real noob question?

Discussion in 'Prop Firms' started by vastox, Jul 17, 2007.

  1. vastox


    sorry, couldn't really find a response on the past pg's.
    Can someone give me a clear and simple description of a "prop firm" and their purposes?? also what are prime broker?retail brokers, any clarifications would really help.
    Thanxx a lot
  2. Surdo


  3. vastox


  4. Back in the day, prop firms put up all the money, some even paid you a monthly draw to lose money. Life was good. Then they started asking for money to cover losses and stopped paying draws. Now prop firms mostly give leverage in exchange for commission dollars. Payouts now are often 100% or close to it for successful traders who do decent volume. Prop firms today make most of their money from commissions and lowering their own costs through the cumulative volume of their traders.
  5. Prime Brokerage
    A special group of services that many brokerages give to special clients. The services provided under prime brokering are securities lending, leveraged trade executions, and cash management, among other things. Prime brokerage services are provided by most of the large brokers, such as Goldman Sachs, Paine Webber, and Morgan Stanley Dean Witter.

    Investopedia Says: Hedge funds were what started the prime brokerage option. Hedge funds place large trades and need special attention from brokerages.

    Retail Brokerages have licensed "Registered Representatives" (stockbrokers), who act as salesmen to execute orders for retail customers. They also offer online trading subject to current margin requirements.

    Prop firms, 2 "flavors" - Firms like Goldman Sachs, or FNYS will hire people to trade with the firm's money, generally following a strict set of rules, and pay them a percentage of their net trading profits.

    Prop Firm using Stock Exchange "entrepreneur" business model (As Bright Trading)....traders run their own business within our business. Traders put up some capital, and then may use a $million or more of our money trade with. All traders are licensed professionals. This capital usage allows these traders to take advantage of "lower risk, higher reward" but capital intensive strategies (mergers, market making, pairs trading, automated black boxes, etc.).

  6. hey don, good to see your back, its been quiet around here without your help..
  7. Why thank you, always nice to hear.

    Don :)
  8. timcar


    What is the general timeframe before one is licensed and can start trading with Bright?