A $50,000 annual "nut" is a large obstacle to many traders. I was just a bit shocked. As I said, a seat lease on exchange might be worth that amount, but just a literal desk, come on...weird. You can trade in my Chicago ofice for a measly $2,000, no, $1,000, no, $400 (and get a rebate), LOL. All the best, Don
Donny, Donny, Donny. Very different business model. Most these firms back traders 100%. In return for that they charge them what is called a desk fee. This includes space, TT or RCG, a Bloomberg terminal, etc. They take the desk fee out of their p&l at the end of the month before their 50/50 split. If they never make any money, they don't pay the desk fee. Do you understand now? This is the model in Chicago as well. Most of the top firms here charge anywhere from 2500 to 5k for a desk.
And you are not backing traders. And Don, their nut might be 50k, but good traders here take home 500k to 2 million a year.
Geographically you have the ideal setup available to you. I've run VPN and remote servers and partnered up with guys just to access the tax free products (SB and exotic options) in the UK and EU. What's the tax rate (%) of your prop earnings? Are the spread-bet spreads wider when adjusted by the tax savings? Are the products the same?
Of course, and if they don't make money, they're gone. I understand that model of course. As a debate topic (kinda slow). Done this before. Say you're a good trader, make $20K per month. Put up zero, pay $2000 desk fee and then give firm $9,000 each month...in lieu of putting up $15kor $20K and keeping the profits....made up for in 2 months. Don't make money, you're gone either way...risked some capital or risked time, or both. (not really a debate, just a difference). And, for the record... I have always supported, and sent people, to Chicago to be part of the action, get hired wherever you can.... best city to learn in, bar none. Heading out soon, have a good weekend. Don
Don, you know I love to debate you. You should not have lobbed that softball at me. LOL. Here we go. The difference is the amount of capital the trader has access to. Say I put down 20k with those friendly folks at Bright Trading. Let's be "very" realistic here. How much money am I really making on that small deposit. Let's say you give me 300k in capital on that 20k as a newbie. As a newbie, I would love to make 1% to 2% on that 300k at risk. That would put in the top 2%. But that is only 3k to 6k a month. And that's a 25% return on my deposit! Now, say I go the other route and work for a full prop firm. They pay me a 5k draw right out of the gate. I haven't even done anything yet. They give me access to let's say 2 million in capital to start. I make 2% on that or 40k. Same 2% Don, apples to apples here. From that 40k, let's give them 20k on the split, 2500 back for desk fees and I still have 7500 or twice what I'm making at Bright. If things go well, in 12 months, I might be trading a 10 million dollar book with a 60/40 or even 70/30 split. If things go really well at Bright, I might have 50k in capital, my 20k plus another 30k or so I made (using the 3k a month mentioned earlier). With that 50k, maybe now you give me 500k in buying power, maybe 750k. The scale on the full prop side is magnitudes larger Don. I know some outstanding equity guys, guys I use to work with. None of them are making over 7 figures. Good equity guys now, and we are talking the top 5% as most don't earn a dime, make 300k to 500k. You know this Don, you see your firms sheets. I know guys here in Chicago making 500k to 10 million on the full prop side. It's about the magnitude of the gains. Now, let's go another step shall we. Those guys that are making that money are now becoming partners in the firm and earning a nut on the whole firm's revenues as well. How many of your equity guys Don are partners? I'm really curious. Don't PM it me. If you care to divulge it, tell everyone, not just me. I'm willing to bet you and your brother are the only partners. You don't give equity out to anyone. Don, these are not trivial differences. They are huge.
Then you have places like Quad where you get looks on secondaries and IPOs that are massive to your PNL. They have 20+ guys in NYC averaging >$2MM. Huge variance but the access to secondaries is unbeatable. You don't pay a desk fee, but it's couch-monies if they were paying 120k for the desk.
Don, I'll throw my cards on the table and show you what I'm holding. I'll give you a firm's name and numbers. Guys that "start" at Breakwater Trading get a 10k to 20k daily drawdown allowance. That's to start. That's what they can lose in a single day. After 12 months that number goes up to 100k to 200k. That is in a single day Don. Now, let me ask to see your hand. How much money can your mean reversion pair traders drop in a day on a 20k account? Are we talking $200? $500? 5k? Do you see what I'm getting at here Don? I think I just beat you on the flop.
I can agree on some of this. The actual "number of new traders" is where we may disagree. You may know better than I. I don't think the number is "huge" (to quote Donald Trump, and you, LOL)... much like my friends who own/run First New York... great job, 500 applicants, maybe 5-8 hired each year. I hope you can tell me Chicago is much better. You know we get a lot of our traders from some of those firms. Not "softball" at all on my feelings about Chicago. My brother and I have always said "don't be geographically limited when starting out in the trading field. Go wherever you need to go to learn from the best." Chicago is always ground zero, next NYC of course, but we like Chicago a bit better...probably just because we spent so much time there. Don
Don, can you be more specific about your disagreement over the "number of new traders"? I didn't catch that.