Is Bright an NASD firm? Worldco was, look how much being with a registered NASD firm helped out and protected the traders there!
No, we happen to be Exchange members, so we don't need to belong to the NASD. And, yes, registration alone does not ensure credibility, but at least there are strict regulations that must be followed, and traders have recourse if anything inappropriate were to occur. You wouldn't go to an unlicensed Doctor or Lawyer, I would guess. As always, "due diligence" is a good thing. FWIW, Don
Specifically what are some "strict regulations" that Bright must adhere to that a non-exchange member firm doesn't have to adhere to and that protects traders? What recourse did Worldco traders have through the NASD? Did the NASD get traders their money back from Worldco?
I can't speak to the WorldCo debacle, but the requirements of exchange members are pretty strict. A firm could lose their registration of they are proven to be violating any rules, and why would any viable firm risk their livelihood. Traders need to do their own due diligence, not simply rely on an regulators...but, that being said, if there are NO regulators involved, then there is no recourse...no one to complain to, no one to yank licensing, etc. But, to address your question: For example, every piece of correspondance, including this message, and all ET messages, are required to be kept for audit purposes. All trader correspondance is subject to the same audit trail...financial statements must be audited and "FOCUS" reports need to be filed quarterly. Management must be licensed as well, and subject to arbitration.....the list goes on and on. I do agree that "reputation" is every bit as valuable as "regulation" - and you see what happened to WorldCo's reputation...I just like traders to have full disclosure and transparency, and when the Firm's registrations are at risk, then compliance is much more likely. Don
"no one to complain to" You can complain to the Better Business Bureau, but they aren't goint to help you get your money. But neither is an exchange. I have never heard of a exchange pulling a firms registration because a trader complained to them that the firm did not pay them? If a trader complains to an exchange who is the firms SRO, the exchange would just tell the trader to take the firm to arbitration, and would offer no help. With a registered firm you are forced to do arbitration and are not able to file a lawsuit and sue the firm as you can with a non-registered firm. "but the requirements of exchange members are pretty strict" please, we both know that the rules for an exchange member firm are very lax as compared to an NASD member firm. That is why NASD member BD's can carry customer accounts and exchange BD's like Bright cannot, because the SEC doesn't feel that exchanges watch over or regulate their firms enough to keep customer accounts protected. As an exchange member no one in Bright's management even needs a series 24(supervisor's license), you only need a series 7. "But, to address your question: For example, every piece of correspondance, including this message, and all ET messages, are required to be kept for audit purposes. All trader correspondance is subject to the same audit trail...financial statements must be audited and "FOCUS" reports need to be filed quarterly. Management must be licensed as well, and subject to arbitration.....the list goes on and on." Uhhhh, how does retaining emails and other correspondance protect a trader from the firm taking his money? Also I don't see how filing FOCUS reports protects traders? "Management must be licensed" I previously spoke of this and how exchange members management don't need any extra licensing than a regular trader needs. Anyone who has a series 7 knows that there is very little if any information as related to trading that you learn from taking the series 7. I also already spoke how forced arbitration is less of a recourse than the ability to file a lawsuit and sue. You still have not told us why a trader is better off with a registered firm? Or why you continously put down and use scare tactics to scare traders away from an unregisterd firm that maybe a better fit for that trader and a better deal an opportunity? And tell them that they should only deal with exchange member firms like Bright?
I can't make you understand the difference between a non-regulated "firm" and one that is subject to strict rules, especially if you simply don't want to understand....just like trying to explain religion to an atheist or vice-versa. The reason we don't have or want "customers" is because we don't want to bother trading retail, and the regulations require that we cannot have Professional traders intermingled with retail types. How can traders make any money with 2 to 1 or 4 to 1? Mangement must have additional licensing (Series 24 for example, which makes the Series 7 exam look like gradeschool), pay a Compliance Officer, register in every state, etc. And, the State regulators have and do respond to traders complaints when valid. The BBB is hardly a regulatory agency, and yet, to use your argument, why did the traders at WorldCo not complain? The BBB would have done nothing anyway, all they do is keep track of complaints. Arbitration is what licensed traders and firms agree to, and yes, exchanges have yanked licenses in the past. You can certainly check the NYSE and other exchanges (and the NASD) for violations and fines, and there are firms with many of both. I could go on, but to put the ball in your court, why in the heck would a firm choose not to be regulated so they can use RegT margin, and not simply have retail traders? Why do they not join at least the NASD as an IB if they're just going to trade retail? I'm sure there are some valid reasons, exchange memberships cost money, etc. One final thought...it is much easier to do due diligence when you're dealing with a registered firm. Anyway, trade wherever you like, it's still a free Country last time I checked, LOL. Don
You still haven't answered my original question "You still have not told us why a trader is better off with a registered firm? Or why you continously put down and use scare tactics to scare traders away from an unregisterd firm that maybe a better fit for that trader and a better deal an opportunity? And tell them that they should only deal with exchange member firms like Bright?" But despite that, I will answer your question, "but to put the ball in your court, why in the heck would a firm choose not to be regulated"which you have already answered. "exchange memberships cost money" Also if the firm is not registered, traders do not need to take the series 7 exam. Why bother having traders spend all that time and effort to pass the exam, when nothing they learn from it is gonna help them in trading. Also between the cost of study book and the cost of the exam and registering, it is about $1,000 per trader to get them licensed just for the series 7. And the trader might onnly be with the firm for a short while. This makes me ask you, with all the additional costs and the hassle of paperwork to comply with regulation, why the heck would a firm choose to be regulated? "Mangement must have additional licensing (Series 24 for example, which makes the Series 7 exam look like gradeschool)," As part of Bright Management do you have a series 24? I got my 24 years ago, however it is expired now. But it was much easier than the series 7. It is the same exact material that is on the 7 but the 24 doesn't cover as much material as the 7 and focuses more in depth on the material it does cover. "The BBB is hardly a regulatory agency, and yet, to use your argument, why did the traders at WorldCo not complain? The BBB would have done nothing anyway, all they do is keep track of complaints." I never said the traders from Worldco should have complained to the BBB. "What recourse did Worldco traders have through the NASD? Did the NASD get traders their money back from Worldco?" When I bought up the BBB I was being sarcastic, and trying to show that an excahnge won't help you anymore than the BBB to get your money back. And how being with a registerd firm doesn't protect a trader.
OK: A trader is better off with a regstered, licensed firm vs. an "entity" that can and many do "hide" behind some corporate veil, many are sub-llc's that protect the owners but not the traders, can use the firm's capital properly, can receive short stock interest from their clearing firm, can use the larger short stock pools for trading, can use research tools other cannot (like GS research), can run background checks easily, can surround themselves with other professionals (remember, we cannot even have retail customers near our traders), have the protection of a fully disclosed balance sheet and trading agreement, have access to a licensed Compliance Officer for free. We are exempt from Self Employment taxes (FICA), we are taxed "mark to market" - we don't have to worry about wash sales and other nonsense, we don't have to report each trade (only a year end K-1). Being an exchange member does cost, as does passing the Bar exam for lawyers, and the Medical boards for doctors. Of course the S7 has nothing to do with trading, just like a Nevada Driver license has nothing to do with racing Nascar, but you still have to have one. I have traders with horror stories from some of these "big" firms you see on TV all the time, and I have traders who have worked in these non-registered places tell me stories that will make your hair curl. Before licensing was required, we were exchange members and our traders were afforded all the same benefits - when licensing became a requirement, we feared that we might lose traders for fear of taking an exam...but to our surprise, we ended up getting a much more serious individual who was willing to put the effort into licensing vs. "hey let's go try trading stocks for a while" just to see if we like it, not the type trader we wanted. Anyway, as I said "to each their own" - I would rather have my money with Goldman Sachs than "Billy Bob's Savings and Loan" - but, hey, maybe Billy Bob doesn't make me sign anything, LOL. (This is really not a big battle, just a difference of opinion) Don
Hey Don, ironically, that "non-member, non-broker/dealer, non-NASD, unlicensed, firm" actually utilizes and teaches a very similiar concept as pair trading. Just without all the bells and whistles, or the fees for the special training class or a boot camp program. And scalping is not pushed, far from it. Good volume traded to gross profit ratio is promoted. By the way, being NASD licensed is nothing more than extra costs & regulations. It's not a favor or benefit. You can spin it anyway you want, but once the leverage advantage was gone, there is absolutely no sane reason to want to be licensed. Pair trading is a safer strategy most of the time, it's just that you can get blown out by one anomaly. It's happened and will continue to happen. It's not a fool proof strategy but it does work. And it does bring up commission volume and interest charges, let's be honest. It is what it is. Does not make you guys sheisters or whatever, unlike most equity "prop" firms, you promote a style that actually works.