define prop firm

Discussion in 'Prop Firms' started by elit, Sep 24, 2006.

  1. elit


    Hi, could someone define "prop firm" for me, I don't know this word as I'm not native English speaker.

  2. Prop means "Proprietary". Usually, you are trading with the firm's money, where if you had a retail account you'd be trading with yours.
  3. For example: Our traders may put up a token amount of risk capital ($20K or so), and then use not "abuse" our money to trade with. Sometimes a $million or more, which allows them to trade the strategies that actually work (M&A, pairs, opening only, market making, etc.).

    Hope this helps,

  4. jasmine1


    A proprietary trader trades with the firm's capital and gets a percentage of his or her profits. The firm takes ALL the risk and a good percentage of the profits as well as commissions and fees. If a firm claims to be a proprietary firm, their trader's do not put up a "token amount of risk capital"

    Over the last few years many trading arcades have tried to re-define the definition of proprietary traders to help them reduce risk and keep their business models alive.
  5. We engage in the stock exchange, floor trading, business model...the same thing we did from the "other side" going back to the 1970's. Nothing new or different, just designed for those who want to run their own business vs. having a job. Keeping 100% of one's trading profits is a nice lure, especially when you have so little at risk.

    We found out a long time ago that traders tend to do much (much) better when they have some money at risk.

    Trader/employee types have to make a lot of $$ for the firm before they can keep anything (in most cases), and the poorer traders won't be around long. Firms don't really need to pay someone to risk their capital any has pretty much seen to that. What we see is the entrepreneur having the best chance for continuing success with full profit potential.

    As they say "different strokes"....all the best,

  6. ken__0


    hey don, which one of the strategys you mention above do you find yourself and your traders utilizing the most
  7. Well, the opening only strategy is working better than ever the last couple of months. I noticed that we are putting in somewhere around 32 million shares worth of OO orders these days.

    The pairs guys are still the reigning champs overall.

    A lot of automation going on, with a few different approaches from scalping to MOC imbalances.

    Always a few guys who just make money no matter what, and to be honest, there are several guys who make $$ ..and I have no idea what they're doing, LOL.

  8. jasmine1


    The thread poster is asking for a definition of a proprietary firm not a definition of Mr. Bright's firm. That is what I provided him in my previous post.
  9. Magna

    Magna Administrator

    Agree, so let's please stay on topic. If ken__0 or anyone else has a question for Don best to ask it on one of the many Bright threads, send him a PM, or give him a call. Thanks.
  10. Maverick74


    Don, there must be some wine still left in me, but I am going to have to agree with you, just this once though. I think some guys on ET need to understand a key critical difference here. First of all, the prop desks of old, i.e. Solly, Goldman, and First Boston recruited guys from MIT, Cal Tech, University of Chicago, etc. and their desks were small. The jobs were highly competitive. In other words 5,000 guys applied, 3 were hired. Those jobs are still around and I doubt anyone on ET would qualify.

    The prop firms that exist out of that circle today are a little bit different. Like Don said, they will provide capital, but you need to take some risk. Most firms have found that traders with nothing to lose, lose. That's the bottom line.

    Are there guys out there that still get backing deals? Sure. On an individual basis. Just make sure you understand one thing. In the city of Chicago alone there are about 10,000 resumes floating around with guys that swear if someone only gave them a chance, they would show them what a great trader they are. Maybe 5 of those guys will find a backer. Yeah, it's that tough. And you better have some pedigree. University of Northern Illinois ain't going to cut it. LOL.
    #10     Sep 26, 2006