Is Proprietary trading dead as we know it?

Discussion in 'Trading' started by gimp570, Mar 13, 2008.

  1. gimp570


    WIth the SEC cracking down on greater than 4--1 leverage and requiring 25K down are prop. firms going the way of the DODO BIRD

    Even the big B/D's seem to be in trouble...

    is prop. trading going to be around 1 year from now?

    Is retail going to be the only way to trade in the future??

    Don Bright what do you think about the future of prop. trading??
  2. There are going to be 50 people trading futures on my floor in a couple of weeks.
  3. paden



    Because they are leaving an equity prop to go to your floor? Or are you saying you are a prop firm, and have no problem getting traders?
  4. if your right, there are going to be many out of work traders. you know who gets screwed if this is true? the little guy who does not have $25,000. Also for us experenced traders, not having inexperenced traders around means less liquity and less easy pick offs

    i;m amaized how evey company is having a liquity crunch yet all the prob firms have been ok. My firm is self clearing so i know they have enough money to get leverage for us. But was wondering if this has affected others?
  5. Let's say a trader does a million shares per month, uses 250,000 BP and gets rate X from a competitive LLC of whatever firm he is under. Let's say just going to the firm directly and not using an LLC will get that trader a rate of X-.001.

    To go retail, the guy needs $65,000 to get the same BP. If he can borrow it at 8%, that's $5,200 annually or $433 per month in interest.

    However, since he saves .001, he saves $12,000 per annum or $1000 per month.

    Since the LLCs that could potentially go out of business (most likely they'll just find a new legal way to restructure) are just middlemen whom you're paying for leverage, I don't see why any trader with access to credit is not better off by this situation if the trader goes retail and gets a better rate.
  6. gimp570


    Not everyone has access to 65K cash..and i am not sure that a prop. trader doing 1million shares a month paying .0025 is going to find .0015 for a rate...however i dont know much about retail trading...but i seem to have a sudden need to educate myself...what is a good rate for a retail trading doing a million shares a month?

  7. Call the firms and ask yourself. The LLCs are earning more than .001 on the trader in most cases, and while you can't get the rate they have from the firms directly since the LLC is doing 20 million and you're doing 1, you can get a lot better.
  8. jd7419


    It just doesn't make sense to me to trade retail. You just need way to much capital. I know I need at least 1-1.5mil bp and there is no way I can or would put a 1/4 of that into a retail account. If the sec does take down llcs I expect the real winner will be the cme. I know with futures I can put $75,000 up and have enough leverage to make what I do now in stocks. I trade alot of spy so making the switch won't really be a problem. The main reason I like stocks is the variety and ability to spot sector strength/weakness compared to overall market.
  9. Don Bright continues to be one of the most honest, straight shooters in this game.

    IMO, all firms have noticed a change from direct share trading to backet trading through ETF's and other hybrid vehicles.

    These have certainly changed the nature of trading to one that seems to mirror futures contracts, which are also baskets, or in the 1980's / 1990's vernacular "derivatives". Add to these hybrids or derivative, the next layer of derivatives called options and then spreads. Trading has changed from the simple days of owning a share for dividend payments sake (read: investing) all the way over to the hunt for and search for volitile stocks in which one can buy here and sell there over and over and retire (like the commercial says).

    This always was going to be a dynamic industry, and its now having economic realities forced upon its more esoteric bond and bond derivative contracts. Watch out for the further implications towards stock trading, in addition to the SEC crack downs on these sub-LLC's.
  10. All of this is my fault! :mad:

    After all these years of trading futures, I decided recently to do stocks also through a sub LLC prop - then Tuco gets nailed the same damn day. :D

    Thanks SEC :p

    S crewing
    E quities
    C apitalists
    #10     Mar 13, 2008