My (positive) take on prop trading and Tuco

Discussion in 'Prop Firms' started by gtgtgt3, Jul 9, 2008.

  1. gtgtgt3


    For what its worth, here is my take on the state of prop trading.

    I honestly feel that Tuco was an isolated event and will have no bearing at all on the future of prop trading. Firms that were doing the wrong things like Assent have changed their models.

    The problem with Tuco and Assent is that a Broker Dealer was paying commissions to a Licensed Rep for business conducted with non licensed traders. That is a huge no no. That is why Assent made traders either get licensed or trade retail.

    Now even Tuco is fighting back. The most powerful securities lawyers in the country, Sadis Goldberg ( volunteered to represent Doug Fredericks (owner of Tuco) pro bono. They have appealed everything that Doug had previously agreed to. Doug was guilty of hiring some 3rd rate law firm out of California that obviously knows nothing about securities law. The SEC basically said to Doug "you can't afford to spend 100's of thousands of dollars defending yourself, so lets settle" I have also heard from other prop firms that they have talked to Sadis Goldberg as well and they are helping them. Also, do you really think that with all thats going on in the financial markets that the undermanned SEC enforcement division is going to waste their time with prop trading? Especially if they know that Sadis Goldberg is going to fight them every step of the way.

    I feel a lot of prop firms panicked. The ones that felt strongly about their business models stood firm. Think about Valez: They advertise on TV, clearly state on their website that they take a deposit and charge a rate for trading!! And these guys are known to be somewhat shady! Don't you think that if the SEC was going to go after someone that they would be an easy target?

    Four months have passed and nothing else has happened in the prop trading world. My advice to prop traders is this:

    1. Stick with a reputable firm. Its pretty easy to do a search on ET to find the better firms. A good place to start are the sponsors of ET.

    2. Leave as little money as possible in your account. Obviously that doesn't mean $1....but an amount that both you and your firm feels is appropriate for your risk level. Before you join a firm, make sure you are able to take a mid-month payout, or a payout every time your account hits a certain level.

    I'm curious to know what everyones thoughts are as well.

    -- GT
  2. heard anything on when Tuco's traders money will be given back?
  3. SEC bascially banned people from daytrading if they don't have $30,000.

    these entrepreuners lent the money via a LLC so these people can daytrade.

    the only defense is whether this min. $25,000 rule is even legal.