Commissions or profits?

Discussion in 'Prop Firms' started by shneed, Mar 13, 2002.

  1. shneed


    I have a question to pro traders on this thread. I have an opportunity to start trading for a prop firm, and the deal that I was offered, was either pay commissions (something like a penny per share) and keep all the profits, or pay no commissions (just a $1 and change per 1000 shares plus ecn fees), and split the profits 60/40 my way. One more thing, I have to put up capital in either case. Anyway, between those two choices which do you think is better, I now trade through IB, and would love to get my hands on bullets.

    Thanks for any posts,
  2. Take the figures from your recent trading and do the math. Shouldnt be too hard to figure out.
  3. If you are a scalper trading in and out 20-50 times a day with size to capture small profits 5 to 10 cents, the second deal would be much better. This reminds me of the Schonfeld deal except that they don't have to come up with $ but their split s something like 25% of gross.

    Would you be kind enough to tell us what firm this is?
  4. Take the no charge deal and trade 67% larger. You will effect the same payout as if you took the 100% deal with no commissions. Why wouldn't you take that? Let the correct trading idea pay for commissions by increasing your size. I assume you would only have 60% of the losses too. Right? Or, if you get 100% of losses either way then take the full payout and commission deal and accept the fact that your partner doesn't want any risk, only wants to collect whenever you push the button. Your firm is now just a bank lending you money (leverage) and collecting transaction fees. The question you should ask yourself is: Are you looking for a clearing firm or a partner who participates in your business.
  5. shneed


    It's hard to figure it out, since on the days that I lose money its mostly because of overtrading and therefore commissions, is it better not to pay commissions and be profitable even just a little and pay 40 % of that or to lose money on the down days vs to have to pay percentage on the good days. Anyway, I can probably do the math, just wanted some feedback.

    Don't want to tout the firm here, if you are interested, send me an email or PM.

    Unfortunately the losses are 100% mine.

    Thanks for the responses.

  6. Whoa....this is not "zero" - you are still paying enormous ECN fees. If you had only $1 per thousand, then the answer is an easy one.

    High volume traders (100K per day or more shaers) should pay zero commissions...low volume traders should pay the penny. I checked some of our records, and that is how it worked out.

    I would question the whole deal a little bit, look for ECN rebates to the firm, etc. Since you are responsible for your losses, and they are in real need of any share volume (a problem with self clearing firms) I can see the reason for the choice. The firm has a no-loss situation.

    I would ask about the same basic trader needs: Interest charges for debit balances, haircut charges, etc. And, as always, be SURE to see their balance sheet...make sure they have plent of "owners" money, and be sure you can get your money out whenver you want. And if they tell you that you need to "go flat" at month end...then run for the hills!!

    Overall, either deal may work for you if the above conditions are positive!

    (BTW, this is a "re-write" of many older "deals" from some firms).

    Good Luck!!
  7. alanm


    This caught my eye. Do some firms do this to make their capitalization look adequate (when it might not otherwise be) for some kind of month-end SEC or exchange reporting they have to do?
  8. You hit the nail right on the head!!

    In a serious note, this is a concern for the whole industry. If a firm is "forcing compliance" at month end...does that mean that they are out of compliance the rest of the time....probably. This is a highly regulated industry, and when a single firm puts every trader in jeopardy due to "questionable" makes me worry.

    Always check the basics, in whatever business you're getting involved in.
  9. Shneed

    I sent you email. You did not answer.
  10. shneed



    I apologize, my email has been down for the past 2 days, anyone in Southern Florida using Adelphia Comm. is having these problems. The firm is a canadian broker in Toronto, if you still want the name I will email you back when my email is back to normal. They offer prop prop trading. I am strictly interested in bullets, couldn't care less about the high margin, don't want to sit in an office, only to trade from home, and since I don't have S7 anymore and don't need it to trade through a Canadian firm it works out perfect.

    #10     Mar 14, 2002