What is the prop firm business model?

Discussion in 'Professional Trading' started by levalencia, Dec 19, 2012.

  1. I am trying to understand how the prop firms work.

    Lets suppose I have 10K, with tm global capital intraday leverage 10:1 I will have 100K buying power intraday.
    Now lets suppose that I a good trader, and at the end of the month I made 10%, that would be at the end 110K, for 10K profit, the payout is 1%, so they get 100 dollars, commissions and the das fees, I get the rest, lets suppose about 9K.

    For me its very hard to believe that with 10K I invested, I made 9K, thats why I want to understand how is the business model of prop firms.
  2. 1245


    These type of prop firms only make money on marking up commission and sometimes on ecn fees. Without a lot of volume, they don't make money. This is why this end of the business is dying. Not worth the risk reward any more. Be careful who you choose. Don't just look at commission rates. Ask to see there latest focus report.
  3. I think I can trust the firm I a checking TM Global Capital has good reviews in all sites I have searched, and almost no bad reviews at all. but this doesnt solve my original question.

    So, they lend me money, so that I can make a lot of money, but they only make a few dollars?
  4. 1245


    They don't really lend you money. They provide you leverage and most firms expect you to be flat at end of day, so they don't use any capital. Correct. They make very little on you unless you do a lot of volume. Does that answer your question. Do yourself a favor, ask for their most recent focus report. I know of one firm that went from over $25m to near zero in one summer. You are becoming a limited partner in a regulated firm. Know what you're getting into.

  5. This is the answer I got from them, what u think?, it makes a lot of sense and this prop firm has many good reviews in different websites.

    TMGC is a private proprietary trading firm based out of Bat Yam, Israel. We are not registered with FINRA or any other US regulatory supervisory. No focus or private corporate documentation is available for public display. That's something you will need to take into consideration before opening an account with us. Our firm does not fall under the regulatory supervision of FINRA; therefore, no FOCUS or any other type of FINRA report is conducted on our organization. The broker-dealer we are registered with is Swiss America Securities, based out of the Bahamas which is licensed by the Securities Commission of The Bahamas to carry on the business of a broker-dealer and investment advisor therefore no type of disclosure is required to be made. Whether this effects your decision to join us is up to you; however, making personal records available over the internet is not a risk we are going to take considering we are not located in the US and have no legal protections from any local or federal US court.
  6. 1245


    This is a tough call. Even with a US broker dealer prop firm my feeling is that you are partnering with people and you should get to know them and their finances. I would also be OK joining a non BD LLC where the LLC is providing me with leverage for a % of profits but not marking up commissions, if I know them and trust them. This situation gives you none of that. No US BD, NO personal relationship, no idea if you'll get your money back. I would not do it.

  7. You have outlined a hypothetical example.

    So far, you have placed 10k then another 10K is now in their hands. You have also spent a month in time.

    Right now, you have no return in your pocket and they have 19K in their pockets plus 1K you do not expect to litigate. You also have no legal rights.
  8. cml2949


    Do you have to pay for office space?

    Using their charts or trading platforms?

    Are there any other costs tied to being with them