Is it not a must to set up an office in mumbai where the real estate prices are the highest in the country. Yes most of the indian i-banks are in bombay but they trade the indian stock markets. You could set up an office in any decent sized town where the cost of living is low (thereby you don't have to pay up them traders) You didn't include the cost of education/training that you'll have to provide. Consider that you won't be able to get any productivity from the traders for the first 3 - 6 months !!!
Yup - I'm not considering any costs yet since I don't have a good understanding of them yet. But... why would I open a daytrading firm OUTSIDE of Mumbai?! One of the reasons that daytrading firms have such a bad name is that they are often set up in a half-assed fashion by any schmoe with an account, andLLC and a willingness to sell B Class shares. That is precisely what I don't want to do. Whomever opens up in India, is an early entrant and can count on stiff competition down the road. Therefore, why wouldn't you establish yourself at the high end immediately in order to effectively compete over the long run? I'm talking about a slick office in central Mumbai, state of the art technology and infrastructure, and a stipend that would create buzz among the finance community (" did you hear about such and such firm that pays you to trade thier money?"). Given all that, it would be hard not to get fully staffed from Day 1. If you start at the high-end from the beginning, you always have the OPTION of moving down the food chain, whereas if you start at the low end, and comptetition increases, you're the first to lose. Example: Diesel could sell jeans for $20 if they wanted and they'd sell, but Old Navy could never sell jeans for $200. With regard to productivity - as long as they are pressing the keys and churning, they are productive as far as I'm concerned. Granted, you've gotta figure about 2 weeks on a simulator, but not more than that.
I'm sorry but your post just really bothers me on several levels as is displays such poor business sense. 1. Who is your target demographic? - University grads and young people beginning thier career in the white collar (often financial services) workforce. Where are they? Probably in Mumbai. Opening a daytrading firm outside the core of the city is ridiculous since you're basically going in giving them a reason to not trade at your office. If you want to succeed, why would you do that? 2. What training are you referring to? A 1 day seminar on what an ECN is, what side is the bid and what is the offer. How to read the open book - that's it buddy. 2 week on a simulator and the commissions start rolling in. The real question I'm trying to answer is why this isn't already being done in a big way. With the Indian per capita income so low, a US daytrading firm could pay them what they could earn working a real job in Mumbia... I just don't get it - and I've been speaking to many Indian people lately and haven't gottan an answer.
The people that will be joining your firm will greener than green and will require way more than 2 weeks on a simulator before they can start churning throught 20K shares/day. (Without losing their shirt and blowing up your company's account that is.) You'll need to provide a method for your traders to learn while trading 100 share lots (simulators are worthless) and go up from there as they get better. This may take more than 2 weeks. Someone with experience doesn't need you nor will he/she pay an extravagant .015/share commission. As a comparison, I believe Swift's commission is ~0$+ECNs-rebates so in order for them to make money their traders also need to make money.
You have no idea what you're talking about dude. India is wide open and 20k shares per day is quite easy to do on 100-200 share lots. New college grads routinely pay .01/share at trading firms in NYC, plus a p/l split. If they last, of course, they shop for a better rate.... but at least.01/share in India is very doable. With regard to rebate trading - that's an attenuated universe. Also, you made no mention of the fact that since they're trading in USD, it's concievable that they could make an amount equal to or greater than the per capita income in India - that's a fish's dream. The method of payment could be ACH to an HSBC account, which is all over India.
More likely than making, he will be losing an amount equal to or greater than the per capita income in India. Especially if his training consists of 2 weeks in a simulator. Someone posted an article about an Indian trader that had a 10$ daily goal. (So that he can feed his whole family) I doubt that he'll be churning through 300$ in commissions to do that.
Your point makes my case! If the Indian per capital income is $538 and a trader comes in to trade an account denominated in USD... He will begin on 100-200 shares and his daily loss limit will be equal to his "tier size" - in this case $200 max loss for the day. He will be getting in and out all day for an average of 20,000 shares per day....(20,000x .013 = $280 in commission for the day)... Over time, he will (hopefully) become profitable and if not, he's let go and the firm is about breakeven on him. If he makes money, he'll consider himself rich beyond his wildest dreams - $100 per day in India is serious money. Also, you don't seem to know how a prop firm works. If a firm can keep most of it's trader below 2000 share lots but can keep them ACTIVE, then not only are they racking up commish, but the firm's risk is fairly low as well...The fact that the Indian per capita income is so low means expectations are lower, which means that even a horrible trader who eaks out $10 per day will consider himself a success and will stay trading longer - turnover will be decreased leading to more people trading thus leading to more commish. And... yes, the per capita income is low in India - that's why you could pay a draw of say, $60 per month, to ensure that you are fully staffed with the hungriest most determined young fish.
Yeah. Keep in mind the losses are also magnified by the low per capita income too. A guy happy to make $20/day isn't going to have the financial resources to indemnify you if he blows up. I do think you have a good idea. Just be sure to partner up with a juiced-in local so you will have help on local politics and cultural differences.
According to the finance minster of India, it's $800 as of late 2005. http://in.rediff.com/money/2005/oct/13income.htm So, if you pay traders, who are not required to put up a deposit, a draw equal to 1.5x per capita income. 800 x 1.5 = 1,200 1,200/12 = 150 per trader per month. So, for 15 trader, you'd be into them for 2,250 per month, which I think of as an insurance policy against not being fully staffed, right?