charliechan
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probably one of the kyte lot. no real risk management and the odd fine for dodgy book keeping of customers money.
minx
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Forced merger or was this always on the cards?
Both really, from what I understand the two were geographically close, one being at number 10 and the other number 11 Old Jewry, and they had a lot of synergies and it made commercial sense. I think it was felt that it was a good fit and provided economies of scale to both parties.
Agreed it is long overdue, trading groups are offering ridiculous leverage, wafer thin commissions and the markets have become a lot tougher to make money in. Add to this the fact that the number of trading groups has grown to uncomercial levels and that most of these have very weak balance sheets and a few are not even FSA registered. The net result is that a significant failure is now a racing certainty. The lessons of Griffin and ICA have not been learned and traders will loose large amounts of money.
At this stage though it needs to happen so that some sanity can return.
At this stage though it needs to happen so that some sanity can return.
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fiftyfifty
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So who is offering economies of scale? Segragated accounts? Several exchange memberships? Top class IT?
Agree with you on the way things are going. As things get tougher people will either leverage up for less return until someone blows up or a few houses go by the way side. Or we'll see more "mergers".
Agree with you on the way things are going. As things get tougher people will either leverage up for less return until someone blows up or a few houses go by the way side. Or we'll see more "mergers".
Economies of scale come in many shapes and forms, savings in terms of office space if both have more space than they require and they can be contained on one floor. Savings in terms of costs of exchange connections, IT hardware, IT staffing and of course a combined unit is in a much stonger position to get lower clearing rates etc.
Segregation is the most abused and misunderstood concept, I am amazed how many people seem to be totally mislead by segregation, sometimes deliberately.
Firstly the ONLY security you have is the balance sheet of the company you are directly contracting with. There are trading rooms that make great play of the fact they hold funds with big banks and clearing institutions, that is of no benefit to you as a trader.
For example say a trading room ABC is a prop trading outfit, not FSA regulated and therefore cannot hold client money, they clear for example Fortis, they have twenty traders and they go down with losses of £ 1 million, Fortis are obligated by the FSA to protect all their other clients from any losses from ABC, but the traders at ABC have no recourse whatsoever. So if you were a trader with £ 50,000 on your account you are done for, as far as the liquidators are concerned all the money is owned by the company and will go towards paying off debts.
Now then same scenario but this time ABC is a regulated company holding client money and each trader is segregated, again clearing Fortis and again they go down with £ 1 million losses. This time the clients have some measure of protection but only in so far as ABC has to make good the losses to the segregated traders to the balance sheet of the company (ABC) and this will take time for FSA to sort out, in the meantime your money is untouchable. Let’s say after the sale of all the assets there is still a loss but the traders are able to recover £ 0.60 in the pound. This is what happened at Griffin. Again none of the traders at ABC will have any recourse to Fortis whose sole responsibility is to make sure the failure of ABC does not effect any of their other customers.
The basics are this, make sure you only sign up to an FSA registered company as this means the balance sheet and company structure meets minimum FSA standards, make sure the company has a good strong balance sheet as this is your only real protection and then remember the basic rule of economics, you get what you get what you pay for. If you want to go to a bucket shop with a poor balance sheet because it saves you £ 0 02 per lot commission then you probably deserve everything you get if they are one of the companies that fold.
There are more than a few trading rooms with very poor balance sheets and some that are not FSA registered but offer very cheap commissions and huge leverage, they will blow up sooner or latter.
Segregation is the most abused and misunderstood concept, I am amazed how many people seem to be totally mislead by segregation, sometimes deliberately.
Firstly the ONLY security you have is the balance sheet of the company you are directly contracting with. There are trading rooms that make great play of the fact they hold funds with big banks and clearing institutions, that is of no benefit to you as a trader.
For example say a trading room ABC is a prop trading outfit, not FSA regulated and therefore cannot hold client money, they clear for example Fortis, they have twenty traders and they go down with losses of £ 1 million, Fortis are obligated by the FSA to protect all their other clients from any losses from ABC, but the traders at ABC have no recourse whatsoever. So if you were a trader with £ 50,000 on your account you are done for, as far as the liquidators are concerned all the money is owned by the company and will go towards paying off debts.
Now then same scenario but this time ABC is a regulated company holding client money and each trader is segregated, again clearing Fortis and again they go down with £ 1 million losses. This time the clients have some measure of protection but only in so far as ABC has to make good the losses to the segregated traders to the balance sheet of the company (ABC) and this will take time for FSA to sort out, in the meantime your money is untouchable. Let’s say after the sale of all the assets there is still a loss but the traders are able to recover £ 0.60 in the pound. This is what happened at Griffin. Again none of the traders at ABC will have any recourse to Fortis whose sole responsibility is to make sure the failure of ABC does not effect any of their other customers.
The basics are this, make sure you only sign up to an FSA registered company as this means the balance sheet and company structure meets minimum FSA standards, make sure the company has a good strong balance sheet as this is your only real protection and then remember the basic rule of economics, you get what you get what you pay for. If you want to go to a bucket shop with a poor balance sheet because it saves you £ 0 02 per lot commission then you probably deserve everything you get if they are one of the companies that fold.
There are more than a few trading rooms with very poor balance sheets and some that are not FSA registered but offer very cheap commissions and huge leverage, they will blow up sooner or latter.
fiftyfifty
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Ok, so segregated accounts may be overused and in alot of cases meaningless. My own experience with this would be a little different (small company renting space from bigger company - separate accounts with clearer and separate legal entities). Although I know this is not the norm and I'm still open to risk from people within my company, keep it small and trust them all implicitly.
Yep that would work as well, keep it to a tight knit trading group where you have complete control of the Risk, leverage and complete faith in the people you share the risk with.
As you have a direct clearing relationship with presumably a big balance sheet General Clearing member you have the security and more importantly you understand where the risks are.
As you have a direct clearing relationship with presumably a big balance sheet General Clearing member you have the security and more importantly you understand where the risks are.
charliechan
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in my experience no arcade has much in the way of memberships. they may clear via a gcm like fortis, but they dont have any clearing rights themselves. even kyte is only an executing member meaning they can not clear trades. i know someone else clears kytes trades.
personally, i looked at a load of arcades a while back. i realised they were all pretty much nickle and diming on everything - poor it staff, slaving bloombergs, cqg etc. i can get good/similar rates and good margins if i build a relationship with my clearing broker so why bother? my connectivity may not be as great using domestic broadband + back up, but i dont see speed to market as the golden nuget arcades do for 2 reasons: 1/ so many hedge funds opperate market making algos on boxes next to the exchange i could never be 1st in the queue, 2/ i use resting orders mostly in my style.
jmt
personally, i looked at a load of arcades a while back. i realised they were all pretty much nickle and diming on everything - poor it staff, slaving bloombergs, cqg etc. i can get good/similar rates and good margins if i build a relationship with my clearing broker so why bother? my connectivity may not be as great using domestic broadband + back up, but i dont see speed to market as the golden nuget arcades do for 2 reasons: 1/ so many hedge funds opperate market making algos on boxes next to the exchange i could never be 1st in the queue, 2/ i use resting orders mostly in my style.
jmt
CityTrader
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I am not sure what a half comm shop is?
They are a bit of a hybrid, they have backed traders, self financed traders & Oil, Metals and Equity brokerage desks.
They have two trading rooms at present, one in Old Jewry and one in Dublin although I have heard a rumour they are also opening one in Singapore.
They also offer remote access to self financed traders.
Commission rates are competative as any around.
They are a bit of a hybrid, they have backed traders, self financed traders & Oil, Metals and Equity brokerage desks.
They have two trading rooms at present, one in Old Jewry and one in Dublin although I have heard a rumour they are also opening one in Singapore.
They also offer remote access to self financed traders.
Commission rates are competative as any around.
MidasTouch1
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heard rumours of Xconnect taking over Elite too. Wouldnt this create the largest prop firms in the city ?
You are correct, I have heard that Elite and Xconnect are merging to form Xconnect Edge a new NCM on Eurex.
That means they have absorbed Atlas and Advance and have now joined forces with Jamie MacLeod of Mac Futures fame.
Aparrently more are to follow so watch this space.
That means they have absorbed Atlas and Advance and have now joined forces with Jamie MacLeod of Mac Futures fame.
Aparrently more are to follow so watch this space.
Directional
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wow thats pretty big news! keep us posted when you know more
This is the e-mail copy of the press release that is being circulated:-
Xconnect, Elite Derivatives Ltd and TTR (The Trading Room)
Xconnect and Jamie MacLeod are joining forces in Xconnect Edge to support the new generation of trading teams evolving in the derivative markets. The service levels and architecture now needed by customers, who themselves are competing in the tightest markets known, will be delivered by the combining of complimentary trading and business expertise in the new venture.
Significant changes have and are occurring in trading - floors and locals ceded to screens and trading teams; liquidity in some markets is dominated by grey and black boxes; and, market access costs are increasing dramatically. To reduce increasing cost pressure, Elite Derivatives Ltd, Xconnect, TTR and associated companies will be combining their volumes through Xconnect’s existing architecture.
Xconnect Edge’s core delivery will be the best trading architecture combined with the development of customers’ businesses. Thus trading architecture will be redefined at a higher level than the norm to include all of: on-site control of connections and servers; risk management; market information; compliance; hardware, software; IT support; clearing and settlement through a major bank; legal form and development of business for resale - if that is the wish.
This will be an exciting development for us and we look forward to joining with new partners
Xconnect, Elite Derivatives Ltd and TTR (The Trading Room)
Xconnect and Jamie MacLeod are joining forces in Xconnect Edge to support the new generation of trading teams evolving in the derivative markets. The service levels and architecture now needed by customers, who themselves are competing in the tightest markets known, will be delivered by the combining of complimentary trading and business expertise in the new venture.
Significant changes have and are occurring in trading - floors and locals ceded to screens and trading teams; liquidity in some markets is dominated by grey and black boxes; and, market access costs are increasing dramatically. To reduce increasing cost pressure, Elite Derivatives Ltd, Xconnect, TTR and associated companies will be combining their volumes through Xconnect’s existing architecture.
Xconnect Edge’s core delivery will be the best trading architecture combined with the development of customers’ businesses. Thus trading architecture will be redefined at a higher level than the norm to include all of: on-site control of connections and servers; risk management; market information; compliance; hardware, software; IT support; clearing and settlement through a major bank; legal form and development of business for resale - if that is the wish.
This will be an exciting development for us and we look forward to joining with new partners
