Due diligence

Discussion in 'Prop Firms' started by fissure, Nov 23, 2006.

  1. fissure


    Hi, I'm thinking of joining a prop firm and want to make sure the firm is reputable etc. I've read many times on this forum that people should do their due diligence before joining anywhere but I've never read any specifics on what to look for (Ive used the search). So would someone give me suggestions on what basic info. I should be looking for and where I can get that info. from, other than from the company itself?

    Thanks in advance.
  2. Fractal


    See how much the trainers earn. Ask what commission rate and payout you start with. Anyone giving you .01 a share is going to make your career difficult. Determine if the clearing firm has been around for more than 10 years.
  3. GGSAE


    Well if you didn't have any success from doing a search on the firm using the button at the top right, or by reading the comments on the brokers section (green tabs at the top of the page), you can just ask if anyone has traded or trades at this firm.
    Any one of these should give you some answers.
  4. lescor


    The equities prop trading scene in North America is actually a pretty small word. I think the firm's reputation among it's peers counts for a lot. All the players have been around, have run groups and offices at various places, and are generally known. If they have been anything less than honest and up front, have bilked traders out of money owed them, or operated in a generally sleazy manner, their reputations will precede them and you should watch out.

    Once you talk to the firms and narrow your choices down, come here and do some searching and asking around. In general though, most places are solid. If you have idiots or ner' do well's running the place, you'll find out about them here.
  5. Fractal


    I agree. Read up on the man above's posts; he's been around the block a few times.
  6. As with any business venture:

    1. Check regulatory affiliations (exchange member or NASD).
    2. Check for any regulatory infractions (some have long lists, some don't).
    3. Check financial security by getting a copy of the firm's balance sheets.
    4. Be extremely cautious of "sub-llc's" - put your money with the main firm, not an offshoot.
    5. Licensing procedures (will they sponsor you for your license?).
    6. Be sure they have a good Clearing firm (after all, they act as your "bank").

    And the obvious things like time in the industry, number of existing traders, etc.

    Your accountant or lawyer should be able to add to this list.

    All the best,


    (And, yes, there are multiple firm's who would qualify under the above scrutiny). Fewer by the day lately it seems, however.