IB and 25K rule

Discussion in 'Interactive Brokers' started by roger2, Jul 31, 2001.

  1. roger2


    I have been reading the interesting thread regarding Echo trade (and others) and prop trading vs. retail trading. It is reassuring to know that there are options available. Yet, some posters have noted concerns about pro trading firms which deserve consideration.

    All I actually know for sure is that I like IB. I feel comfortable with IB. I don't want to be forced to go to another broker.

    I speculate that a significant portion of IB traders are under the 25K limit. Why? Many try IB because of the low commissions. If the difference in commission matters to someone, then it may because they are working with a smaller account.

    If I am correct, then IB stands to lose customers to Echo and others because of the 25K rule.

    So, at Echo traders are not subject to the rule because of the way their business is set up, among other things requiring traders to pass the Series 7.

    Why couldn't IB set up a 'Pro Division' requiring the Series 7? Or spin off a sister company to that effect?

    I don't know all that is required to set up a business like IB or ECHO. But it's a lot: creating user interface, setting up accounting and record keeping, training support personnel, etc. etc. etc....

    The point is, after doing everything required to set up IB as it is, it would only take few small steps to set-up a 'Pro Division' at IB. I'll take the Series 7 to stay at IB ...looks like I'll be taking it in any case....

  2. gh1


    the new SEC "pattern day trader" rule effects me. So i have been looking for options too.

    I may be alone in this, but i find the software fees at Echo prohibitive. Even if they waive them for 5 months -- so, what then. Geesh! 300 a month! If i have an account at 10k (Echo's new minimum) what makes them think i can afford 300 a month?

    Most traders at this level of capital are not doing it for a living (unless they have outside funding for living expenses) Even if i turn 100% and double my account in a year. It is now at 20k -- make that 16,400 -- after paying the 3600 for Echo's fee, 36% of my total gain!

    And please spare this thread with the "you shouldn't be trading with an account of 10K", "newbie bait", "your an idiot to not be trading at a prop firm", type of responses -- we've read enough of them, and value your wisdom, so please -- i can only take so much sage advice.

  3. mjt



    Don't forget the nearly $200/mo in professional exchange fees (assuming you need NYSE in addition to Nasdaq)
  4. tradeRX


    I agree! These fees are outrageous!

    BUT...you must pay them or become "newbie bait" at the hand of the likes of "Hitman" and his cohorts!

    Do you really want to "hold his bags"?

  5. mrbud


    Are the software fees dropped if you make so many trades per month? Like MBT or others?
  6. NKNY


    All the fees should be a write off.....

  7. m_c_a98


    I guess you have to weigh the Pros and Cons:

    Pros: more leverage/higher returns(larger losses)
    Cons: more fees
  8. mrbud,
    The software fees are rebated according to your volume for remote traders at ECHO.
    Happy trading,
  9. roger2


    The reason I started this thread was to offer the suggestion that IB could set up a new Pro trading division set up in such a way that regT would not apply (i.e., set up similarly to Echo and others).

    Keep the IB interface and everything else .

    This would solve problems for under capitalized traders, eliminate worries about software fees (although exchange fees would be higher for "pro's" with Series 7), and retain and/or attract customers for IB.

    Maybe if someone agreed with my suggestion we could get the attention of someone (def) who may then make the suggestion tothe brass at IB ??? (if they haven't already thought of it, that is)

    Anybody agree????
  10. gh1


    I am sure there is a rebate for volume. The exact schedule is not posted on Echo's site (that i could find). However it is probably in the 50K/month range. With a 10k account, who is going to be trading 50k shares a month?

    Yes fees are a write off -- so -- going back to my original example -- POST #2.

    My gain is 10k, my expenses are 3600, i now pay capital gains on 6400.

    What are short term cg taxes? 28%?

    Without the expense of the Prop fees, of 300/mo, i pay 2800 on 10k and i am left with 7200. (7200 plus my original 10k and my account is now at 17200)

    If i go w/ the firm and associated expenses, i pay 28% on 6400 which is approx. 1800. So now i am left with 4600 (4600 plus my original 10k and my account is now at 14600)

    Sorry, i'd rather pay the gains on the 10k -- unless my math is wrong

    The only hitch here is, and this is a big one! If i go with the prop firm -- i may actually get the opportunity to trade enough to make the 10K in the first place. Without the protection from the SEC that professionals enjoy, i may not, no! WILL NOT, have the opportunity to trade enough!

    Give me a break! 3 trades a week! Crimony Sake! What an f'n farce!


    #10     Jul 31, 2001