Prop Systems Trading

Discussion in 'Prop Firms' started by ultradyne, Sep 18, 2008.

  1. ultradyne


    Are there prop firms out there that have platforms that support automated trading? Equities and/or futures.

    I'm not trying to sell my system, just looking for a traditional prop setup. I make a deposit, get Series 7, rewrite my code with their API, and then trade using firm capital.

  2. I think almost all of them do
  3. Of course, we have zillions of auto programs, black boxes, etc. Use the RediPlus/Goldman ATS system or use your own, simple Active-X or up to FIX.

  4. Futures as well like eMinis? I thought most props only traded stocks.
  5. With some prop firms, you can't even MENTION futures let alone trade them.
    I made a comment once in pre-market trading about futures in a prop firm's chatroom and I was quickly chastised by the moderator: "no futures talk in here".
    Futures to prop firms are like silver crosses to vampires.

  6. Interesting. Why is that? It must have something to do with the net profits to the prop firm.
  7. Has to do with the lack of commissions they generate for themselves and the perceived higher risk. Not to mention that most prop firm owners don't know anything about them.
  8. Now that most of the simple answers have been covered off let me add these points. The reason 'true prop firms' (those that back their traders 100% and don't make $ on commission markups), have an aversion to trading futures is much more sophisticated. Here are a few reasons:

    1. Bringing traders through the learning curve is intensely expensive. The scaling factor is just not there. Do u trade 1 contract or 2 , or 3 , see the problem.

    2. The 'edges' in trading futs are just not there. The futs mkts, liquid ones anyways, tend to be incredibly efficient and hence very hard to exploit mkt inefficiencies and gain an edge.

    3. The ability for a trader to offset or minimize his costs through adding liquidity to the mkt is absent. This is a part of point 1.

    4. Concentration of risk. There are not as many futs contracts (especially liquid ones) as there are equities. Hence if you have a sizable floor, you will often be concentrating risk when most of the traders are trading the same contract.

    5. There are many equity products that can and do replicate the performance of futures contracts. These products offer cost advantages over the futs contracts. These equities can (ie. SPY, DIA, IWM, USO, GLD, etc) also be combined with other equities to hedge and or create other strategies simultaneously.

    These are just a few of the 'other' answers to the OP question rather than just dismissing the reason as "prop firms can't make commissions off futs trades" response.
  9. My personal experience, and that of many other prop traders I know, has been that stocks are 10x easier to make money trading than futures.

    For me it comes down to the fact that in stocks I can easily buy on the bid and sell on the ask almost every time. This isn't my goal, I trade directionally, but this lowers my cost of trading to almost nothing, because when you get filled this way you also get a rebate that basically covers your commission.

    I did the math at one point and figured that trading the ES vs the equivalant number of shares of SPY had me starting $15 in the hole on ES, vs .20 in the hole on SPY. That is huge!

    I did the math a while ago so no one get on my case for it being off.
  10. Yes , exactly. Good example of points 1,3,5 of my above response.
    #10     Sep 20, 2008