am plannin' to join prop very soon...intense leverage and haircut are waaay to attractive to let 'em go for long...i mean if u know how to cash in on high liquid shits what the heck can stop u from takin' larger and larger pos, innit. i bet all retail traders would be much better off goin' prop instead then takin' it on on their own for ages with slim if none chances of makin' it work.
If I already have a series 7, what are the pros and cons of joining as a sub-LLC when compared to as a prop trader(or class C member)?
According to the Regulators, all members of a "subLLC" member must be licensed for this to work...I always worry about those who won't / can't take the S7. If you were to be able to do this, then the tax consequences would be prohibitive, IMO. Others may try this, we try to stay above scrutiny whenever possible. Can always check with a regulator, however (I've been wrong before). All the best, Don
Don, This is not true. The reason is that its not practical to make everyone in the LLC to have a series 7 for many reasons. One, what if your LLC is used as a fund and your investors are class b members. Are you saying your investors all should have an LLC? Of course not. There are many arrangements where guys go in together to form an LLC but only one of them is actually trading. The other guys might be in research, capital raising, marketing, etc. All you do is nominate who in the LLC is going to be the trader, he is the one that needs to have the 7. If you are not going to trade, why would you need or want to have the series 7, think about it.
Even worse, why would a trader in prop firms require a "Broker" license S7? And hedge fund traders not?
OK, having checked with my Compliance Officer and she with our SEC attorney, the response is this. We would have to join the NASD, which we really have to reason to take on another expense/regulator, and or Attorney would not sign off on us allowing the type of arrangement you describe. A loophole like this is not worth risking our continued clean image. One group applied from another Firm, and we could not get pre-approval, so we followed the attorney's advice, and continue to do so, of course. I suggest to those who want to have an LLC for some reason, that the simply have some other arrangement with those who work for them (as you say, research, etc.). All this stuff seems to change from time to time, and that is why we pay the big bucks to our Compliance Officer (Hi Diane). LOL. BTW, I'm meeting with the CHX CEO on August 22nd for lunch, will you have some time to get together after the close on that day, or perhaps lunch on the 23rd (you pick). We can discuss on PM. Don
Hedge funds remain non-regulated for the most part. I did notice that the CFTS is doing some investigating based on the fact that they (hedge funds) trade a considerable amount of commodities and futures....it seem they are trying to rectify the regulatory lapse at this point. I really have mixed feelings....people should be able to do what they want with their money...but then if something goes wrong they have to understand that there was no regulatory body to intervene for them. Don
How about: Probably most prop firms trade mainly stocks; perhaps not many prop firms focus on futures; hardly any prop firm concentrates on options. The whole framework of prop trading would be: Trading options is the main job for prop firm's risk managers.
Good point, and since traders get leverage using futures or options anyway, it doesn't make much sense to offer "leverage on leverage" - again, risk. Don