Prop & Series 7

Discussion in 'Prop Firms' started by shlomotk, Jul 25, 2006.

  1. shlomotk


    Can someone give me the quick explanation about why the 7 is required to prop trade?

  2. Surdo


    You are trading O.P.M., not just your own.
    A retail trader that trade's his own funds exclusively need not be licensed.
  3. Back in 1998, when all the SOES bandits and other questionable practices and firms were all around, and people were shooting at one another and "day trading" was a new thing (LOL, day trading has been going on for 200 years)....the regulators were concerned, and were closing down shops right and left. There was talk on Capitol hill about classifying exchange member firms trader's as customers, which would have left a couple of thousand families without a way to make a living. We, and other professional firms, lobbied hard to keep our exchange status for our traders.

    The regulators agreed to do so, but they needed a way to distinguish between retail and pro, so they came up witha S7 license...we were happy to comply so that our traders could continue to have all the benefits available to exchange members.

    That's pretty much it.

  4. Surdo


    As far as I can remember The Series 7 has been around many years prior to 1998.
  5. Series 7 has been around for years for retail brokers. Our members didn't need a S7 until that time frame around 1998. And, to tell the truth, we were worried about it from a business standpoint, but it turned out to be a blessing in disguise...we attracted a much more serious group of people, willing to take exams....fewer "cowboys" trying to make a quick buck.

    All the best,

  6. shlomotk


    so if i understand correctly, the distinction is that you are not a customer of the trading firm, you are an employee?
  7. By joining a firm as an LLC member, you are a limited liabilty partner with all the pertinent advantages. In our case, you receive a K-1 and are exempt from Self Employment taxation.

  8. Greetings Don,

    Can you explain this K-1 and the Self Employment taxation exemption a bit?

    Does this mean one only pays capital gains taxes on trading income if you list your occupation as full-time trader?

    Is this a standard for most prop shops?

  9. You guys need to do just a tad of research on your own :D. A K-1 is a tax form, not a trading specific thing.

    A k-1 is just a tax form for income from partnerships or other pass through entities like an LLC. Your trading income as a member of the LLC is filed as a pass through to you and you include it in your personal income taxes.
  10. Thanks, Optioncoach!

    Yuo're right, a search first would've been the thing to do.
    #10     Jul 25, 2006