I would just like to be blunt here. What is the catch? It seems that Bright is offering lower commissions, better leverage, ect. If I have $100k, trade 100 share lots many times a day for many different stocks, why should I go to say IB, instead of Bright? (100 share lots means it is better to go for a penny a share fill, rather than a flat rate.) There must be a cost somewhere, but I haven't gotten it yet. Can I trade with Bright from home?
http://www.elitetrader.com/vb/showthread.php?s=&threadid=1865&highlight=haircuts not sure maybe someone can clarify but these charges are totally separate from margin rates, thus your incurring two types of charges not just the margin costs but also haircuts.
if you are trading 100k, for 100 share lots, why go to bright? because commissions will be cheaper with IB as you increase size.. plus no 200 a month in fees for software that may or may not do what you need it to do.. being labeled a "pro" so you pay pro exchange fees.. the fact that Bright is just starting to get up to speed on the Nasdaq.. the hastle of the series 7 exam.. and on and on.. the only advantage i could see would be if you are going to sit next to one of their better traders.. which you wouldnt be doing from home.. but for 100 share lots, 400k is plenty of buying power unless you want to trade BRK.. basically to answer your question "whats the catch?".. you are.. youre the catch.. and im not saying bright has nothing to offer.. but in your situation, not trading size and not being able to benefit from the atmosphere of an office.. i dont see how its better than IB.. -qwik
I feel that if I can get 10x leverage at Bright overnight, then paying $200 a month and 1 cent a share is pretty reasonable. My strategy is in pairs trading, so I can keep the volatiltity low, and I am interested in high leverages. I am not sure how the haircut will come into the calculation. It says on http://www.stocktrading.com/html/fees.html that there is no haircut for 6x leverage. Does margin apply and what are the rates? Another question: Is the 2% per annum haircut on a 10x leverage based on the book size (10x initial capital), or based on my initial capital.
As a member of Bright, from the start you can get 10x intraday, 5x overnite. As long as you show that you're not risky, you can increase that pretty quick. There is no haircut up to 6x on HEDGED positions. For example, you have $100K in the account, $300K long and $300K short. You have a total of $600K hedged - no haircut. The 10x, 6x, etc. is based on your Net Liquidating Balance at the end of the day. I think currently the margin rates are around 2.5%. Margin applies on everything over your Net Liquidating Balance.
Thanks for the information. Even 5x overnight without a haircut sounds like an attractive proposition. It is something that you cannot get in retail brokerage. Is anyone at Bright trading a black box model? With IB, one could set up excel filters and send orders with ease. Is Bright only for people who stare at charts and level 2s? What happens if a trader loses more than he puts up? Is he obliged to pay or is he an employee? Do other people suffer?
Very few people use L2 at Bright, some stare at charts. Don't know who uses a black box, (most are the standard grey putty color ). However, there are some who use automatic order entry based on parameters and also those who use FirstAlert (www.neovest.com) for filtering and identifying opportunities. Bright's traders are members of Bright Trading, LLC. An LLC means that each member's liability is limited to his capital contribution. Bright uses a lot of Risk Management to keep traders from getting in that position. If the trader lost up to $10 million, The only other people that would suffer would be the principals, not the trader members. If you recall Harbour Securities, a trader's loss of around $600K brought them down (I think that's right, someone correct me if I'm wrong... oh yeah, like I have to ASK to be corrected on this website:eek: ). Another thing that helps is holding overnite is not a big thing at Bright and when most people do it, it's in hedged positions, so that mitigates risk har more than naked positions.
Just a note on matched pair trading. If you are a matched pair trader with 100k in capital, it would make alot of sense for you to trade at a trading L.L.C. You could get 6 to 1 margin in approved matched pairs and a low per share rate. There are several Trading L.LC's including Van Buren,Bright,ECHO,Lieber & Weissman, ETG & Genaric. Our LA office does alot of matched pair trading in NASDAQ stocks. Matched pair trading is far from a "perfect" hedge and overleveraging in matched pairs is not a good idea for inexperienced traders. If you have never "leveraged" matched pairs, start small and increase size with experience. Our firm and several others offer a DDE link to an Excel spreadsheet, which is a good tool for matched pair traders. Gene Weissman Lieber & Weissman Sec., L.L.C. gweissman@stocktrade.net See us at www.stocktrade.net