This is where the professional trader can be separated from the semi pro trader, but the minor leagues will be pretty thin if they can not cut there teeth before trading firm capital. It looks like this will not affect the the futures groups and the NFA lets these pool run if they are done correct. Cheers to NFA, Fuck the SEC/NASD. TC
It's sounding more and more like the crackdown last week was due to a FASB violation and not due to the basic prop LLC business model.
Ok, now I'm confused. Don says they are fine but it sounds like the article is about baring deposits and commissions (prop model) across the board. If the relationship appears to be broker/customer then the firm must apply reg t rules, 4:1. BTW mav, could you elaborate a bit on what Joint Back office means and does this apply to the well know firms such as bright, echo..etc.
But my take on it is that a trader will have to actually have a grubstake prior to trying trading for a living. Just like the old days....
Can someone from management @ Prop Firm actuallly say something concrete in regard to this? Is anybody really worried?
I agree with Don. They are going after retail firms, not prop! There are retail firms that disguise themselves as prop and get away from a lot of the regulatory issues that is involved with being a prop firm. BTW, there are very specific advantages to trading as a retail customer then a BD for some of your smarter guys on ET. Think about it for a sec why they would do this. I'm not going to go into it, you guys are smarter then that, you'll figure it out.
I would guess that if they are offering higher than 4:1 AND protecting your money under whatever the acronym is (spic? something like that), they are breaking rules. Prop LLC's share the risk but if you put 10k and get 100k bp and protect your money under retail laws thats not fair and deserves to be cracked down on.
None of you are getting it......this is the what the large wire hoses eliminate competition....ALL the regulations passed down over the last five years have had the approval of the big 5 on wall street...why? because it puts the smaller firms out of business...why do you think there is this sudden uproar about 'hedge funds'???? why do you think the PDT rule called for 25k or more in equity? because most of the larger firms require 100k to open an account so it would not effect them....its time people and smaller firms fight back...check out this group. they get it! www.financialIndustryAssociation.com
I pulled this up on hfalert.com: Joint back office A clearing operation that a hedge fund jointly owns with a prime broker for the purpose of exceeding the Federal Reserve's Regulation T limits on margin borrowing. By assuming an ownership stake in such a clearing operation, a fund can effectively render all transactions with its prime broker as internal transfers -- giving the prime broker the ability to reduce margin loan requirements substantially, under Section 220.7(c) of Regulation T. By setting up a joint back office, a hedge fund can borrow an amount equal to many times its equity capital. Most other U.S. investors can leverage only half of their investments, under Reg T. A JBO is apparently a way of getting around having a series 7 and 55. A trading outfit like Bear Capital might use this to get around having unlicensed traders use capital beyond reg T. If the SEC says prop accounts (licensed or unlicensed) are glorified retail accounts then some prop firms will exploit some loophole. Don't know if this is it though. ???