From what I understand, if a firm is a licensed B/D, takes a deposit, and pays out 100%, then it's a client relationship and therefore leverage can't go above 4:1. This is the case with firms such as Genesis and Equitrade. So why are there so many deposit-requiring firms that offer 10:1 or even 20:1 and still operate without a profit split? A couple of firms pay out 99% as a way to avoid this.
Genesis for the most part only offers retail accounts if you trade through them. This is the same as going through Etrade or Ameritrade...4-1 if you have $25,000. If you go through a licensed prop trading firm that is a member of an exchange you can get higher than 4-1 using Laser from Genesis. For example, JC Trading operates like this. It's completely legit. The reason they do a profit split is because it's part of their business plan and another way for them to make money. They can also offer a trader a lower rate in exchange for a portion of their profits. But be careful, there are some non licensed LLC's that also offer Laser. These firms in my opinion should be avoided since the SEC is cracking down on theses illegal firms.
Itrade2009 can you comment more on the legalities of this? I get 100% payout and am a licensed prop trader, I never thought this was an issue. but I have heard the argument made by kovacs as well as others recently so I'm wondering what really is the truth. Or is this actually a grey area that people are getting by with?
Hello, I am also curious about this. I read somewhere that when you join an LLC, you can get a maximum of 99% payout. When I talked to Bright, they say the payout is 100%. Most use K-1 partnership instead of 1099's. Not sure which firm you trade with, but it's an interesting topic worth discussion. I agree with Itrade2009, firms that are non-SEC complaint are being shut down or folding. If you read my other posts regarding Team Trading, then you already know!
If you have a Series 7 and trade through a Registered Broker Dealer none of this would be an issue. 7 + BD = you can get whatever payout you negotiate with the firm + whatever leverage you negotiate with the firm.
unless you are with a CBSX registered B/D which DOES NOT require a 7 ..only a U4. CBSX firms are not FINRA !
Ok, so can CBSX firms (which do not require Ser 7), pay out 100%, just like the FINRA firms such as Bright? Or is there some max? Any help on this would be great, thanks.