Deposit outside of LLC?

Discussion in 'Prop Firms' started by tonyb, Oct 26, 2003.

  1. tonyb


    In your collective experiences, can there be a prop scenario where the trader puts up some initial money, but that money is NOT placed with an LLC. Instead, its placed in an entity that would be separate from the claims of creditors (obviously, such a structure would have protected the Worldco folks). Or would a non-LLC deposit defeat the whole purpose of the deposit itself?

  2. I was also wondering about that possibility. You ask if that would defeat the purpose of the deposit in the first place.

    Well, what if it were arranged so that the money would go into some sort of seperate account or some sort of escrow where the money could only be used against that individual traders' losses. Not against other traders' losses, nor to be used for company expenses...

    That would seem a fair and legit setup if that is somehow logistically possible to arrange.
  3. It doesn't work that way ...
  4. just find a decent firm.
  5. shneed


    I traded with a firm couple of years ago in which I gave them a subordinated loan callable at any time, and signed a trading contract that said that losses could be recovered from that loan.


  6. whats the name of the firm?
  7. (Couldn't resist)

    Since SIPC only covers $100K/$500K, and we put up $10Mil of our capital in the LLC, I guess we may fit into the "decent firm" category.

    In all seriousness, that is all you can really do. When you want to take advantage of what the "system" offers you (capital usage, market access, etc.), and only risk a small amount of money, the best you're going to do is check balance sheets, and come into the whole venture fully informed.

    I would be a little bit leery about that "signing" a note thing....sounds a little bit shady on the surface. I'm not saying it is, but it causes my radar to beep.

  8. find an IB (introducing broker) to one of the big guys like SLK. i.e Bright (free plug from competitor alert! :eek: :D ) Then you can rest assured that your money is being held in a safe place. Any trader that goes to a self-clearing firm should be very wary.
  9. Holy Cow....words of wisdom for sure.

    The "self clearing" firms are obviously having problems...the overhead just keeps on, month after month, even the the revenues drop by 50% or more. Market share alone cannot make up for losing money, no matter how you sugar coat it.
    Some of the Introducing Brokers have good business models as well. As in anything, however, some don't. Ask to see the whole business structure outlined for you before getting involved.

    "Eyes wide Open" always!!

    All the best!!


    (Just a note: BT is not an Introducing Broker, we are Exchange members, a little added stability for the traders).
  10. Apologies...I thought that Bright was an IB to SLK.
    #10     Oct 29, 2003