Starting a prop firm

Discussion in 'Professional Trading' started by Kicking, Aug 22, 2003.

  1. Say you would like to start a firm with some trading buddies, just an office to trade and a dozen workstation some of which you rent to newbies that you train. How much capital would be appropriate? Would $500K or 1 million enough assuming you trade futures? Assuming most of the traders will not be daytraders (you hold multiday positions). No need to pay top dollar for connections and software. What montly expenses are we looking at? What about regulatory issues in the US and the UK?
  2. I remember reading a post very similar to this a few days ago, so you might wanna search.

    I'm not an expert, but 500K-1 mil. sounds pretty low to start a prop firm.

  3. cartm


    Do you guys help set up IB'S?
  4. bone

    bone ET Sponsor

    If a firm wants to hold futures contracts overnight, 500K-$1M won't let you hold too many. You'll pay greater commission rates as well because the clearing brokers are required to run SPAN and margin/cross-margin calculations, and the clearing broker's risk manager has to provide oversight.
  5. bone

    bone ET Sponsor

    And that's the point. The thread starter wants to implement a strategy of holding futures overnight - and unless he's only talking about a very small number of contracts, his capital situation may not be able to accomodate his trading methodology.

    Even if he's hedged, the brokerage account manager, clearing house or exchange may not recognize that leg of the spread as margin.

    The killer may be the fact that they let him hold, let's just say for conversation's sake, 20 futures contracts. Well, it would be typical that a clearing brokerage firm would charge a firm that trades only on an intraday basis or scalps exclusively $3.00 per R/T for ES. But that same firm might insist on charging a firm that holds positions $7.50 per R/T for ES - and that means ALL of their ES trades. So, as you can see, the commish could be a back breaker if these guys expect to trade any cvolume at all.