'Evolution" "Adapt or Die" etc. etc. This is what we have been doing for decades...and I applaud those who take this serious, and who take the time to do the real research. And don't underestimate the major players in the field...we have the some plans...and (as many of you have noticed) have implemented them. Of course I can't disclose all of our business plans, but those who know us know that we have grown by a factor of 10 our "web based" "techno-traders" and lowered their "brick and mortar" costs considerably. Heck, we have to "fight with the MAN" every day for every penny.. just like everyone else. BTW for your "rumor mongers" .... Is the Generic/FNY rumor true? Did Ron sell to FNY...(God Bless America if he did) (actually, God Bless America in any case..., but you get my drift!!). Don
Thank you for you responses... Indeed...this is no new concept.... Its just that there are far more front end firms and almost no back end or profit centered firms.... Clearing firms...self clearing...business structure...advertising costs....bricks and mortar....software....successful traders with valid blotter histories...all of it matters....and there are no barriers to entry for those firms capable of changing to this model... I do firmly believe that the profitability of the client has to come first as the major objective...the change in technology and the advent of the internet make this possible... The back end model relies on profits...not the number of shares that you trade.... Again thank you for your excellent responses....and we'll keep those that that have an interest up to date....
V, I agree that the change in tech can and has changed the brokerage model...to a point. But, if tech has revamped the brokerage model, then it has also done the same from a traders standpoint. Why not just get 3-4 guys in an office running a few black boxes that are pumping out 1mil shares each and call it a day. If I could literally get .001 with no additional costs that is what I would look into. Why take on the risk and stress of having traders trade for you when you can get a machine to do it? I would just trade 20k share lots of CPN and LU all day on a black box while I play my Xbox. Tech can be a catch 22. Look at airline pilots. They used to do all the flying, now they can basicly sit in first class and have a drink with the passengers because the plane can fly itself from New York To Hong Kong with no problem. Some traders do fail because the firm they are with will bury them with costs and fees. But, since the good days of 2000, I have seen more and more so called "big traders" not take home a dime since these days. Why is that? Most don't want to put in the time to actually learn how to trade. There is only so much a firm and training can do. There is not a Holy Grail for trading. Even now, some of the new traders don't put any effort into "their business". Trading is not easy and there are stats that will back this up. The high majority will never make a dime at it and this causes a problem with a model geared soley on profitability.
The high majority will never make a dime at it and this causes a problem with a model geared soley on profitability. So the model should be to capitilize on the hopes and dreams of the many........and to give the profitable ones better deals? Michael B.
To me, it's funny about this profitability stuff being the engine of revenue. Make no mistake, there are 2 distinct sides of the business- the houe and the customer. The traders are the customers and the firms are the house. The house makes money always and the customers make money rarely if ever. This is the simple model that has existed on Wall St. since it's beginnings. You are either on the inside or you are on the outside. And if you can't figure out which side you are on, you are on the outside. Who do you think is richer and has a more steady income stream, Goldman Sachs, Morgan Stanley, Generic Trading, (insert any name you like), or it's customers? Simple answer to that one. A model based on the profits of it's customers will not work simply because they will generally have no profits. Some may say i'm cynical. I say that I am either more experienced or the only truly honest person to say such things. Find an real 'edge' like the house has or be relegated to being a gambler at the casino like 99% of all players in this market. The few make money from the many (and they make good money at that!). In case you didn't know, Wall St. has produced more millionaires and super-millionaires (100x more than professional sports) than any other career in this world (as an insider of course). There are guys that most would never recognize their names from Adam that make A-Rod's salary look like chicken feed. Welcome all comers....Neal.
Finally someone with a clue. Traders shouldn't take this the wrong way. I personally believe that their success needs to start knowing the 'real deal' in this game. Once they know that, they can move on to finding a real 'edge'. Sometimes, winning is more about knowing what is possible and impossible to figure out and go from there. One of the smartest quotes i've ever heard of from an experienced trader when asked where he thought the market was going was, "...i am smart enough to know that i will never know the answer to that question, nor will i ever try to know the answer to that question". How does this relate the the original post? Traders should know what to be focused on and what not to be focused on. Don't focus on beating the house, focus on becoming the house. Becoming the house incidentally, does not mean opening a day-trading firm necessarily. There are many forms of the word 'house'. Basically, it means understand what where the true and legitimate 'edges' are and what is a pipe dream. Find the 'edge'.
Does this model make sense for the higher earning traders? As soon as 15% a year works out at more than the extra commission someone would pay at a competitor, surely the higher earners will switch. How are you going to keep them?