How do Prop Firms Generate Money

Discussion in 'Prop Firms' started by Canuck709, Apr 13, 2009.

  1. Been thinking a lot about this lately. In order to evaluate if an offer is good it makes sense to undersatnd whats in it for the firm. That said does anyone have any thoughts on how Prop firms make money.

    I'll start things off with some observations, feel free to correct or expand as you see aprropriate:

    1. Split - a cut of traders profits
    2. Commissions - incremental fees for trading
    3. Liquidity rebates?
    4. Increased ECN fees?

  2. The optimal way is to find a firm that can adapt to your style.

    The firm I work with only makes profit on profit sharing, so I can enjoy extremely low fees and I get all ECNs passed through (and yes, I can and have verified on many occasions).

    Some traders would rather have 100% payout and pay higher fees because their margins are higher/trading volume lower.
  3. Wow what a nice place to trade...
    they also give you a cote on traders you recruit?
  4. I'm sorry, cynicism doesn't compute well with me.
    Enjoy Title.

    And learning to speak proper English wouldn't hurt you.
  5. Try posting this or PMing this to Don Bright. It would be interesting to hear from him...
  6. In our case, we engage in what is commonly known as the "stock exchange, floor trader" business model. My brother and I enjoyed this for years. We had to buy Exchange memberships, but after doing so, we thought it was pretty cool that we could put up $25K or so and then use a $million or so of, what is now Goldman Sachs money (Spear, Leads, and Kellogg back then)..... to trade with. And...keep all of our profits. All the clearing firm asked is that we run our trades through them...they gave us fair pricing and provided all the services we needed..a "win-win" (hate that term, ut it applies, LOL).

    This allowed us to engage in strategies and tactics we could never have done without proper use of capital.

    This arrangement fit our entrepreneurial spirit and needs... and worked so well, that in 1992 we started Bright Trading with the same model. Our traders don't need stock exchange seats, of course, and simply get a license and become a member of the family so to speak.

    We trade billions of shares each year and get a rebate back from Goldman on the commissions paid. We have around 500 traders, and we provide all the services our traders really need... (at least "most" of the services, LOL).

    17 years later, still enjoying are the traders it seems...

    PM with any specific questions you may have....

    Phoenix guys....Thursday night dinner: celebrating our new affiliate location...our "Boston guys" opened up in Scottsdale!

    All the best,

  7. Yes, and much thanks for coming out to MIT this past January for Mike Epsteins Gambling seminar.

    It was very enjoyable to hear from you
  8. That was really fun... being around all that brain power, LOL. Glad to come again if invited.

    and to Mr. Canuck... I answered your PM...