Well, the 100% days are over. But there certainly are no shortage of firms that offer much higher payouts then 80%. The problem Don is going to have is that there actually are a lot of firms that offer 60% to 80% payouts where the traders use firm capital. Margins are getting squeezed everywhere. I honestly think equity prop firms will be non existent in the next few years. At some point the risk to reward for stock starts to get really ugly. Back in the Worldco days the margins were sick, I mean sick. That world is gone. Now I see both firms and traders alike having to take more and more risk to make less and less money. The math simply doesn't add up. Of course this can be said of our entire financial system in general. Right now in my opinion, I think equity prop firms are the equivalent of an option seller. Basically selling .10 options and praying the music doesn't stop.
Yes my friend, you are right...the money laundering historically was done for the reasons I noted long before we were concerned about "drug money" or other bad guys. But, yes, we had to appoint a AML "czar" as well, LOL. Don
Might be time to have another audio discussion with you about the things that are working in today's environment...help people out a bit...I am extremely motivated after our weekend long Intensive workshop over the last couple of days. We addressed everything, and had our top people (some who had fewer than 7 losing days this year, even I was a bit shocked). With all the pessimism out there (much of it rightfully so), it was nice to hear the good stuff.....and, as always, I'm sure your top guys are doing well with the derivatives. Just educational...I think we were well received last time we had an online event....whaddya think? (I guess I could just call you, LOL). Don
Sure we could do that again. The point I am trying to make Don is not that there is no one making money. I'm talking about this from the prop firm's prospective. Look, that guy you talk about who had fewer then 7 losing days in the last year, what do you make on that guy? You are not getting his p&l right? No, you are getting his commissions. That guy could have only had 7 winning days last year and you as a firm could have theoretically made the same amount on him in commissions. The problem Don is that there are not enough of those guys to offset the dead weight. The reason I used the option seller analogy is precisely because of that guy you just mentioned. Firms have to lean really hard on those exceptional traders. Not just Bright Trading but every prop firm all the way up to the Goldman's and JPM's of the world. You don't own those assets. Those assets have flight risk. A majority of your traders produce less then 10% of your firm's revenue. The top 10% make or break your firm. This is not just true of Bright Trading but every trading firm in the world. So in order for your firm to stay solvent, you have to keep those guys and subsidize the bad guys. But as you are doing this your margins keep getting tighter and tighter and the risk keeps getting higher and higher. Just like our banking system, it's a tight rope. At some point the music stops playing. BTW, these issues I am bringing up I'm not trying to throw them all in your direction, these are problems the entire industry is facing. Look, you guys never use to look at guys with less then 25k in capital. Then that dropped to 20k. Now I see you will look at guys with 10k. When does it go to 5k? Or 1k? You should not have to do that. In fact, you should be going the other way. Our firm has been raising capital requirements every year, not lowering them. This is usually the sign that an industry is in it's final stages where you basically open the doors and take anyone. Again, I'm not trying to insinuate that Bright Trading is going to go under. Bob is a smart guy. Don, not as much (just kidding). You guys do have a valuable asset and that is capital and I'm sure Bright 2.0 is around the corner. You'll find a way to evolve, you have the money to do it. But Bright Trading as it exists in its current form as well as most day trading stock firms, will probably not exist in 2 years. Just one man's opinion. I am often wrong.
I still don't understand this or Don's statement. It's my understanding that the requirement to disclose applies only to licensees. I have no trading-related licenses -- don't need any -- and so far as I know, I can have accounts scattered all about with no disclosure. Am I wrong about that?
Exactly. When you trade a firm account, the account is not in "your" name. Very easy to launder money. If I have an IB account in "my" name and launder the money to my TOS account in "my" name, well, that's a pretty easy paper trail even for our incompetent SEC to follow.
I'll have to agree with Don here. Firms that evolve with the changing regulations and adjust to those new markets survive. It's always been survival of the fittest and always will be. Having said that, I will agree with Maverick in that firms that do not risk capital and share risk with traders probably won't be around much longer. Those that do seem to be doing just fine these past 3 years.