That's very low. With 500k, you'd get 50 million with any firm that is sound enough to provide it. The prob at that point would be sorting through the fly by nights. Institutional prop is notoriously competitive. Also, let's not forget that they can move markets because of huge size, whereas a daytrader managing 5 million (leveraged) might be able to move one stock for a few minutes. Prop desk at investment banks and at funds like SAC are notorious for running reverse desks - buying small lots from all of the sell-side firms and then coming in with huge size on the offer. So the key diff between prop and prop (institutional) is capital, and hence, the strategies that are deployed. Frankly, I'm not sure I'd ever want to work at a prop desk at an IB - can you imagine the pressure?
Besides you are still risking your own money - so you don't want to use this kind of leverage for yor own sake.
Interesting thread, there are a few more differences, I think. One, institutional prop desks have virtually no commissions (or transactional cost) to speak of, since all the trades are processed internally, usually the head of trading (in general) just get hit with a small internal transfer charge at the end of the year. By not having to factor in cost of trading, but instead only have to pay some government regulatory fees (which are miniscule to begin with), this enables prop desks to get into very thin profit margin trades ("sucking pennies"). Two, some institutional prop desks have virtually no equity size limit to speak of, instead only their VaR numbers are monitored by enterprise risk managers. So in a sense, lets the prop desks to take on some gigantic positions (as long as they are hedged). It is not uncommmon for prop traders to talk in terms of "how much million" they have made for the bank, rather than returned "xx%", since xx% is almost meaningless as it is unclear what is size of the equity base used. Three, information flow, I can't speak enough about the informations flow that happens on the trading floor of an ibank, or how much I miss it. It is not just who is doing what, it is all the little rumors, it is in the middle of a lot of fairly smart people, each with their own different backgrounds, and if a person is observant enough, one can gleam a lot of information by what is said by the head of certain desk, etc. And in general it is a very good collegial environment, you can call up the head of say govvie repo desk and get a quick read on the repo flow (who is quietly offering a lot of 20 year, etc). And inversely, somebody will call you up and get a read based on your area of speciality.
I know for a fact Prestige pays out 100%, 80X leverage, rates as low as .003/share Liquid 100% payout as well, 100X Leverage, no clue about the rates.
thats insane, these are equity prop firms? their only compensations for 80-100X leverage is 3 cents a share? they better have good risk management teams
Not insane at all. If you're familiar with the prop industry, you'll know that 500,000 shares per month is a small-time trader. That's MINIMUM $1500/month commish for each person. Prestige has a two-floor loft in manhattan with over 100 traders. So, the very low end is 150k per month for Prestige. I figure the rent is 20-30k. The only other expense they have is the hardware. So, you figure the owner is netting a solid 800k/year for very little work. All he has to do is ensure than the pros are able to be profitable and that the fish are able to churn all day long.
Well, you need to realize that they aren't going to let an account go to zero. Typically, you can buy into an existing trading group within a prop house for around 5k. Otherwise, you can go directly to the prop firm and the minimum is a bit higher - for Prestige, it's 10k, for Assest it's 25k. Once you burn through 50% of that, they'll ask you for another deposit. Also, let's not forget that these people aren't using Scottrade. Prop traders don't let stocks move against them by points at a time.