Intraday margin rules

Discussion in 'Prop Firms' started by neisykay, Feb 18, 2004.

  1. ... so, does anyone really know what the rules are for a trader at a 'prop firm' who has a Series 7 and puts up capital?

    ...or, if not the rules, the risks both to the trading firm and the trader (and yes i know the risk of one trader blowing up a whole firm - i am not talking about that).

  2. tdoc


    It varies by firm and by trader. Usually, at the time you sign on with a prop firm, you will be given a specified amount of intraday leverage based on your deposit and experience. The usual margin requirements do not apply. It is between the firm and you. 25:1 intraday and 2:1 overnight are typical, but I'm sure there is a wide range. Check with the individual firm.

    As for the risk, it isn't as great as you think. All prop firms have risk manager(s) who watch the positions of every trader in the firm. Although not all catastrophes can be prevented (trading halts, unexpected news) I have found that they do an excellent job of managing the risk of both the trader and the firm on a real-time basis. As for the risk of the firm becoming insolvent, the best way to minimize that is to go with a a large prop firm with many traders and a proven track record.
  3. The amound of capital usage (not "margin" - term is similar, but legally different) depends on how much $$ the Firm has available. Each Firm has a highly different capital structure. Many firms need every penny of the traders money for "net capital requirements" ...(you can tell if they tell you they cannot give the trader their money back for 12 months, or have other restrictions). I can speak directly to BT only, of course, and we can allow our traders the use of capital based on their requirements, trading styles, risk tolerance and understanding, etc. Many traders may use $5Million on the opening orders, with only $25K or $50K in their sub account.

    The key is "use of" not "abuse of" capital.

  4. Does the payout agreement have any bearing on the government's guidelines regarding this?

    IE does it matter if the trader takes 100% of both profits and losses?
  5. Each firm is somewhat different...some have "shareholder's capital"...some "pool money" etc. Some may need money for "net capital requirements" etc. They may be governed by a different set of rules.

    Whenever a trader of ours has questions like this, we simply refer them to our (highly competent) Compliance Officer.

  6. Don and others -

    What I want to know is the REAL answer to the rules/laws/guidelines regarding intraday margin for a trader who has a Series 7 trading in a proprietary firm.

    I would imagine anyone here running or managing such a firm knows what the rules/laws/guidelines are.

    Another way to ask the question is to ask when is a limit of 4/1 the only allowable margin?
  7. Never ...
  8. ....that isn't what some very knowledgeable and experienced people in this business say....

    also, i have much more intraday currently..... and have been in the biz on and off for almost 10 years.... knowing Bob at ETG and Eddie at Bright and .... I could go on and on.....

    it is often very difficult to get those who know to really explain - aside from saying negative things about other firms.... i just want to know what the powers that be say/indicate.... ie SEC etc.
  9. Intraday buying power for a self clearing BD is completely open ended (unlike the futures market where a clearing firm can and will get an intraday call);

    Overnight is around 6:1 for the firm, not the trader;

    Your leverage based on your capital contribution has nothing to do with anything but the firm's policy ...
  10. metoxx - thank you for that reply - denise
    #10     Feb 19, 2004