I was talking about retail accounts not prop accounts. Prop accounts call their own shots. They can give you anything you ask if they wanted to.
I wasn't referring to that particular advertisement when I stated that WorldCo's new advertisements claimed an excellent training program. Actually, I can't find the actual advertisement I came across a couple of weeks ago. If I do happen to come across it, I'll post it on here for those that are interested.
Despite what all these firms are doing, if you are getting 100% of your p&l, you are subject to federal reg T. It is my understanding that there is currently a request for a "no action" letter by one firm asking the SEC if they can give a 100% payout and if a trader can take losses. There are some interpretations of the regs that say a prop trader may not write a check to cover his losses. This issue has never been determined in writing by any agency. The firms that pay 100% are taking a roundabout view that you are an investor in an LLC and can be allocated P&L anyway you agree and that it is the entire LLC that is subject to net capital not the individual. While that may be true of an LLC, the SEC determines who is subject to net capital and who must meet reg T. If the firm gets the no action letter, then Bright and all the 100% payouts are safe. If it is denied, then those firms paying out 100% and maybe even those allocating any losses to a trader may be forced to change their model. I think in a twisted logic way, the firm that submitted the request really wants it turned down. A negative ruling by the SEC could jeopardize most of the firms in this business. The ones I know of who would not have a problem include Schoenfeld, First NY Securities, and ETG. I am sure there are others, and I am sure that some of the other firms will adapt if necessary. This issue was explained to me by a college friend who is a securities litigator at a large Wall Street law firm that helped draft the letter. Coincidentally, I bumped into him tonight at a Yankee game. He would not tell me when the letter was submitted nor when he expected it to be ruled upon. (Disclaimer: While I can repeat his explanation, I do not have a firm grasp on the legal nuansces he makes. Also, my friend would not pass the background check for a job with the FBI or CIA. Suffice it to say, he inhaled. Maybe even tonight.) It seems like being a real customer is the safest structure.
Why would the firm you speak of write a letter to the SEC at all if it wanted to keep a percentage of its traders' the profits (my understanding is that the firm hopes for a negative decision from the SEC so that it might claim a percentage of its traders' profits)? In other words, why not just tell traders that the SEC prohibits 100% payout? It is clear to me that firms which pay traders on a salary basis and consider such traders to be employees rather than members of an LLC can pay traders however they like.
OxonianTrader, As you registered at ET on 9/12 and your very first post the same day (outside of an incidental on Chit Chat) was starting a WorldCo thread and providing a "recruitment" link at the WorldCo site, the latter has been removed. While I want to give you the benefit of the doubt, that this thread is indeed an honest inquiry on your part and not a subtle promotion (even down to the thread title), I must ask that no links be provided and no discussion of specific payout structure. WorldCo is not a sponsor at ET and therefore cannot be extended free advertising space in any form, directly or indirectly. Thank you.
Ox, Looks like Magna is on to you. Size, I appreciate that you understood my post. It is a subtle point that too many people are ignoring I am afraid. I guess we'll find out soon enough.