I have been trading with IB for 1/2 year and have been reasonably profitable. While I am more or less OK with IB's commission and execution, I was NOT too happy with short sale interest charges for hard to borrow stocks, which sometimes can be as high as 50% on an annual basis. I short a lot of relatively illiquid stocks, and this is really eating into my profits. Will a prop firm make a difference in terms of borrowing cost relative to IB? Or are they all looking at the same pools of available stocks for borrowing? If so, which prop firm? I live in NYC suburb (NJ). I trade about 30-40K shares a day, and my strategy is market neutral. I have not had a down month since April, while the account is up about 60% since then. I am only interested in remote access for trading since I have another job that requires me to be around sometime during the day. Any advice will be greatly appreciated. njrookie
It really boils down to a "supply and demand" type of thing. GS charges our traders too (for certain hard to borrows)... but, for the most part, the fees seem in line...nothing like 50% per year or anything. FWIW, Don
A series 7 will be needed for most prop firms... btw, what typ of strategy do you trade? It seems to be s delta neutral gamma scalping type strategy. Is that correct? Walt
the costs are just passed on. the process will become much more transparent once AQS comes on line. http://www.tradeaqs.com/
it's been pointed out to me that you could also look to the SSF and EFP markets as an alternative way of avoiding the high SLB costs or obtaining some additional transparency on pricing.
Thanks everyone for contributing to this thread. I do pair trading, sometimes on rather illiquid stocks. Still learning my way around. I was averaging 1% a day back in March to May. These days money is hard to make. I wonder about 2 things: 1. Whether profitabilit has evaperated for pair trading now the big players are back to play (I mean the deep pocket hedge fund); 2. Is "hard to borrow" stock interest charge really a pass-through? If so, there is no point to switch to another firm. My understanding is that the lender (pension fund/mutual fund/index fund) and the broker (in my case, IB) have some kind of profit-sharing agreement. IB makes quite some stock available for shorting. However I always wonder whether I can get a better deal somewhere else. njrookie