Why would a prop firm do its own clearing?

Discussion in 'Professional Trading' started by NegativePips, Mar 5, 2012.

  1. I'm looking at a prop firm that's relatively well known in my area but was surprised to hear they do their own clearing. Is this normal? I started wondering about it after I stumbled on this link listing things to look for in prop firms and they mention having a reputable clearing firm. Why would a prop firm do their own clearing? Is this reason for concern?
  2. So they can take the other side of your trades.
  3. Maverick74


    No. No reason for concern. They earn a fatter margin if they self clear. It's much better for you because you'll most likely get better rates.
  4. rmorse

    rmorse Sponsor

    Which firm?

    If a prop firm is self clearing, they can have larger margins if they are big enough to pay for the infrastructure. Sometimes, they outsource some functions like stock loan if they can't handle it. Remember, as a member of a broker dealer, you're not protected by SIPC. If your prop firm is taking the added risk of being the prime broker, that may not be in your best interest.