There are prop firms right now that have already moved to that model. There are many ways to skin a cat. Commissions are going to zero. Take that to the bank.
the business model of wall street has been financial advice fund management and education and brokerage commissions. the model hasn't changed just the competitive environment has changed and regulations have changed. the problem is finding student willing to pay $10,000 for education. there aren't that many people interested in daytrading or trading so it's really is 'small market' i've done a business analysis of the business model of 'trading' and prop firms and the business model is not that impressive.
The education market is huge buddy. Chicago still fills up huge hotel room banquet halls every month. Don Bright has no problems filling his boot camps. SMB has standing room only at theirs. Come on man, you are clueless about this business.
i'm in the west coast and daytrading isn't big here..not too many people want to wake up at 5:30am chicago and east coast have a bigger active daytrading and trading scene. advertising and promotions pays off. you put a big ad in TV and newspaper of couse you get people showing up. come to my seminar. what happend to wisetrade informercials? last time i showed up mostly seniors and housewives and retirees at the seminar
that business model is the horsetrack, lottery, casino, sport betting business model drinks are free in las vegas. the only problem is the 'game' rigged. the sport bookies at Vegas can't rig the sport games. that would be impossible..the players and team owners of these team make their money in sponsorships.
You make some good points regarding the business model of wall street, however I can assure you that there are LOTS of people willing to pay for education. Have you ever been to a Trader's Expo? (there's one coming up in Manhattan in Feb), or wait until the west coast has it later in the year. Team Trading signed up enough traders from these expos and from tv ads to generate revenues "in the millions", and that fact is a matter of public record and clearly indicated in the court papers filed between the owners over a contract dispute. About 3,000 attendees come to these Expo's and many purchase products to learn various forms of trading. Infomercials also work, of course. And just an fyi, "Wizetrade" was purchased by MBTrading a few years back, so that's probably why you're not seeing their infomercials anymore. Regarding prop firms, if they can acquire mostly remote traders who put up their own risk capital, pay for their own software fees, and don't require much handholding, then why would they pass up a 500% markups on a person's trading commission...AND take a cut of the profits as well! Even with the Canadian model giving 20 cents per 1,000 they're making a profit. Sure, most of it is from a trader's split, however there is STILL a markup at that rate. The prop firm model works both in favor of the firm and the trader. The trader gets the use of capital to build up an account and track record, and the firm gets the markup on commission. If the firm can offer education and charge for it, then it's just an added bonus. I also agree with Don, it's better to trade in a small group and join a firm than actually start one. Or trade retail and trade whatever you want at your own pace. Just focus on the charts and not the headaches of managing people and all the compliance issues that seem to never end.
I don't see how it works in favor of the trader. The training doesn't work as can be seen by the other thread requesting input from Bright traders. A grand total of two posted with no specifics, nothing about how they went from losing to winning, or even if they were consistently profitable. The record the traders will most likely build is as losers at a prop firm. As for capital, it isn't a problem. The US is awash in liquidity because of the Fed's zero interest policy. The problem is getting a return above zero for your capital.
Remember gang, Trading is a Business - from the traders level. Not a "job" - not an entitlement - a business. We act as facilitators...we provide capital usage (a "must" for most traders), training in current technology, strategies, etc., and a cohesive group of professionals to work with. We offer safety and a comfort level. It's up to the trader to take what we offer and combine it with their work ethic and skills. I am very comfortable in the fact that what we offer as an alternative to retail trading is gigantic for those with less than $100K to trade with. If you want to be a trader, we are one choice of many. I can tell you that my top people work hard at their careers and are also willing to help others (Retreats etc.)..... Here is another example that I'll leave up for a few days. http://www.stocktrading.com/darrenclifford/ Darren Clifford, who runs one of our most successful groups, did his presentation from Hawaii this year. Slight technology problems first couple of minutes. "The Power of Change - what to do when things go wrong." Nice title, LOL. (A bit too "cute" with the birds in the background - but Darren is a fun guy. "Top 30 traders under age of 30" a few years back, still going strong. Listening to Darren now, good stuff from a really talented young man. Came to school in 2002, top trader article in 2005, now here it is about 10 years later, never had a bad year. Has backed many traders - an all around good guy. Has traveled the world (still trading daily) - took his parents around the world too (nice). Reference: http://www.stocktrading.com/trader10030.html (more from our retreat available on: www.stocktrading.com/Tradinginfo.htm ) Our routing changes for 2011 are already paying off for our traders as well. The initial reaction is "wow, this is huge" - referring to payment models. Anyway, as I've always said, Bright Trading is not for everyone, but I feel that we offer value added, and we have some pretty darn good, happy traders that have been with us for 10 years or more. And, yes, I don't see many guys here on Elite Trader - I guess it would be smart marketing for me to have them go on here and type in glorious testimonials, but I'll leave that to the others. We train to grow our trading group. We train traders from other groups, even Rob at Echo has sent traders hsre. We have helped traders from Swift, due to my friend, Charles Kim - co-owner of Swift. Although I put a disclaimer on the site about how much of what we teach cannot be done at the retail level, much of it can be applied there as well. It is a good way to speed up the learning curve for your trading business. A few months in the learning curve can mean a lot. Traders do pay for school and boot camp - and can return as often as they like (many do, I have 6 or 8 in school this time - to keep up with all the changes). We communicate every morning via our morning call, we have free workshops twice a month, we have Retreats once or twice a year...bringing top traders to share (as above) - to help the new or struggling guys. You asked about a business model, well ours is education based to some degree I guess. We only do 4 classes per year, and we teach at the Community College as well. OK, about time for class - gotta get ready. Good trading everyone!! Don
Don, I'm not sure what prompted the long advertorial you just wrote, but let me quote the OP question for you again as it seemed to have alluded you. "Can somebody please shed some lights on the business model and economics of running a prop-shop?" He was not asking about the wonderful advantages of trading with Bright but rather about running an actual prop shop and the economic viability of the model. Not a single sentence in that long diatribe addressed it. Do you want to give another go at it? BTW, this is an interesting discussion to have, so let's try to keep the thread on topic.
I was just trying to respond to various posts at one time - didn't mean to get carried away...I do feel that there is much more to a trading firm than just putting people in front of a DOT machine (I'm sure you agree with that). I think I made one point earlier about "groups" - the calls I get from groups who want to set up in an office, or simply a few trading friends working online - I think associating with a Firm vs. going through hoops involved of forming a B/D etc. (Especially in this day and age of regulatory hurdles, although not a deal breaker, certainly costly to stay "clean and green"). Of course, size and scale would make that call I guess. Having an existing firm is a different decision from starting from scratch. I think you would agree on that, whether it be Bright or Vtrader. But, this is still America, and I applaud any entreprenurial attempts by our younger counter-parts. Don