That is like asking Visa how do they do it, lots of electronics, great deal of money in the beginning, not like you can nickel and dime when monitoring systems. I have always found most of systems they have seldom work or there are so many signals, they don't factor slippage and fees. Whether it is one investor or sixteen? The amount can't go over a certain limit and when you send in the form showing you are controlling the account and that limit is hit, brokerage most likely will stop trades as they don't want to be fined by the feds. I just wonder how much Visa pays for all the equipment and programming each year, security nightmare. Good luck.
Check out interactive brokers friends and family account. you can trade their accounts on their behalf I believe. Don't know any details. cheers
I already support IB individual accounts. Technically this works great. I was just trying to get some advice from the legal point of you.
I want to understand this better. So you're saying that a personal individual individual account controlled by an owner might have troubles once the account value hits certain limit? Do you know what that limit is? I'm using Interactive Brokers and could not find such information on their web site.
if the robot is sitting on your server or if the master account/block account is in your name (or your entity name) then you are managing client money. if the robot is downloadable onto client computers and client is in control of switching on/off the program then you are not managing client money. Look up cooltrade - that was (maybe still is) a software that resided on client PC and client fires it up every morning. third option is to give the black box to a broker who can 'auto-trade' your system. Under auto-trade arrangements you can charge based on the number of contracts being traded or size of account. Size based billing is a missing feature at collective2.
I'm trying to run fourth option: the robot is sitting on my server, the money is sitting on client's account, and the robot is dealing with the client's account. This is very similar to the second option but with a convenience of not running it on the clients computer, but in the cloud.
In that case I am fairly sure you cannot circumvent registration. If it's futures then you are acting as a CTA and would need to register (you would be like a mini collective2 who is registered a CTA). If it's securities then it would be SEC registration (not state regulation) because you would fall under their definition of 'robo-advisor'
"Although most robo-advisers limit their offerings to automated portfolio management functions while avoiding other advisory functions, they are still deemed to be investment advisers subject to the Investment Advisers Act of 1940. As such, robo-advisers, like traditional investment advisers, are regulated by the SEC and must be registered; because they are deemed to be internet-only advisers, they may register with the SEC regardless of assets under management. As registered investment advisers, they are subject to the same requirements as are traditional advisers. However, because of the robo-advisers’ unique business model, some of these requirements, such as the fiduciary duty to act in the clients’ best interests, the requirements of full disclosure of conflicts of interest, and client account reviews, for example, may prove challenging."