Arabian's paranoid scenario of the day: The end of prop firms?

[arabianights]

If we take it as a given that the better prop firms are clearers, and thus clear their own trades, a comment I read elsewhere from an ex SEC chairman (in response to Madoff) was that "people who invest money should be required to deal through a non-affiliated entity" to prevent self-dealing.

Now if this is the case surely this means that prop houses will have to clear through somebody else, and particularly when you consider the larger ones (i.e. not purely arcades) will have clients they may decide to focus on the client business rather than doing that... now those of us who've been doing it a while and therefore have money are probably alright because we could convert to pure self-backed clients BUT where is the new blood going to come from? Certainly I couldn't have started without backing. And if you are purely taking commission off locals and don't have an interest in their profits any more will you bother running a trading floor or not?

 

[megamuel]

I've no idea what you are talking about because I am drunk, and even if I wasn't drunk I wouldn't have a clue. I'm feeling rather bad at the moment. I know nothing about trading, I come on here and make jokes and take the **** and say nothing of any use, yet I seem to have recieved quite a few reputation points for the drivel I come out with. I feel rather guilty. Oh well
xxx

 

[megamuel]

Oh dear. I really need to stop coming on here after the pub!

 

[arabianights]

I dunno, I reckon most of the best posts here are made by drunks

 

[DC STOXX]

I've no idea what you are talking about because I am drunk, and even if I wasn't drunk I wouldn't have a clue. I'm feeling rather bad at the moment. I know nothing about trading, I come on here and make jokes and take the **** and say nothing of any use, yet I seem to have recieved quite a few reputation points for the drivel I come out with. I feel rather guilty. Oh well
xxx

By far one of the best posts of T2W

 

[new_trader]

Oh dear. I really need to stop coming on here after the pub!

Yes, you should start trading immediately instead, with no STOPS.

 

[bullcar]

And if you are purely taking commission off locals and don't have an interest in their profits any more will you bother running a trading floor or not?

Please keep up to date ; that business model died out with the dinosaurs as did the "arcade". I do not think anyone is doing that, bums on seats stuff. ( If im wrong let me know).

 

[arabianights]

The dinosaurs are extinct?

Anyway you've misunderstood my point. If prop shops are no longer allowed to share in the profits of locals then they will become pure brokerages, and then what are the implications of that?

(Mind you I think there are still a few doing bums on seats silly-spreading stuff where 90% of P&L goes to commission but I'm not going to name names...)

 

[new_trader]

The dinosaurs are extinct?

I think so. I watched a documentary on the Discovery channel the other night and apparently the Earth was hit by a giant asteroid which killed all the dinosaurs. It happened about 50 years ago or so.

 

[PualoP]

Some of the CME Group members were kicking up a fuss about European prop shops recently.

The CME has a Proprietary Trading Firm incentive where you get a reduced exchange fee if you qualify under their definition of a prop firm (trade company capital only).
However, CME Group members were arguing that many firms allow self backed traders to trade under the guise of these prop shops to get access to the reduced rates, thus acting as a brokerage and not a proprietary trading firm. Therefore they should not be entitled to the reduced exchange fee and instead should pay full non-member rates.

 

[bullcar]

Ok, But prop shops DO MAKE MONEY because and only because THEIR TRADERS MAKE MONEY.

So you point is a little bit of a dead end unfortunately.