Arcades Low Revenue & Profits

[controlz]

I have been doing some research on some of the larger arcades and groups, and was wondering why their revenues/profits seem to be so low, considering their size, and the way people always talk about how they have traders making millions and millions each year.

For example, Marex has 200+ employees and seems to be one of the largest, and most successfull companies of it its type in the City, yet its revenues last year were only £79m, and the Kyte groups revenue was £115m with pre-tax profits of £11.7m.

Just a question purely out of curiousity, I am sure it's just something to do with how the firms are structured, but I would be interested to know!

:cheesy:

 

[scose-no-doubt]

Aren't arcade traders classed as self employed? If so then the company income that you're looking at would be only transaction charges, rebates etc and wouldn't reflect the total amount of income generated by traders.

All depends on how the books are put together. That's what I'd be doing anyway and I'm quite awesome sometimes.

 

[controlz]

Aren't arcade traders classed as self employed? If so then the company income that you're looking at would be only transaction charges, rebates etc and wouldn't reflect the total amount of income generated by traders.

All depends on how the books are put together. That's what I'd be doing anyway and I'm quite awesome sometimes.

Well, I would have thought that would also include all of the money they generate from splits... and surely these firms want to make themselves look as successful as possible.

 

[scose-no-doubt]

In my experience private companies are more concerned with paying as little tax as possible rather than making themselves look good. Reputations is probably a more important than the IS insofar as hooking prospective traders.
I'd have to have a proper look at the rules around accounting in prop to draw up anything concrete but you're definitely talking tax-dodge overseas subsidiary stuff etc here imo on the basis of a sub 10% after tax margins alone. Also possibly a balance sheet fiddle depending on how the backing money was classified.

Who knows mate. All's I say is don't mess with Grant Thornton.

 

[weakpunter]

I wouldnt look at these 2 companies as arcades, much more of their business is in broking and general clearing than......proprietary trading , prop trading makes up a small part of their business´s , so taking splits of profitable traders wouldnt bea notable arm of their activity.

I have been doing some research on some of the larger arcades and groups, and was wondering why their revenues/profits seem to be so low, considering their size, and the way people always talk about how they have traders making millions and millions each year.

For example, Marex has 200+ employees and seems to be one of the largest, and most successfull companies of it its type in the City, yet its revenues last year were only £79m, and the Kyte groups revenue was £115m with pre-tax profits of £11.7m.

Just a question purely out of curiousity, I am sure it's just something to do with how the firms are structured, but I would be interested to know!

:cheesy:

 

[arabianights]

In my experience private companies are more concerned with paying as little tax as possible rather than making themselves look good.

Exactly... why would one want to show off to the man from the revenue

Anyhow, as weakpunter says, it doesn't sound like you understand the business model.

 

[controlz]

Exactly... why would one want to show off to the man from the revenue

Anyhow, as weakpunter says, it doesn't sound like you understand the business model.

I believe I understand the business model, however if these figures DO include the splits they receive from their traders, it would appear like they make very little from the trading aspect, and be hard to believe that many of their traders are making several million a year (which I have heard is true).

Just my head trying to get around it, that's all...!

 

[Pento]

Most of the reputable arcades have spin-off firms or subsidiaries which are owned by the same people but have separate accounting books. I'd assume the prop trading aspect including the traders profit splits falls under the spin-off firm whereas the clearing of the same traders trades goes through the main firm. The numbers you quoted above only show a part of the profits these umbrellas make.

 

[weakpunter]

I believe I understand the business model, however if these figures DO include the splits they receive from their traders, it would appear like they make very little from the trading aspect, and be hard to believe that many of their traders are making several million a year (which I have heard is true).

Just my head trying to get around it, that's all...!

Just to try and clear this up for you once and for all.......any company that basis its profit on trader splits is verging on sheer lunacy, most of these firms including the ones you mentioned make money 99.9% of their money on commissions, round turns,spins what ever else you´d like to call them, if there are any profits made on splits they are more than likely through trading groups that trade/clear through them as Pento rightly pointed out.
There is not a clearing operation in the world that would base its revenues on trader
profit splits!