There are a few different prop models. Typical Scam Model Pay for training. They rebate you an account. The training cost more then the account they give you. Buyer beware. Arcade Model Trader puts up all the capital to get leverage and around PDT rules. This is the most common model. The key is you put your money up at risk. No risk model No risk. These fit the true prop definition in that trader puts up no risk capital. Only a few of these and difficult to get into them. Even so, some may have tight restrictions that make it difficult to profit. Salary/draw/split model This is similar to no risk model. Trader puts up no capital at risk but gets a salary/draw in addition to % returns. Now, most props are either going to be discretionary style or quantitative. From what I've seen most quant props are only interested in high frequency models. They are looking for a models that might trade again just extreme volume. This is probably not the type of stuff that an experienced CTA could model. Typically these edges might take a million to exploit and produce maybe 100k-200k per year. They don't produce huge return but they make money every single day and don't take much risk. They are mostly interested in risk free profits. So, if you aren't a math wizard (like me) then you'll need to find a discretionary or other route. I do have strong rule-based strategies but nothing these firms would care for. You probably fall into same group as me.. it is not just rule based but you need to fit what they want: high frequency, modeling massive data, science degree.. It is specialized stuff. Hopefully we get some rules out that will end this HFT madness and put these mega geeks back to productive activities where they belong.
Bright and the rest of the leverage brokers won't be happy with that italicized text... Again: "â¢Only the firmâs capital is at risk of loss; no traders may make any contributions or payments to the firm nor have any capital at risk." ^above poster as well... +1
No, I didn't have to put in any risk capital at all. The desk fee was definitely at a premium for the company. They called it a fee for software, connections to the floor, and whatever else they could make up. I suspect their monthly costs to put someone in front of a few screens is about $100 per month so they are making $1,100 per month from you if you're profitable. The split was just like bone said. 50/50 to start and if you were profitable over enough time you could negotiate a better deal. They aren't going to let a guy making 50k per month, for example, walk out the door and trade for another firm for a better rate.
the big difference of course is the futures versus the equities - completely different beast and business model.
Lucias, thank you very much for the breakdown. Scam and the arcade model are the ones that I would not be interested in.... I have a science degree and my trading program has live performance results. But it's not HFT. I'll see where it goes. I might have a chance at it.
Did you have to pay the desk fee for every month regardless of the monthly PL? Or it was just deducted if you were + for the month? Well that 50/50 split is not bad at all. Also, did you have to sign a contract stating something to the effect of you had to trade there at least 6-months or one year?
The $1200 was charged against you regardless of whether you were profitable or not and it accumulated from month to month like trading losses would. The contract didn't specify that I had work there for any specific length of time but it did say that if I were fired with or without cause, or if I quit trading for the firm, I couldn't trade for any other firm for a period of 1-year. I can understand this clause because these firms teach you certain things that are proprietary and they don't want it wandering down the street to another firm. Also, if you developed any software while you employed there it was the permanent property of the firm, even if you developed it at home without their knowledge. They would have to do some prying to find that out but if you're put on the stand you have to tell the truth. While I was there I never saw any legal action taken against a trader and the non-compete clause can be hard to enforce. A judge will hesitate before he prevents you from earning a living and supporting yourself but allowing you to work at another firm would probably come with some stipulations.
Thanks the1. OK, it sounds like the contract can get tricky. The 1-year ban sounds unfair to me though especially if one brings in his/her IP. I will understand that if they make you commit for a period of 6-months or a year but basically they are saying that no matter how you and the firm depart, you can't deploy your IP for a year.
If you decided to jump ship I don't think they could stop you from trading your own account from home. The biggest thing they don't want you doing is sharing trade secrets with the competition. I would do the same thing if I ran a Prop Shop. A buddy of mine was trading Prop about a year or so ago and the firm closed down and he had no problem hooking up with another firm. I suppose that is because the original firm closed its doors and wasn't interested in enforcing the non-compete clause. The firm was profitable. The owner was up there in years and just wanted out of the business so he shut his doors.
I am in chicago. I didn't mean that you ever put money up but you get paid out quarterly. So if one day before end of quarter you have 100 in your account and then the last day you lose 100 your account will go down