Why would you pay for a desk at a trading firm in London?

What is the purpose of occupying a seat on a trading floor of an arcade in London which:
- charges you at least £1,200 just to sit there
- takes at least 10% of your profits
- has absolute control over your money
- is not covered by any compensation scheme in case it goes bust.

I see no reason why these traders should not set up on their own, using their own clearer, keeping all their profits, having the same low commissions as in an arcade. So, what is the point?

 

Isn't that why most of them have shut down?

 

Most have but there are still some in operation and they are full and seem to be doing well - the biggest one having about 80 traders and literally 2-3 more spaces left. I admit it is beneficial from a psychological point of view to go out and work in a proper office but not on the terms I mentioned - I just do not get it.

 

It takes effort, time and skill (that they don't want to be bothered with) to set up an arcade by themselves?

 

Because trading on your own kills you from inside... slowly

What's 2000gbp when you make 20000gbp ?

It's called a business expense.

 

Not familiar with the London prop scene, but I thought that the main benefit of joining an arcade is that they pass through rock-bottom members commission rates to the traders. I could be completely wrong on this though. If you are paying retail (or near-retail) rates then I don't see the benefit.

The only other possible benefit would be a superior exchange connection, which may help with high(er) frequency strategies.

 

They might be providing more financing to the traders like prop-trading firms? And also from what I read, they provide like a social environment with camaraderie. Some of the good ones, apparently many of ex pit traders go there and they would tell war stories on the floor and stuff. So there is also the social and entertainment element there.

 

That is NOT true, not if you have proper work/life balance.

 

Commission examples (0-10,000 sides per month): ES $0.80, 10-Y T-Notes $0.80, Light Sweet Crude Oil $1.11.
80/20 profit split. £1,200 desk fee.
Are these really that rock-bottom rates? You can get that setting up on your own with a clearing firm, assuming you get CME membership

 

Do they take 10% if you are completely self funded?