I would like to know from the guys that work for the top prop firms (Chicago, New York), what is your payment structure for a hybrid salary/profit-split deal?. I´m in the process of opening a trading group and want to compare our ideas with the already working structures. We´re planing a minimum salary-based deal with rights to profit split with time and experience (up to 50%), and a bonus based in both individual performance and the overall office gains. Since the thing is developed from scratch, we think that it´s a good idea to keep the profit-split low for the first year and create a risk fund for possible future losses. But once the fund is ready, the payout would immediately rise to normal levels.
You really have provided no info here. The question is too broad. The structure depends completely on the type of trading you are doing, how many partners in the firm, how much capital they are putting in and the type of edge being exploited. Weren't you looking at joining a prop firm a few months ago and asking really basic questions? Now you want to start one? My best advice is...don't.
why would someone join this? whats the incentive? From my point of view this is only good for someone who doesn't know anything or someone who always loses money. Unless your salary is over 250k
Mav, Only Equities and Futures daytrading, mostly market-making and neutral strategies. The group will not be a big one, since the strategy needs close cooperation among a controllable group of people (2 experienced traders and 5-8 fresh newbies from college ,7-10 ppl max in total).
See, this is the problem. Equities and futures are two different things. I can't even think of a firm that exists in both spaces. There is no point to making markets in equities as the cash outlay is too intensive. If you want to be an HFT firm (not the same as market making), then you are way behind. You'll need to spend millions in technology just to catch up with the worst firm in the space. Same goes for HFT in the futures space. Seriously, just can this idea and find a good firm to work for. You have absolutely no idea how competitive this space is.
Mav, The thing works, the money is there. I asked a concrete question regarding to the payout structure in prop firms, not an opinion about our firm strategy. Yes it have something to do with HFT, but it´s not HFT itself. I know that futures is not the same that equities, but the strategy works in both worlds. You can give me payout examples for both cases if you wish. But please, don´t start with those "market is dead" lessons .
Just make money, get a good payout, and be happy. Mav is a Pro in this world, and I think he tries his best to help others whenever he can, but that doesn't mean you can't make something different work..... Give us some updates when you can....and, "All the best" Don