rebate with Speer L & K

Discussion in 'Prop Firms' started by andrasnm, Nov 22, 2001.

  1. What is the true rebate ? How much is paid out and how much
    if any is a revenue source to a LLC. Is it legal if it's not paid out
    all ??? I suspect when my days with ETG were going awry it was
    when I and others started suspecting that ETG's true source of
    revenue was rebates and they only cared about the volume.
    the trading profits were bonus but larger they got lesser it was
    important. With firms like Echo where they take no profits at all on
    rebates it must be mostly commissions or rebates on it !!!
    Anyone dare or care to "go there" :D
  2. :D :D :D :D :D
  3. Hi Andrasm

    I don't think it is a legal issue at least with the securities regulators. After all, volume rebates are normal in this economic system much like Avis and Hertz probably get discounts or rebates from the big three car makers. I think it could be a potential IRS reporting issue regarding the LLC income distribution.

    People join or form LLC's to start legal firms, medical groups, restaurants,etc. to enable them to share in the risk and reward of a venture. If a traders share in the 'venture' is his own pnl, it is concievable that the IRS might take issue with that. When and what remedy they may ask, is the big question.

    just my humble opinon.
  4. Not sure about rebates but from what I understand Spear Leeds charges its broker clients from .0025 to .02 per share depending on their volume. The actual numbers may be a little more or less than these but this is a good estimate.

    Spear also does things like provide free office space and equipment. I think it's safe to say that every deal is probably different though, depending on the client's volume and other factors like the time of day, weather, who the broker is "sleeping with," etc, etc. :)
  5. Rebates vary from firm to firm based on their relationship with the Clearing Firm. Obviously a new firm is not going to get as good a deal as an established firm. The overall Capitalization of the Firm comes into play (for risk control reasons...since a new firm has no track record, and little money, the Clearing firm is going to charge them more, simple as that).

    We have negotiated pricing adjustments over the years and have shared them with our traders. We are doing the same for 2002...there is no mystery to pricing.

    Since all the commissions on the sheets are calculated using the same basic fee (in our case now 1 cent), we calculate the rebates to the traders based on their volume and status with the firm. SLK or anyone else is not going to customize each trading firms daily sheets to reflect pricing changes.

    The same reasoning goes from Clearing Firm to Trading Firm, and from Trading Firm to Trader....that is another reason to stay away from the additional middle man or Franchise holder.

    No "silence" here....:)
  6. What's the difference if you charge less initially or charge more and get a rebate. The net cost is the only issue. What I think your firm does right from what you wrote in the last post is to target your lower costs to the traders who have earned it or deserve it. You earn it by making money and longetivity, right? That is why your firm and a few others that I know (ETG, FNY etc) do it right in my opinion. Why should any person off the street deserve the same rate as your trader who does 500,000 shares a day. The trader doing volume helps the firm get a lower rate as a whole and he should reap the benefits as well as the firm, not everybody.
  7. You have seen that we do reward experience and longevity, and will continue to do that. In addition, I think the firms that stay away from charging ticket charges are good for the newbie who should be trading 100-400 shares at a time in the beginning without having to pay 9.99 or whatever.

    Overall costs break down in several ways, and the more you know about an individuals trading habits the better you can price them. We have had quite a few years to work out the bugs in pricing.

    Thanks again.