How do prop firms make money?

Discussion in 'Professional Trading' started by jlee15, Mar 27, 2007.

  1. jlee15

    jlee15

    I really did a phone interview with Hold Brothers. I have never heard of prop firms before. What I am wondering is how these firms make money. The guy told me on the phone the company is willing to leverage me 30 to 1, and my losses would only be limited to my capital contribution. That seems a bit risky. A better question would be how these firms control risk.
     
  2. Like any broker, they make money on commissions and fees. They buy trading services and financing wholesale and sell them to you at a markup. If they have a payout less than 100%, they are also taking a portion of your gains.

    If you have nothing at risk other than your deposit, they will probably watch it closely so that they can shut you off before it is exhausted and they have eat any losses in excess.