Risks trading with ECHO Trade?

Discussion in 'Prop Firms' started by PKJR, May 15, 2001.

  1. PKJR


    What are the main risks of trading with ECHO trade?
    Is there any legal recourse if the company goes down?

    Thanks for any comments.

  2. I don't know the specifics of this company, but most reputable firms are SIPC insured up to $500,000 per account, so that if something happens to the firm, your money is still covered. You should ask the firm if they are SIPC insured, and if so, you're fine.
  3. PKJR


    The problem is they do not provide any form of insurance since it is LLC. You in a sense become a member..I know rtharp was mentioning something . I like the leverage and etc. but sending 50k without any insurance even against the management fraud is little bit risky, isn't it?

  4. I have done some homework. If the LLC is not with a deep pocket your 25K or whatever you put up is all at risk !
    That's a fact. Folks have lost money before like this.
    Bright has the money at Fido trust account but even that
    may be questionable. Ask them a financial statement and
    see the reaction you get ! ;-)
    All it takes is a few rogue traders and a bad market day.
    P.S. their risk manangement may give you some piece of mind....it would not for me. !!I just trade futures or
    funds at leverage. I mean if you get into all the trouble
    why not trade e-minis or e-naz futures ???
  5. PKJR


    This is strange. I have received emails from Elite Trader showing replies to this thread from other members like xll, rtharp and others but I am unable to see them. Can you guys post them again?

  6. ok hopefully my reply goes through. I sent a reply but it would just hang. I guess it would send email and than nothing.

    First check out this thread here.


    I started it about LLC firms awhile back. It's how I learned of Echo. Traders here I think have realized I am very happy with them even becoming a manager for a new office soon in San Diego.

    LLC's aren't SPIC insured. This is very true. There was a firm about 2 years ago Harbour Securities that went under due to some of the trading practices of that firm. One trader was trying to control a stock. He would buy it at 20. It would go down to 17 so he would buy 100,000 shares and than again and again and again trying to keep the price up. I think he was long something like 800,000 shares at 7. It was obvious he was buying into some serious selling. Meanwhile he was short a few thousand shares of RMBS for a few days during the bull market run which he held for days and days thinking it would come back. (I think we all remember what RMBS did)

    No LLC would ever let a trader take something like that on now. Daytrading.net was a division of Harbor. They split off from them because some of the traders didn't like what they saw the LLC doing. I have yet for them to reply to any emails I sent them. No LLC will let what happened to Harbor happen. Echo's managers have 80% of their networth in the company. I've watched as Jeff installs $3600 dual Point to Point T-1's in the Arizona office. That is 2 of them, with different providers coming out of different points in the office in case a construction worker takes out a line the other should be intact. A firm planning on leaving wouldn't be investing in that type of expense for their traders. Echo takes it personally if the trader can't trade due to the connection. Yes it's a lot more expensive to have this. If Echo were to go under the managers would follow by losing a huge portion of their networth. This is why LLC's have strict risk control. They limit your # of shares per stock, # of open positions, # of longs and # of shorts, and limit the amount that they will allow you to hold overnight. This is to protect the firm. There is also risk insurnance for the firm. This is for the firm though and not the trader. If you open an account with Echo the forms aren't few. It's a friggin book. I'm not kidding something like 500 pages. It's all about the risk controls that the firm places on their traders to protect themselves. NASD has also taken a part to protect the members. They heavily regulate LLC trading firms. That is one of the reasons why traders at LLC's require a Series 7 license. A trader who has a criminal record for a felony or fraud wouldn't be allowed to trade at the firm. You should see the pile of paperwork the NASD requires them to file monthly and quarterly. Echo has so many risk controls in place it would take 80% of their traders to want to break the firm to pull them under. 10 traders couldn't do it if they tried. I don't consider my money at risk with Echo this way.

    Read that thread and reply back here. I am happy to tell you more about Echotrade.

    The website for anyone's information is.

    Robert Tharp

    my message board for anyone interested is
  7. vonk


    Just because the managers of ECHOtrader would lose 80% of their worth doesn't mean that the "unthinkable" won't happen. Shame on you, Robert. That is one of the very biases your father talks about. What happens when a 5 sigma event happens? That event that no one anticipated and the funds of the firm vanish? Never happen? Impossible? Well, if that were true you wouldn't need an arsenal of lawyers to write that 500 page document that spells out in numerous ways how a member's capital is now an asset of the company and will be used to cover any such liability.

    There is risk here. Period.
  8. This is a risk, but (in my opinion) when you weigh the benefits against the drawbacks I prefer that risk. Trading capital shouldn't be capital you couldn't afford to lose.
    That chance is small. If it bothers you that much don't open an account, this type of trading isn't for everyone. Sweep you account of profits every once and awhile.

  9. This is the same risk every floor trader, and member of exchanges faces for their account when they find a clearing firm. They must have their money pooled. My buddy Tom was a member of the CBOT and cleared through First Options. They told him everyonce in awhile sweep your account of profits since their funds are pooled to be safe. Echo by being an LLC allows it's members the advantages of being a member without the high cost of leasing a seat. We all share the same seat.

  10. RTharp,
    Let me say this first, I am not opposed to LLC trading.
    I have done it way back before any of these firms aside
    from Bright were around. It not a bad way to gain leverage
    and be part of a professional environment. I know personally
    that Bright has many guys who are very "big hitters".
    However have you ever got a reply from any of these firms
    when you start poking around their financials ? Did Echo
    tell you anything ? From your post you indicate - they did.
    They attitude was quite different with me however. Never
    any positive stuff. I have talked to most of the bigger
    and better firms (for obvious reasons).
    Just that why even bother with them ? Some will tie up your
    funds and it's a big deal to take money out. I have attemted
    to go to Bright in San Francisco and never did because
    they switched to Chicago from Philly, meaning they would
    never "grandfather" my series 7. All in all if they have
    the financials and risk managment I am sure there is nothing
    to fear. Does echo trade via Philly membership ?
    #10     May 16, 2001