Difference between CBSX and SEC registered firms?

Discussion in 'Prop Firms' started by kcgoogler, Sep 25, 2011.

  1. So say you stick with broker dealers; what is the difference between a CBSX registered firm and a SEC registered firm (ofcourse other than the obvious affiliations and the requirement that you need to clear Series 7 in one vs 56 in another).

    To be more specific say you want to compare Avatar vs Echo.

  2. JamesL


    I believe the main point is that with CBSX your deposit is locked up for a year whereas with Echo or Bright it is not (as has been claimed on here before).
  3. rmorse

    rmorse Sponsor

    ALL Broker Dealers doing securities business in the US are registered with the SEC. Then you have to join an SRO. Most SROs use FINRA as their regulatory body. The CBSX at this point is self regulatory. To determine if your JBO requires a 365 day lock up, you have to ask if your capital contribution is used toward trading. If is part of their trading capital, even for one day, your locked up. If they place the "deposit" in a different account and it's not need for the firms capital requiement, you may not be required by the SEC to lock up the money.

    It's rare that a prop firm does not use the capital you add toward their capital account. Where a firm is registered is not a great way to pick a firm. I would concentrate on the safety of my money, services offered, people I'm going to deal with, platforms offered and variable and fixed costs. You have to look at trading as a business. Who do you want as a partner in your business?
  4. Agree with Robert about checking the whole package, not lock up periods.

    These - like other rules - have changed recently and firms may not be in favor of them, but have to comply. One example, Bright has max payouts because of its clearing deal with GSEC (who had to comply with FINRA rules). Bright isn't FINRA and didn't want to do it, but didn't have a choice.

    Well capitalized CBSX firms - some at least - did not use capital contributions from members for trading capital, but on October 1st, 2010 the CBOE put out a memo which said they had to going forward.

    In a nutshell, because of some scuzzy CBSX marketing pitches to retail (etrade, schwab, amtd customers) using a sort of loophole with no licenses required, the SEC put pressure on CBSX to require this to make it less like retail.

    Echotrade's SRO is the Phildelphia Stock Exchange, so they still require 7's but don't need to require lock ups etc. I don't know if they lock up or don't lock up money accross the board, done right, it can be done on a case by case basis.

    Gut here - the Series 56 will be required across the board for prop (the 7 will get you a waiver), and that for prop, lock ups will be required... But who knows how long that will be...
  5. You can read the "FAQ's" on their respective sites. Here are some comparisons:

    Avatar: CBSX, Series 56, Lightspeed platform, payout once monthly.

    Echo: PHLX, Series 7, Sterling, payout twice per week upon request.

    Regarding lock up of capital, CBSX firms require the 1-year lock up as posted above, Echo does not, however if you currently have a Series 7 license that is about to expire and you join Echo, then your capital may be locked up (to avoid "license parking" with a firm).

    Regarding financials and reputations, they both seem very solid. Of course, as always conduct your own due diligence.