I always wonder where does the money come from for all this 100 to 1 or 400 to 1 leverage? Is it some thing like an accounting adjustment ? since there is no real cash changing hands only buying power to trade stocks......... If some one is getting 100 to 1 rather than 4 to 1 then where is the balance 96 coming from????
There are some problems. I got this directly from the SEC PDT rule applies even if you are licensed and that there is no way around it, there are minimum equity requirements which is 25k. Brokers aren't suppose to give more than the 4 to 1 leverage. Again this doesnt serve as legal advice in any means. [/B][/QUOTE] SO you think going with one of the big B/D prop. firms putting down 10K getting 100K buy power putting your licenses down (going prop.) RIGHT NOW... would not be a good idea because of the SEC is going to make everyone put down 25K and 4--1 leverage
this is too bizarre.. the SEC is ruining the industry based on rules by the illegal Federal Reserve which is private international bankers and no one cares, unreal.
another thing to consider if looking to go prop. right now!!! with the SEC cracking down is some firms tie up your deposit for one year...what happens if you put down money for a prop deal and the sec says No GO anymore will you money still be tied up for 1 year?? SO you think going with one of the big B/D prop. firms putting down 10K getting 100K buy power putting your licenses down (going prop.) RIGHT NOW... would not be a good idea because of the SEC is going to make everyone put down 25K and 4--1 leverage [/B][/QUOTE]
Yes. Dude, all the SEC is telling is this: we want to protect you the people we don't want you to loose just 5000 instead we want you to loose more; 30,000 (since 25k is the maintenance margin; you cannot trade if equity goes below 25K any single second)... This will be a debacle...
You got it - The Creature from Jekyll Island! http://www.amazon.com/Creature-Jekyll-Island-Federal-Reserve/dp/0912986212
Well there is cash changing hands. This is what happens. We will use a regular llc. They open a retail account and get 4 to 1 leverage. (I know don gets more but that will only confuse people). Say I open an account with 250k, so I have 1 million in BP. Now I can bring 10 traders on with 5k up and allocate 100k in bp to each of them. Now if you really want to get teachnical, I could have maybe 12 traders with a 100k each because remember, I have 1 million in bp but the odds that everyone caps out their BP at the exact same time, is unlikely, there are statistics to break this down. If that is unclear, sorry..doing several things at once. Now if everyone does happen to use all the BP at once, margin call is coming now. Make sense?