the trader need to sign a contract obligating him for a minimal amount of time?
  7. Will be interested based on where you are based. Sounds interesting.
  8. xtrader


    where is the trading office?
  9. Why charge them anything at all? These are your traders, right? You are essentially 'hiring" them without pay, so just pay them a percentage of "net net" profits....wouldn't that make more sense?

    Our traders who back others don't have to transfer any capital anyway, as I;m sure you won't, just "guarntee" the accounts, and give them a share of the profits....

    And who wouldn't want to move to Vegas anyway?? Why would anyone live anywhere else??


  10. axehawk


    What licenses do you require?

    I've heard that taking the Series 62 then the 55 was an easier and less time-consuming route than taking the Series 7.

    Will you be able to sponsor incoming traders prior to them moving out west?


    #10     May 23, 2002