20% less income would not change your standard of living! Well I guess you are one of the few in the world that this is true for. You must be very lucky! To tell traders to just increase there trading size to make up for the 20% clip is plan ignorant!! You dont sound like you have any clue how hard it is grinding out a living trading day in and day out. God bless
Well what other factors...for example: does the firm cover your data fees, is the commission SIGNIFICANTLY lower. If the firm is doing this then the split is the way to go, because then your interests and the firms interest are in the same direction : profit. The commission fee only model at 100% payout means the firm influences you to TRADE MORE, because thats the only way they make money, they will also LIKELY markup all of your fees and their fees as well. In theory I think this is correct. These types of firms basically favor high trading frequency models because they are only taking soft dollars. Firms now who are looking for hard dollars may be much more interested in your profitability, not you churning up share volume, and this could lead to a synergistic relationship where you become better. When I was at firm X I had this relationship and it was fantastic. In practice, in a split, if the fees are not as near to zero or the commissions are not just fractionally greater than their costs, this model sucks. Some firms might want to take a split without showing you that your fees are significantly reduced, I would just look elsewhere if this is the cast. In addition, will the firm share in your losses? How is your capital treated if you make some kind of deposit? The answer here is not canned but depends on many of these factors. If I could get a split and can CLEARLY see, by the firm providing me info not me begging for it, that their interests and mine are clearly in line, then I would consider such an offer seriously. If the firm is not transparent on this one, then again, look elsewhere. In a split relationship you might have to ask your self "what is the firm doing that deserves 20% of my profit." That is a lot of money to a profitable trader, contrary to what the prior posters have written. Again if the trader costs are as near to firm costs as possible, because fees and coms are significant, it's worth looking into further. But this must be determined by you clearly understanding your trading cost metrics and how things would change if the payout model changes and by how much, and if your fees are different enough and by how much, and a more or less subjective feeling on how this particular firm you are looking at can add to your profitability (if they provide significant more leverage on your same base equity, do they have programmers that will code things for you, how easy is it to get money into and out of your account or sub account). Clearly these is no one answer that will work for all traders X all firms that split. z ? [/B][/QUOTE]
He takes risk. What does the company do to get 20%? If anything he should charge them 20% off his commission if he is successful. They should even be charged 20% of the profits he makes because they can monetize his volume, follow him etc. So he has to charge them, not the other way round.
I am with you. They take no risks and want to take 20% of your profits. That is a 20 delta call option free to them, applied to the winner. If they were to take the other side of their customers, then it would make sense that they charge to offset the loss from the winners.