IMO the least of anyone's worry in trading is someone (broker whoever) stealing their strat or being told this reality.
They would be trading on Material Non-Public and violating the new fiduciary standard and YOU would notice and report them. I had a personal experience with a matter like this when I worked at the CBOE.
First of all I want to say that this is a THEORETICAL discussion. So I am not a billionaire trader with the golden grail. So don’t use these stereotypical arguments as they don’t apply on me. Theoretically he can be fooled by randomness, or he can be right. Can you give with 100% certainty the correct answer including hard proof? No. So maybe he is right to worry. So what you basically say is: if he made enough money it is no problem that they can steal his “intellectual property”? What if he wants to make more money, what is enough? Will the criminal decide for him what is enough? What if he wants his children to continue his trading? Shouldn’t it be HE who decides what happens with HIS “intellectual property”? No matter if HE is dreaming or not, because that is irrelevant. Question is: is it normal that people steal something from you that you consider valuable for yourself, no matter if it is really valuable or not? Is it up to the criminals to decide what you can have or not? Why is there always so much fuzz about China not respecting IP of US companies? These companies made already enough money according to the above used logic. Let’s make a quick calculation: You trade 1,000 RT ES per day and make on average a profit of 3 points a day per contract. This results in 3,000 points profit at $50 equals $150,000 profit. What does your broker make on these trades? 1,000 times a commission of let’s say 70 cents per RT (it will be normally less), equals $700. If he copies just 1 day all your trades he will make $149,300 MORE than by just taking your commission. Your broker would need around 213 days of commission to make the same profit. If the broker can just steal 1 tick per RT, he will make $12,500 profit instead of the $700 commission. The broker can after 1 year quite his job with $3 million in the bank instead of $168,000 commission. Imagine the amount of money if he could steal the trades for 1 month of 1 year. It is clear that he wants to have a lot of clients that generate a lot of commission. But just stealing from 1 client his trades will not harm 99,99% his “commission generating part”, and the stealing might make more money than his total “commission generating part”. Just do the math. I never heard about a broker that was caught. That can mean 2 things: or it never happens, or they cannot be caught. How would you notice? And how to catch them if they really did steal trades?You will never receive the necessary data needed to find out if something illegal happened. So by definition you will never be able to check/proof what happened. Killing people is forbidden by the law. You risk to get a lifetime sentence. But nevertheless thousands of Americans get killed every year. So the arguments that it is forbidden by law and it can ruin your life are no guarantee it will never happen. The same applies to brokers and even to all human beings in any situation. Just one final question: who of you all is/was working in a brokerage and speaks of personal experience in his job? It does not make sense to post here with 100% certainty what happens in a business if you even never worked in it. And you should have worked on the place where the fraud could happen. Bringing around coffee in a brokerage is not really “working in the brokerage”. “Quant” Gaussian works part time and trades, so he clearly is not working in the brokerage business. Yet he thinks that he knows exactly what is real and what is not. He must have very special gifts as even people working in the brokerage business many times even don’t see it when illegal (on purpose or accidental) things happen. Maybe we should ask Morse, who according to me is as very trustworthy man, about his opinion. But even he will never be able to give 100% guarantee that illegal things never happen. Morse is a human being like you and me. He is no superman who can watch everything that happens in the brokerage. Others on ET apparently think they are superman, they see it even while not working in the brokerage business. They apparently know what is BS and what is not. They even know which trader is papertrading or losing money without any information about that person. LOL.
I once returned a great deal from "betonmkts"( years ago , a few hundred to about 10 grand) , could have been luck , but I got what I would call a fishing phone call from one of their accountants/ directors , ( I wasn't about to describe my strategy , but a few weeks later I got several emails from one of those guys that sells strategies , who wanted to use my record for marketing and would pay me a few hundred , I suggested he had to have been "colluding" with BOM to first know about my wins and to then be able to mkt my record, and he agreed this is what happened , I declined .
No-one is saying that there isn't an occasional rouge individual who breaks the law, obviously that happens in every industry. What anyone who knows anything about this line of business is saying is that it's got enough natural incentives for this not to happen and the requisite compliance infrastructure that it's rare and caught quickly if it does happen so it's not a reasonable thing to worry about. A brokerage company has absolutely no motivation to do this because as long as the company as a whole makes more from commissions than any of their individual traders (which I'll bet my entire net worth is the case for anyone here) they would be foolish to throw away that stream of stable cash flow for the highly uncertain cash flow of some punter's precious secret strategy plus the almost certain regulatory and reputational harm that would shut them down. IB, for example, has a market cap of $16B. Let's say that just get's cut in half when they get investigated for this kind of activity, a loss of $8B. Name me a trader again, who's precious precious strategy is worth $8B? Can an individual employee go rogue? Sure. Does the company have an incentive to detect this behavior and eliminate it? Well in the case of the example above, an $8B incentive. If you've ever worked at a financial services firm you're aware that all your trades have to be precleared before you make them, you have to give your employer full access to all your trading accounts, and violation of the above rules more than once generally starts you down the road to termination pretty quickly. There's an entire compliance division with folks who do nothing but look out for this type of behavior. It's fairly easy to track if copy transactions are happening at both the broker level and the SEC level. Do a google and take a look at the details of the last dozen or so insider trading cases the SEC has prosecuted, the power of their market surveillance program will be impressed upon you if you're not already familiar with it. Can anyone "100% guarantee" that joe punter's precious won't be stolen from him by a broker? No, no more than anyone can guarantee that a nurse won't knowingly inject patients with lethal doses of medication, for example, something that has happened more than once in real life BTW. When you go to a hospital do you take measures to ensure your nurse isn't injecting you with a lethal dose of medication, just because "no one can 100% guarantee" they aren't? You may, but if you did the rest of the reasonable world would tell you that you're being a paranoid fool and to STFU and focus on the important things like not dying of whatever has you in the hospital. Same thing here. Just because it's possible or no-one can "100% guarantee" it won't happen doesn't in any realistic universe equate to it being something that merits the level of paranoia on display here. If you really lived your life by that heuristic you'd end up in a bunker 100' under ground eating twinkies by yourself, because "no one can 100% guarantee....... won't happen".
great summary, I hope OP will get it, and will focus on most important ingredient of trading success - positive expectancy.
I already got a similar call from one of the biggest brokers triggered by my account balance/growth, offering wealth advisors, etc. That tells me that they definitely have radars set up on their end for X amount of balance/growth. After that -as long as there is a greedy human being on the other end - I don't know what they can do (may not do themselves, but give it to their off brokerage buddy and get a cut, noone would know). For those of you who say - they have no incentive to do so because they earn commissions and they would not risk it - the point is - them knowing my profile - individual investor - they know I would have practically no way of tracking it down who was mimicking/front running/copying strategy - especially if they gave it to someone off their brokerage grid. To answer if I am a professional or not - I think there is a lose definition there. I have done my share mistakes (that some of you mentioned "if he holds"), lost six figures (that I could afford), I am part of that class action law suit against SVXY that took people's money and evaporated 2 years ago (it was really too easy to make money to be true, should have known). I currently "specialize" in Daytrading futures based on volume/price action setups and patterns. My pre-trading expertise is also pattern recognition, and I do some Easylanguage programming for that. Currently majority of my time is trading. So I'd call myself - maybe a semi-pro. Semi, because emotions are still in my way. I have been "lucky" however, lately in getting it right, and before I put it in strategy, and hooked it to broker - I was just trying to do my homework, and see what other people could suggest I could do before, not after I expose myself (may or may not work out in very long term, I don't know, bout an ounce of prevention goes long way). Thanks again for those who took a little bit of their time in professional discussion and said some interesting perspectives on this matter
Sig I think your being naive , I suspect many brokers have people secretly following /accessing information on very successful trading accounts , could be anyone , directors , technicians, if there's a lot of money involved stuff leaks .
I feel like I gave a very detailed list of reasons why this is a self correcting problem and why just because "it could happen" isn't a reasonable criteria on its own....and you responded with "you're being naive, it could happen". If there's anything specific that I said that was incorrect it would be helpful to point that out. Absent that, I'm not sure repeating what I was debunking without any more support furthers the conversation?