Here's how you monitor ALL your traders... whether at Echo or Bright: you have a list of all your traders sorted buy % of P&L lost. This is constantly updated. All you have to do is see who's at the top of the list. Both companys have multiple people watching these lists. There are also other ways to watch like % of firms captal being used, etc. BTW, even if lots of people are "jumping ship" at Bright... I heard they had over 20 new people sign up last month. I would guess that they are losing some of their better traders to Echo and signing up higher risk new traders. The marketplace will decide the best deal... just a matter of time. Fletch
well if one's main concern is risk management, i would be very concerned about the amount of spread trading done at bright. this is a huge part of their business(i hear pairs trading has become quite big now) i know ge/hon hurt some guys over there. last time i looked, risk management software can't tell me when a deal is about to blow up. my conclusion is there is risk in this business period. is bright riskier than echo???? as we can see from the multiple post there are opinions on both sides. i guess we all have to do our own research and then make a decision.
There are no guarantees at an LLC, but for me, the extra leverage of a pro firm greatly outweighs the security of trading at a retail broker (assuming you make your profits before a firm blows up). The GE/HON deal was one that "couldn't go wrong". The market always loves to ruin a sure thing. That was a pretty big deal and I hear Bright was heavily into it. Incredibly, Bright is still in business (although a few traders are not). Bright has now implemented risk assessment sheets for every arbitrage and pair that you want to hold overnight in size. You have to justify the size you are trading with your account balance and "potential" loss. Although this doesn't guarantee there won't be big losses, they are more aware of the risk than ever before. One key is not put all your eggs in one basket... not all of the arbitrage deals or pairs are going to go against you (well, at least not all at the same time). Fletch
can anybody explain to me the mathematics of how these prop. firms stay in the black?? They take on a huge number of 'fresh' traders who most likely lose money for at least several months initially,,,most of which call it quits after the first year of not making any profits. But fortunately for them none of their capital is in danger. Moreover the successful traders are getting 'high-payouts'. So, how's it working? If anybody can explain the theory of Proprietary firms I'll greatly appreciate it. Any links for research? I have been a pro trader for 5 years now,,,,I just ignored this onslaught of proprietary traders, but its getting too popular and being the contrarian that I am, ignoring it is officially an impossibility ;-) thanks in advance Dr Hoo
Listed firms, get juice from specialist firms for volume ! Naz firms also make the penny a share which also adds up with volume. Add this to the fact that not all prop firms will bankroll you. Bright has zero risk on you depositing 25K. ETG will bankroll but the first three years in business they did not. They just get the juice from SLK and got them invest in them as well. The cost for specialist firms is practically zero, also they can charge the specialist commission and rebate(juice) for million shares traders. This rebate sometimes comes back to the trader (at Bright, ETG) sometimes goes to the firm's pocket. This is why Bright brothers "bad mouth" the Nasdaq, why else ????
All brokers make money on margin interest. Pro firms with higher leverage probably derive a good revenue stream from margin alone.
Actually as a trader with Echo if I hold no overnight I am charged no margin interest at all and earn interest instead on my balance. True daytraders don't hold overnight positions as there is a lot of risk overnight. When I do hold overnight it is either at broker's call or very close to. They aren't making money on margin. rtharp
For pure day traders, you don't get charged margin interest, I agree. Many pro traders also do extensive arbitrage and pairs trading, with positions lasting several days. In that case margin interest becomes a revenue stream. The "haircut" thead gives good examples of how this is calculated both at Bright and Echo.
I found Bright Trading to be more than forthright and up front in their books, their records, their recounting of their trader's profits for the current year to-date and previous year. And, get this, they actually had their K1's issued and in the hands of their traders by mid January 2001 for previous year. I hear that Onsite just delivered their K1's in mid/late August. Should Bright be another Harbor, then I guess battleships can both float and sink, but it would take a whole lot to blow past their risk manangement safeguards as well as their $250m+ surplus capital base. One would naturaly never want that to happen, even in just simple discussion. Really, should any of us wanna-be'z ever achieve their levels of success, then pity us, should we have not learned along the way to diversify such holdings. I feel for those traders, both good, bad and pretty, who lost their monies when Harbor (whenever it did) went down, as well as other firms capsized in calm waters. It is a devistating experience, even to just read about on this site, however, the posibility seems more real under these conditions. Let's face it, the Sunday Business news shows stated that over 1 million persons have lost thier jobs since this Administration began office. A local newspaper's weekday page3/page5 article had a title that included this phrase "When the 2nd layoff job doesn't pay, while you're waiting for the 1st layoff check to clear ...". We collectively can't continue to expect that there remains over 800,000 surplus jobs to absorb those who were formerly employed, just that easily. We may see even more situations occur, yet.
Those places are nothing more then modern day "bucket shops" that prospered mightily during the 94-99' Bull Market. Anyplace that charges you a lot of fees, desk and screen charges and won't even pay for your Series 7 exam, let alone you paying ticket charges plus having you put up your own money is basically telling you one thing and this is going to hurt. You have no pedigree, educationally or otherwise. If you did you would have a job at Goldman or Morgan, Lehman or some other place. Quit kidding yourself about these joints, and God forbid when one of them go under, try and get your precious deposit back.