I am sure this topic has been discussed before on ET. But I have a few particular questions and would appreciate any response. I am an individual trader, never traded at a prop firm, I have a B.S. in Financial Mathematics. So I apologize ahead of time for my lack of knowledge in this area. So here is the situation: A few friends of mine were interested in pooling funds together and starting a boutique trading firm to trade our own strategies We don't plan to be a broker-dealer, we are planning to trade on a retail platform. We are interested in taking in new traders, but we don't plan on hiring them. It's like a independent role. Our plan is basically to offer our recommendations to traders for a monthly fee in a classroom setting. The information will ONLY be offered on-site, no remote trading. & No deposit. We are actually looking into office space in the NYC-Metro area. Monthly fee would also allow trader to trade firm capital with 50% payout. Is this a prop firm? Do we need to directly HIRE individuals in order for them to trade firm capital? Are there other firms that follow a similar model? Let me know, Shawn
You will be a prop/arcade shop. You should put some business structure in place to protect yourself from any risk/liabilities on your personal assets that may arise during the course of business operations. This is especially necessary for having new hires with unknown trading ability. LLC/LLP should be a good start. Your monthly fee is essentially called a desk fee in the industry. You will have to hire the individuals directly and have a trader agreement with some defined compensation plan....spell everything out in writing in terms of the hows, when, and wheres in the payout. Also, if using leverage include who pays debit interest and if the account goes negative who is at loss. Additionally, who is responsible for any software fees. PM me if you have any questions....probably have some examples for you on the trader agreements and such.
Not sure why for example I as a trader would want your recommendations. I think you could offer say a desk fee for trading at your office, and then have a contract saying what max % of capital the trader can trade and what % of profits he or she will receive. I don't think you need to hire them, they could just be independent contractors.
But additionally they should have to adhere to some form of risk management other than % capital utilized.
Good point, but it depends on your level of expertise & credibility of the firms founders (ex-UBS quants, excluding myself). Some prefer streamlined analysis so they know to enter the market & would prefer to solely focus on money management, not when to open the trade. we don't plan to hire unknown traders. I personally wouldn't want more than 10 traders in the firm. All personal hires of course. Thanks for the information, check your PM