Rule avoidance...Check this...

Discussion in 'Prop Firms' started by Don Bright, Dec 11, 2001.

  1. (I posted this on another thread, but thought it may be of interest to you all).

    Several attempts have been made, I am told, by firms to get past the rules for "daytrader" status. Even though it may not be in the best interest of Bright Trading (as far as attracting prop traders), I really think that everyone should be able to buy and sell as often as they like (which I guess is in our best interest, since we have more liquidity)....

    Anyway, you retail traders be careful, I won't mention any names but since this
    new ruling is self enforcing, a few have been pretty lax.

    One major thing came to our attention from the NYSE, and that is that there are a couple of Prop trading firms that have asked their traders to "waive professional status" so that they can save a few bucks on exchange fees. Has anyone ever
    heard of something so ridiculous...imagine jeopardizing all of your traders ability
    to ever trade again just to save a small pittance?? I am sure if any licensed trader got caught doing this that they would be "U-5'd" in such a fashion that they would not be allowed to trade.
  2. Don.. pardon my ignorance on the issue.. are you suggesting that traders now considered "pattern day-traders" should be paying pro fees? or are you saying that some prop firm series 7 traders are claiming to be retail traders to save a few bucks?

  3. The latter...Some soon to be found out Prop firms are actually doing this, and I thought it would be nice to warn any traders out there (and there are some on this board) about this illegal practice. If you are a Series 7 trader, then you must pay those exchange fees. Don't risk your license with these firms.
  4. Eugene



    What if the firm is charging the trader the monthly fees but not paying the exchange. How would you know you were in jeopardy?
    I don't believe traders at Bright pay their fees direct. You pay for them correct? If you don't have knowledge of this scam, can the sec fine or strip an individual that had no knowledge?(They could probably do anything they want)
  5. I am sure if any licensed trader got caught doing this that they would be "U-5'd" in such a fashion that they would not be allowed to trade.

    thank you,

  6. GHansen


    Don, you industry watchdog you. No one likes a tattle tale. :)
  7. wercurna

    A U-5 is a record that the nasd keeps on traders. (Don correct me if I'm wrong) of their past performance at different venues. If a stockbroker /trader was disciplined by a securities firm it would show on their U-5. A bad record would show up so that a trader /stockbroker would no longer be allowed to be in the industry.

    Robert Tharp
  8. They have had their (Series 7) traders sign waivers stating that they were not professionals is the way it was explained to me. So "don't sign nuthin'" about waiving exchange fees is my suggestion.
  9. Whenever a trader (registered rep, in our case) leaves a firm, a "U-5" is prepared wherein the firm must divulge the reasons for leaving. For example, if the trader owes money, has pending disciplinary action, or has violated any rules or regulations, this must be reported. If negatives appear then they may not be able to maintain an active status.

    I know that we try to keep in contact with other firms about "rogue traders" and the like, and we appreciate getting the "heads up" from others.

    Despite competition, we must all work to maintain propriety in the industry. I refer all of this to our Compliance Officer for review.
  10. Now it appears that 2 quote vendors are being brought into the fray from "professional" firms not paying their respective exchange dues. Come on people, check with your firm to be sure that you don't get "hung out to dry" by these characters trying to save a buck or two. This could really snowball, and you 3 know who you are...please fix it...for everyone's benefit.
    #10     Dec 13, 2001