I am not sure I understand what you are offering with your idea to set up an "FX desk." 1) Are you offering a proprietary deal or a professional deal? 2) What advantage does it offer over trading currency futures at the Chicago Merc? 3) Is this more for trading options or the underlyings? nitro
1) Both. One group would be guys who simply wanted to come in and do their own thing. We would provide them access to the cash and OTC markets, in a risk based haircut account with cross margining. The cross margining will allow all your positions (spot, FX futures, forwards, CME FX options, cash options, exotics) to all be grouped together to generate one risk report. You simply cannot do this in a retail account nor could you ever have access to cash markets without a million dollar line of credit with a bank. Another group would be trading on salary. A friend of mine is running a very similar model to this. He gets some smart kids right out of school that will work for pretty cheap just to learn to trade. They make enough to live on and then get a bonus at the end of the year. They would simply be executing my strategy. The other group would trade out of a fund. They would not have any money up. However, I would be pulling guys out of the first two groups to put into this fund. I refuse on principal to take any guy I don't know, track record or not, and put them into an environment where they are trading someone else's money. You have to earn it. 2) As far as FX futures, I'm not interested in directional traders. I already know what the success rate is for guys taking swings in FX (it's about 1%). I'm looking for smarter guys then that. If they want to do that on their own in the professional account, that's fine. 3) Groups two and three will be focusing primarily on derivatives. Group one can trade whatever the hell they want. Like I said before, maybe this is a real shitty idea. So I welcome all criticism. I'm asking these questions now so I don't have to pay for them later.
i still in school (IIT in Chicago). So I don't know the landscape to well. I know of one EFX group in Chi that offers traders backing and has a small retail operation. only FX though now futures or options. Can I PM you my info?
I know IIT very well. I know Russel Volcjk too. He teaches a lot of the classes there. No, please do not send me your resume just yet. This goes for everyone. I am simply on a exploratory mission right now. This could still be 6 months off as I have a lot of stuff on my plate right now. I might also do this with an index option group as well. I simply want to look at all the pros and cons and also gauge interest.
is the real money maker for you the group 1 guys who come in and do their own thing? the second and third group you describe sounds like all the other prop trading firms (I don't mean day trading shops). Also, how big would you really need groups 2 and 3... a few guys only?
Actually no, the big money would be in groups 2 and 3. There really is very little money left to be made in the commission business these days. The commissions would be amount to a small dividend payment every month or every quarter. The real money is in the p&l. In fact, group 1 is really the toughest deal. You have to manage their risk, make very little on them on the commish side and deal with all the headaches that go along with having independent traders. The only reason to have that group is to be able to discover talent and pluck guys out of there into group 3.
Wow, I could have used you a year ago. We have nice space now over at 181 west madison with Fimat. But I will definitely lean on you if we need more space. How is it that you have all this space? Is it all vacant now?
Currently it is vacant. It is in an associates building. I don't think you can beat the offer we could provide you with. How long a lease did you guys get into? Did they provide hardware and in-house servicing? Think of the saving of not having to pay for a tech department. That alone could make a move worthwhile. Three quality techs could easily equal a years rent? Hmm! Did they offer to cover parking? How much space do you have there? This setup is with furnished space too. The start-up venture that was to occupy it got a larger capitalization than they expected. They then needed even more space and they left all. It is setup and ready for immediate use. The phones are even in, and on. There's artwork on the walls and file cabinets are ready for useage. It's more of a high tech layout. Did you get a cafetaria? You should easily be familiar with all the positive things happening just west of your offices. It close enough to the loop for the business, but far enough away to miss the traffic and hustle. If you're the real decision guy you should PM me. I have interior photos too!
I'm not sure how long our lease is. But I know Fimat gave us a good deal because of the amount of business we gave them. I will look into it. Although I will say 11k sq feet is a lot of space. There is no way we could fill that up. I never wanted to have a huge trading floor with too many traders. Much prefer the smaller boutique operation. But I would love to see pics and the address. Feel free to PM me the info. I can always be persuaded. But I do not write the checks. All I could do is lobby for the space.