To be fair to traders and protect themselves, firms can charge a monthly tuition no much more the permitted monthly loss. The "tuition" is waved when the trader is profitable and have a positive balance in the account. The current model is a scam model. A trader gives many thousands to the firm upfront so the firm can be the boss. The old "risk deposit" model you are trading your own money with leverage. Much better than the present deal for the trader.
The SEC could care less about retail traders or small prop traders for that matter. Supposedly this agency is being "transformed"...whatever that means. However, stupid things like the PDT Rule remain in-effect....and not even on their "radar". Best to stay in the world of emini futures and pay homage to the CME Group and their rip-off fees and/or the CBOE with stock and index options. The world of equity trading has been given to the "big boys only".
Exactly. Without the PDT 25k rule, these scam prop shops will not have so many being forced to forfeit their entire trading account to be with the such a firm. Very few (if any) would re-coup the many thousands they pay for online training. Still fewer would end up making a living trading the "firm's capital".
Update: day 4 of actually trading at Keystone, net positive for the week, still getting a bit used to the setups and the platform... My p&l is improving each day, looking forward to finish the month well, the mods are giving good advice and good analysis, I am trading very disciplined and it shows in the bottom line... I may have gotten to this point in another year or two on my own...lol...the discipline and risk management are where the big improvements are. Later all.
The downside of all of this is that if you take a Training course you probably only get approximately a 50/50 profit split, which is steep for a beginner. The only time that you should be willing to give something like that up is if you're trading somewhere like first new york and they're bank rolling you with a 20 million dollar line. Taking 50% from a guy who just starts out trading makes it extremely difficult. I firmly stand by my belief that you should NEVER EVER PAY FOR TRAINING ANYWHERE AS A CONDITION OF JOINING A PROP SHOP. You should only put down money when it is counted as a risk deposit or initial deposit, any other type of capital you pay.... no matter what the firm says, you can be fired at anytime and lose it. If you're going to be trading your own money you should be taking atleast 90% home, for non-licensed guys the only legal way to trade prop is that the firm has to take a small piece, and to have your money credited in your account. If you go to a Keystone, Velez or any of these other firms that are talked about in these threads when scams are refered to, you will see that your starting balance after sinking 5K in your account is ZERO. I have never traded through any of these shops, but I challenge anyone who just started at any shop like this to show me an starting balance with 5k in it. Infact I'd be shocked if anyone could show me a starting balance above zero. I GUARANTEE YOU THAT YOUR STARTING BALANCE IN YOUR DAILY REPORT WILL BE ZERO, even after you just handed a 5K check over. That means you have waived your right to your own money and only paid for training. Firms can now limit you as they see fit b/c in theory you only paid for training. I would like for some people who work at some of these firms to reply and tell me if when you started your account had a zero balance or whether it showed the money you paid in it. If it doesn't have a positive balance and is not a Chicago member then the shop is behaving in a way that the SEC is opposed to.... this is the very reason that they have to mask your deposit as a traing fee. I would like to hear from some guys who work at one of these shops. And other posters PLEASE DO NOT ATTACK THESE PEOPLE AS THEY'VE DONE NOTHING WRONG..... THIS IS A DISCUSSION, NOT A PLACE TO RIP APART GUYS WHO ARE TRYING TO LEARN IN THIS BUSINESS. SO LET'S KEEP THIS AN IMFORMATIVE DISCUSSION AND NOT A FIGHT.
There is another option which you did not mention: sub-LLC. This was in fact offered to me by a Hold Bros. satellite office: if I could establish an LLC, after a deposit of 10k which would be FULLY CREDITED TOWARDS MY ACCOUNT, I was "up and running" (I am NOT licensed). 100% payout, $5/1000 commish (I know, that stinks), but only $150/mo in data feed, ESignal, and bench fees. Not bad really.
That is a way around it, however if you were to go straight thru hold brothers they would probably require a 7 b/c the principal of the llc still has to be licensed in order to get leveraged higher than four to one. Furthermore, in order to legally get more than four to one leverage you must have a minimum of 25K in your account at all times or trade under a Broker/Dealer that is registered under the chicago exchange b/c they can legally provide leverage to traders who are unlicensed.
You are either: 1) right, and they are "skirting" the regs (with confidence) 2) wrong, and they are "right" 3) somewhere in between Let's all keep in mind, the SEC is still in a state of reorganization. I have a feeling there are still a lot of "holes" in their regs and guidelines.
If a firm does NOT require any risk capital of its traders, and only trades the firms money. is that firm still considered a broker/ dealer? say a trader with 15mil starts his own operation, he brings on 5 people and trains them, and gives them 3mil a piece + leverage through say lightspeed. Is something like this common/ easy to set up?