Hey all, First: I don't post very much but I've found an invaluable amount of information on these forums. So thanks to everyone. Second: I have been looking into prop firms recently, and came across a couple that I'm taking a closer look at. I don't know too much about what to look for in a prop firm except to exhibit caution. I know there are people that have joined firms that are on this site, and I know there are definitely questions to ask firms since the goal is to shop around. So I kindly ask you here on ET, what traits should I look for in a prop firm, and what matters to everyone? Any advice is appreciated!
(Still working at home)...not sure whether to leave this one to Maverick or just post all the basics one more time, LOL. Check firm's registrations (Exchange member, etc.). Check firm's balance sheets.... Years in business - and to be fair, there may very well be some newer firms that pass muster. Above all, I think that firm/trader interaction is one of the most important things to check out. We pride ourselves on being online with every trader, every day....daily meetings, weekly or monthly online workshops to share with each other what is working and what is not. And, just send emails, make phone calls.... make the same business decision you would when going into any business venture. FWIW, Vtrader, Echo, and Generic are all in the top group.... I've been told it's not smart to mention "competitors" - but we all have varied benefits to traders. Don
Here are a bunch of questions you should be asking: 1. Do you allow traders to trade remotely? 2. Do you require Series 7? 3. What are your commissions rates? 4. What's your payout split? 5. Do you pass back exchange rebate fees? 6. Do you offer advanced order routing mechanisms? Do you have access to midpoint routes and dark pools? Please elaborate 7. Do you have special relationships with floor brokers (floor routes)? If so please describe the fee and rebate structure? 8. Do you have a capital contribution requirement? If not, please describe any risk management parameters (such as max drawdown per day) that you have. 9. Please elaborate on how much buying power you provide? If this depends on capital contribution, please elaborate on that too. 10. How do you process payouts to your traders? 11. What trading platforms are available to traders? Do you charge a platform fee? 12. Please describe any other fees that you require traders to pay? I ALSO STRESS that you don't base your choices on the firms you receive from this forum. There are a lot of people on this board who run firms. Nothing against Mr. Bright, but working at a firm that solicits traders and posting on a forum is a conflict of interest. Look up websites with reviews. Look up websites like Profit.ly, where brokers have traders representing them. If you don't see the firms listed on sites that traders use, don't go with them. Stick to the few trusted firms that real traders with verified online trades use. read the contract very carefully.
The questions posted by the op are all excellent. Perhaps this will help (expanding a bit on what Don said)... First and foremost, ask the firm for the latest SEC focus report which they file annually, usually by March 1st for the prior fiscal year. Here's why: when you join a prop firm, they will take a fingerprint, run a full background check through DOJ, ask for your social security number, ask you to sign all kinds of agreements, etc. So, it only makes logical sense to do a "background check" on the firm, especially when it comes to finances. Remember, with a registered prop firm, 1. Your capital contribution is NOT insured by SIPC protection. 2. The funds are commingled with other traders' contributions. 3. Your capital contribution is "locked up" for one year (Bright and Echo are the exceptions). The CBOE even put out a circular for the CBSX registered firms that they must inform its sub-account holders that they are "members" and not "customers" and therefore the funds are subject to the losses of the firm AND the losses of other traders. Here's a link where you can read it directly: http://www.cboe.com/publish/RegCir/RG10-101.pdf If you are comfortable with their financial situation (have a neutral third party from the accounting profession review it), then you can move forward. Just my two cents...
Just wanted to say thank you to everyone who has responded so far! Assuming I end up choosing a firm at some point soon, and I ask these questions that have been suggested to me, I'll be sure to let everyone know what firm I went with and why.