Bright Trading = Proprietary Firm?

Discussion in 'Prop Firms' started by Treykool, Apr 10, 2002.

  1. Treykool


    What is the definition of a proprietary trading firm?

    Why does Bright Trading call itself a proprietary trading firm? They require 20-25k capital up front from each trader...of which your losses will be deducted from. The firm takes no hit whatsoever and "conveniently" asks for more capital or releases traders who deplete their initial capital. Furthermore, they charge monthly desk fees and ask you to PAY for your own training (lectures, seminars, etc)....skills once learned that will generate profit for them. This looks to be no better than your run of the mill retail brokerage.

    I understand that they are a sponsor for this board. However, I thought it was sort of oxymoronic in a way.
  2. Eugene



    They can use Proprietary because they don't require all traders to deposit money. Just most of them. Don has mentioned this a few times on this board but its not advertised.

  3. They use the term proprietary because of the ability to meet net capital requirments of a dealer rather than reg T of a customer. The traders are just like a customer who is able to avoid reg T. The Bright's take no principle risk. You get a great payout and low rates, but it seems to me they have no confidnece in you as a trader. A firm that takes risk WITH you is better. You give up some of your profits, but you can just trade larger to overcome that.

    Bright is a good firm. It just is more of a brokerage than a proprietary firm in the tradition of the Saloman Bros, Goldman Sachs or even First New York world (and other firm's too).
  4. Treykool,

    After you make a capital contribution to a firm like Bright, LWS , ECHO and other pro firms, you are actually trading firm capital. For accounting purposes, you are issued a sub account and become a LLC member(partner) and are issued a K-1 tax form for tax purposes at the end of the year. Your payout at pro firm can vary depending on whether you make a capital contribution to the firm or not. I know Don Bright comes from an
    accounting background and I'm sure he will add some thoughts
    when he returns. See SEC report on Day Trading Broker Dealers.
    The report discusses the LLC(Pro Firm ) structure:

    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

    See the complete SEC report at :

    Gene Weissman
    Lieber & Weissman Sec., L.L.C.
  5. Gene,does this K-1 form deduct out commissions and desk fees,showing the trader's net gains?
  6. K-1's that we send our traders show:

    Capital acct. at the beginning
    Capital Contributed during the year
    Partners Share
    Withdrawls & Distributions
    Capital Amt. at the end of the year
    Taxable income or loss

    I believe the Partners share(gain or loss) includes commissions,
    desk fees(as a misc. expense ) and interest income(loss or gain).
    On the K-1 form there are lines for Interest,Portfolio Income(loss),
    other income etc. It's best to discuss the K-1's with the firms Managing Members and/or your CPA. I am not a tax professional and I do not give accounting advice. My comments only pertain to our firm for comparison purposes only.

    Gene Weissman
    Lieber & Weissman Sec., L.L.C.
  7. The term "proprietary" refers to the fact that all traders within the firm are given the advantages of trading with firm capital, access to the markets, and all the other benefits offered (taxes, etc.).

    It has only been lately that the debate about "no cash up" trading as referring to "proprietary trading."

    To say that we have no risk is not true at all, we have "eaten" millions over the years when traders lose more than their initial capital contribution.

    One of the primary reasons to be "proprietary" is to avoid being treated as a customer of a brokerage firm (often debated here, so I won't re-visit it).

    When a trader uses 2-4 million placing opening only orders (or other strategies), then the benefits are quite obvious.

    I will respect Baron's note to "Hitman" on his thread, and simply ask that anyone who has questions can email me directly or call the firm.

    Gene took care of most of the rest, thanks Gene!!

    Hope this helps...
  8. Don,
    I apologize for not knowing that some traders were able to lose more than they put up. Sorry to hear it. You do have the risk of the rogue trader. I hope you try to collect from them.
  9. nitro



    As fars as I know, Worlco (Hitman) does not pay Elite Trader and therefore does not have the "right" to give support on this site.

    Bright (ECHO/IB/LWS) on the other hand pay dues to Elite Trader, and therefore I believe are entitled to give as many facts/support about the respective companies.

  10. Treykool


    Hey guys,

    Thanks for the great info! Really appreciate it. It seems as though the term "proprietary" has been bastardized beyond recognition.

    #10     Apr 11, 2002