thanks for the replies (Gene, Bro59, etc) Gene, I concur, should a trader not last 12months, then perhaps, regrettably, the stars were not lined up, just so, or the ability and the Bull weren't running in the same parade of Roses ... (I thought I was clear in stating that my complaint applies to ..) Months 13 - Infinity, should the LLC member need to deposit additional principal, then those "subsequent" funds (not the initial principal deposit done during months 1 - 12), those subsequent funds would be aged, yet again, another 12 months. Hence each additional set of funds deposited would have a 12 month string following it. I can't see how that statement could be confused with the initial 12 month deposit issue. I, as well as any other licensed broker, should be responsible enough, and check with the Phlx and/or the SEC for this specific ruling in writing, and see the wording for themselves. Surprisingly, the SEC only confirmed the initial 12 months issue; the Phlx confirmed the SEC and further clarified, that should the actual house / firm further bind the contract in more restrictive wording, then cavet emptor (if that's the right spelling)... Hence, my original and subsequent complaint stands on its initial face value. Traders / LLC members beware of your contracts both presently and future ones.... Gene, thanks for the additional coments, and I'm sure that we'll meet in the future...
I've read about this 12 month holding period but i also have been told that if the llc is funded adequately then it is up to the descretion of the llc to return a leaving member's initial deposit as long as the withdrawal does not affect the firms ability to remain in compliance. also, i have been told that a trader can claim hardship and receive their deposit back before the 12 months. i mean no disrespect to gene but i think that if an individual wants his money back and is willing to be aggressive then he/she will get his money back, unless the llc is hiding behind this particular ruling. i may be wrong, but this smells of "golden handcuffs" to me.
Gene, thanks for the explanation. Bryan is right about being able to get your money back. This is where the difference comes in. You need to choose your trading firms wisely. I trade at a firm that has been around for quite some time, and because of their large capital structure, they can and will allow you to take money out if needed. What happens is that the owner of the firm will use his money and return that to you. If you are trading at a new shop that only uses traders capital, then you may have a tough time getting your deposit back. There are traders at my firm that have built great relationships with the owners where even if they blow up, they are still allowed to trade. They realize that most people have potential, and that you learn alot after a few bad beats. The wise trader will learn his/her mistakes and turn it around. If you continue to do so, then they'll cut you off. So as you can see again, choosing the right firm has lots of advantages. Another advantage is unlimited intraday margin. I am hearing of firms that will let you put less than 25k, which is totally crazy, and give only a certain amount of margin. Professional Traders need unlimited margin when they need, and you should have access to it. I am not saying go out and use 50 to 1, but you should never have to calculate margin while trading. Some firms do hold 25% of what you make, if your account does fall below a certain amount for a specified number of days. Alot of people complaing about it. If you really think about it, If you had no money, or little capital, and then made $100,000, why would you complain about making $75,000? I hear alot of bitching around about companies that hold 25% until the end of the year for bonuses. Well, its true that some firms do it and some don't. Understand the rules first. Some spread them into future years, and some do it at year end. Behind the 25%, its possible to keep 100% everymonth. I know a trader at Bright who says that if you make over 200,000, then they you keep 100%. Other firms don't do that, and keep it all till the end of the year. All this talk about getting interest on it is rediculous. Let me ask you guys this, where are interest rates going? Nothing but down. I am assuming that most of these people who are complaining don't even make 50k a year. so 50k a year, about 4k a month, and then 1k for the 25%. 2-3% interest is nothing on it, you couldn't even buy a nice dinner with the interest, well, maybe one at the end of the year :eek: And if you invested it in the market, you would have lost money.... so the argument about investing it etc has little value and added market risk. The advantage that you have is that you can use the bonuses towards the IRS. Thats right. the majority of traders don't save adequately. They go and spend when they have good days, etc. My suggestion is that choosing the right firm will allow you work around a few numbers Best of Luck
We will let traders take out all capital in an emergency. SRO's do not want money coming in and out of L.L.C.'s like customer accounts. If a trader can't make a $25,000 capital contribution to an L.L.C. for a year, he/she is probably not a professional trader. Our L.L.C. members can withdraw any profits above their capital contribution . If a trader keeps losing money trading , I would not lend him/her money. If you can't make money trading , I would find another line of work. Stock trading is a very difficult full time job that requires sufficient capital , skill and time to learn. The SEC & regulators do not want capital contributions from individuals who cannot afford to make them in the first place or the lending of capital to traders who lose money. The main complaint SEC and state regulators had with firms beside risk were lending practices of firms and abuse of margin. I would agree with Mr. Nuetral that firms should require sufficent capital for daytrading that might be above SEC or SRO requirements. The SEC does not want temporary capital contributions to L.L.C.'s. The new rules for capital contributions were created to keep individuals with minimum capital and income from joining an L.L.C. in the first place. Remember, when you make a capital contribution to an L.L.C. , this is not "traders capital", this is firm capital that you as a L.L.C. member have contributed for one year(see L.L.C. agreement). L.L.C's are not "customer" accounts and according to regulators , should not be treated like customer accounts. Gene Weissman Lieber & Weissman Sec., L.L.C. gweissman@stocktrade.net
Fohat, I think there is a misconception about the difference beween the two different types of firms that offer short term trading. The two different types of firms were discussed in the SEC study Report of Examinations of Day-Trading Broker-Dealers on Feb. 25,2000. There are the NASD firms and LLC's : See http://www.sec.gov/news/studies/daytrading.htm . A. Organizational Structures: The second model is the LLC partnership structure in which a firm operates a proprietary business. These firms represent that they do not have customers, but "members" who become part owners of the firm. Day traders at these firms, as part owners, contribute capital to the firm and in turn, trade the firm's capital. Most of these firms are members of the PHLX. There are approximately 13 day-trading firms that are members of the PHLX. To become a member of a day-trading firm structured as an LLC, individuals are required to sign operating agreements that designate the member's ownership rights including: profit sharing arrangements, restrictions on withdrawals, provisions limiting losses, and other provisions common to partnership agreements. Because these firms are exempt from registering with the NASD, they are not subject to the NASD Conduct Rules.12 The capital contribution to an L.L.C. becomes firm capital. There are no customer funds or traders capital. When you join a L.L.C. you are trading firm capital. Capital contribution to an L.L.C. has to be made for one year (new rules). I don't necessarily agree with this , but I must follow the new rules. If you cannot commit capital to an L.L.C. for a year , set up a customer account at a NASD brokerage. We follow all SEC & PHLX rules, and I can't comment on other firms practices. I hope this will set the record straight. Gene Weissman Lieber & Weissman Sec., L.L.C. gweissman@stocktrade.net
Personally, I don't understand the "controversy" with pro firms. As a trader you have several choices of how you want to trade: 1. retail with 2:1 or 4:1 margin, regT and the safety of SIPC insurance 2. pro, ie join an LLC such as Echo or LWS. 5:1 or 10:1 margin with capital restrictions. No SIPC insurance. 3. futures with risks that entails. Just read the account/LLC agreements before signing up. Everyone is regulated to some extent by the SEC or the equiv futures regulatory body (CFTC). Nothing fishy going on ... just different structures.
Gene, good thing that you participate in these threads, as an owner and trader. Perhaps we are better off by having your level contributions to these threads. Cavete Emptor seems to be offensive wording, based on your replies, and, well gets the response, similar to what other firms abruptly state, namely, "if a trader can't sustain the contribution then perhaps they should not ..." (and so forth), or, "anyone who can't put up .... (funds for specified period) should not consider ...". Well, I've seen many a trader while at Onsite, which is now AB Watley, and who really knows why; meet the initial suitability requirements, and got "jiggled" through no fault of their own or through mismangement of their accounts. That jiggling occured through: 1) stupid failures and problems with their SLK Redi+ software, whether these were T1 line disconnects, or their actual PC not being able to handle Redi+ and the charting package and news server windows and the clock, and 2 monitors, or 2) consistently bad fills or redirected orders flowing to non-designated ECN's or whatever, I wasn't fully aware of the details, or 3) trading instructions and recommendations which were faulty at least and fool-hardy at best, where one is told to look for baselining NASD stocks and buy them in anticipation of a pop, which should capture the move, only to find that after so many purchases and loss-covering sales, maybe 1 out of 8 worked, or 4) subtle and strong encouragement to generate tickets daily; whether or not you maintained your capital, made a profit or even a living wage. So, I agree with you, perhaps even as LLC members, even if one is able to deposit firm capital for 12 months or more, then they shouldn't expect to be treated as a typical customer account. Perhaps, customer basis would have left so many of these "now poorer souls" their protections aforded them by the SEC, and SIPC and whom else. One thing that's good, is the vibrant, healthy debate and commentary that continues to vibrate through these threads. Oh, incidently, a number of these traders are happily at other firms and not experiencing those jiggles, irrespective of the market conditions.