YES... anyone providing 100% payout is an arcade. They only make money from commissions. Newbie traders have no financial risk at legitimate prop firms. These firms make money from a positive P/L. That's why payout can be as low as 50%. Plus out of 10 guys, they only expect one or two to turn out profitable.
Arcade is a term used in the UK and Europe. It has not been used in the US very often. Prop. firm is used interchangeably between "true prop" outfits and the exchange business model that Bright, Assent, Hold, Schonfeld, etc use.
Yes, but the model of a 100% payout firm is an arcade model. Many US firms are arcades under disguise of prop. There is nothing wrong with arcades for the experienced profitable trader... he will be better off financially. Prop means trading a firm's revenue... as in investment banks and top tier firms like FirstNY or Citadel. This guy is talking a lot about newbies being churned... we'll they are being churnned at arcade model firms. You cant be churned where they assume no financial risk at the "prop" model firms.
ok, fiannaly we are getting somewhere- bright and the rest are arcades. Where are and who are official props that actually listen to a statistical strategy etc.
The term "legitimate prop firm" simply because traders don't put up any money is a bit misleading. The business of trading, for those who have a choice of putting $25K with IB or eTrade vs. putting the same amount with our firm and using additional capital and trading groups while still keeping 100% of their trading profits, and yes paying commission (as they are charged retail and via overhead with zero down firsm) vs. keeping half the trading profits...simply a decision to be made by the trader. This is simply the same business model used for centuries on the various stock exchange trading floors. Running a trading business, not being an employee or a profit sharing deal. If a trader is making money, then it makes sense to keep all their profts IMO. Just different business models. Personal choice, that's all. Don
Hedge funds, private outfits, and a few firms like First NY, Opus, and maybe Schonfeld. I-Banks and Banks typically stick to Fixed Income (bonds, structured products, etc) but do have equity prop desks. The 100% model (prop/arcade) is like the old floor exchange model. You used to buy or lease a seat on an exchange to get direct access, cheap transaction costs, and leverage, and keep 100% of your profits. The exchange and clearing agent made their money through transactions. With the advent of electronic trading most of this has moved to the computer screens.
Not sure where you will get actual statistics, but maybe you can contact these firms... these are top in the business: FirstNY, DE Shaw, Wolverine and Citadel. These firms are more complex than just daytrading in equities. They are set up similarly to hedge funds (with no outside money) where they do arbitrage, pairs trading, algo type trading... and surely intuitive daytrading in equities. My opinion is that Chicago has the most respectable firm. Many of these firms make markets in options. All firms with prop divisions have high turnover rates... Like I said earlier, they hire trainees and let them trade small size for some time. They play a numbers game and they expect only one or two guys from a class to become profitable. This model doesn't cost a lot of money for the firm because the daily stop loss is usually no more than $200 dollars. Eventually the negative P/L guys get fired and the profitable P/L guys start trading real size.