RM's response doesn't sound to encouraging either. If echo is one of the firms effected is Bright going to be the only "deposit model " prop firm left for traders that need more than 4:1 to trade?
Yes, S7 traders will be at 4:1 intraday if their firm requires a deposit. I don't have access to the memo, only a summary repeated by two independent sources. Both sources state that S7 traders will be at 4:1, but may apply to the firm for fully-backed status. I can't imagine many firms going the 1st NY route... the revenue model is built on commissions. I would imagine this would have the greatest impact on the 100% payout firms that base their prop model on comms. Response to Ang: I can't imagine how Bright Trading will avoid impact from the NASD-led action.
I really wish someone knowledgeable like RM, Don B, etc. would comment more on this because I am wondering whether this is a move by the bigger Clearing firms which have been getting bought up by commercial & investment banks. Do they want the daytrading firms to become true prop and take the risk of the % split, while they get the riskfree commission revenue. If you read my posts in economics, you would know where this is going. Of course, I'm still not too clear on the language. In the sub LLC, there is additional owner capital backing the leverage, at least their should be. Since they're getting overrides, they gotta pay for the risk. So there are owners that put up money and make it at least half true prop. Is the commission angle the barrier? No more overrides?
So not only 4:1 intraday but I would assume you would need at least 25K to get that 4:1 and avoid the PDT rules? Hopefully some kind of solution can reached if these rumors are indeed true....
maybe there's been a lot of complaints about company's like hlv not paying there traders and when the sec looks into it they see it's not even the traders own account but they're under an llc and can do nothing. in all honesty the 5k down gig for non series 7 people skirts the pdt rule. few people are getting liscensed anymore and just going under llc's were the trader is protected much less from fraud. in the late 90's with the explosion of all the day trading rooms people had to have a min of 40k and when one's account went down under 25k or so many day trading companies had inside people to extend loans. the end of that came with the mark barton killings in atlanta.
It is only natural for the trading business to be able to have trader incubators.... This means that traders should not risk lots of capital while learning....so definitely there is a place for the $5000 mins and 10:1 leverage ...in terms of having businesses that know how and have the desire to run this type of business...This ratio allows a learning trader to gain real experience while enabling the provider of funds to be profitable...This is definitely a prudent approach to learning...far more prudent than risking larger amounts... Obviously the goal of trading firms is to have a stable of loyal profitable professional traders that appreciate being with a niche entrepreneurial firm... There are a lot of politics still in action...and as you know ARCA was at one time an arch enemy of the NYSE...now the NYSE own ARCA...At one time NASDAQ catered solely to Market Makers leanings...now NASDAQ owns INET etc... There is nothing wrong with prudence...and there is everything wrong with denying entrepreneurship that provides venues for the trading profession...which is a relatively new profession that has arisen because of direct access technology and the internet.... Why eliminate a legitimate and honest entrepreneurial enterprise ? Just does not make sense....
I haven't heard a single word from my firm, so I don't know, but I can't believe this will end up happening. It would be too destabilizing to the markets to drop volume by 70% by hamstringing licensed day traders.
why were bullets eliminated? figure out which powerful wall street interest does not like this prop model. you will then have an answer.
zdreg.... Marketmakers definitely...because one of their few advantages is to be able to ss without the uptik...Lots of jbo setups would definitely object to having company...
(Per my Compliance Officer)"We have not heard anything that affects our Firm." Nothing from Goldman, our Clearing firm, either. Our business model is a bit different than most. I'm as curious as the rest of you. More as soon as I know. Don