Discussion in 'Prop Firms' started by kwancy, Dec 13, 2006.
Does prop firms really make traders trade with large vol. to churn in fees for profit?
We keep it simple. Remote trades pay $200 per month for access and use of capital...and they get it all rebated if they trade 200K shares (our average is around 700K-800K I think for seasoned traders).
I would personally like traders to stay with us for the long term. Newer traders who "hit and run" don't do us (or themselves) any good whatsoever.
It depends on the pricing deal that is set up between the trader and the prop firm (per-share, per-execution, per-order, pass-thrus, all-in, etc.)
Assuming that the ECN, SOES, SDOT, and SEC fees are passed-thru to the trader, the only revenue earned by the firm is the mark-up they put on the per-share or per-execution/order rates. In this situation, they would be more inclined to have the trader trade more volume.
However, it makes no sense for the prop form to have a trader blow out his account with fees/losses since this revenue stream would dry up if the trader left. It isn't that easy to keep bringing in traders willing to fork over $5k-$10k on a steady basis.
If the prop firm gets a percentage of a traders net P&L (20-30%) then they would prefer to have a profitable trader as opposed to just a churning machine since this % of profit can be lucrative.
A prop fims perfect situation is one in which they have a trader who writes a ton of tickets and is profitable (where they get a % of the profit). However, they can't just push a novice trader into a high volume trading system they are unfamiliar with and expect to be able to sustain a business (unless they are great at bringing in new $5k-$10k donations)
Separate names with a comma.