what are the big size trading arcades?

[MJK]

Hi,

tons of information about London trading arcades here, really interesting stuff.
One interesting aspect for me is the "trading culture" of each arcade regarding clip size.
which arcades let you trade larger sizes (e.g. x000 lots per clip in the bunds or x00 dax lots with a drawdown of just a few ticks without any capital contribution, fully backed. Any information about this?

 

[Parky]

OK, this is an interesting point as leverage is as commercial as the round trips being charged.
Trading arcades have various attitudes to risk but the rule of thumb is usually the larger the leverage being offered to backed traders the more deficient their balance sheet and the more desperate they are for business. In direct correlation as a backed trader, the more you should worry about the security of your money. (Griffin for example)
However as your question is directed as a fully backed scenario, Prop shops would take a view on your clip size and leverage based on your history and performance. It is unlikely a "new" trader, even with a good track record, would get high leverage from day one.
Most Prop shops would want to get a feel for the trader’s style and attitude to risk before providing more bullets into the market.
There is not a direct answer to your question therefore as you would need to know the Prop shop concerned to gauge their attitude to risk, your trading history and your attitude to risk.
As with anything in life it is based on a "risk reward" correlation.

 

[MJK]

thanks for your input.
I agree in opinion that even if you have been profitable in the past theres no guarantee for further profits in the future. But I am not sure if big sizes have an effect on the financial stability of a proptrading company as long as you manage your stoploss limits. Basically, as a prop shop, I am interested in trading really big sizes to generate commissions or get another commission rate offered by their clearers for certain products. If you reached your daily stop - your out for the day. I read in another forum that there are "certain" companies, even smaller shops (in the US), that let you trade ANY SIZE you want in the futures markets without any capital contribution. As long as you manage your risk/return. So I do not agree that big size firms are more "in danger" regarding to any balance sheets - the opposite is the case.

 

[Parky]

The problem is there are no guarantees and I have not heard of anyone trading in such an unlimited fashion.
Stops are not nor can they be guaranteed they are by definition market orders but if there are no resting orders in the market then a stop loss or liquidation at market can and will result in a loss and obviously the bigger the size of position the more risk and the bigger the potential loss.
If you are at a prop shop with a balance sheet of £ 2 million (and there are some with less than that) with twenty traders then they would very reckless to be offering the type of packages you have indicated and any profitable traders at that house should be very worried.
Most clearers would offer leverage geared to the funds on the account so for example at a quality clearer offering 2-1 leverage your £ 2 million would get you £ 5 million intra day trading power, if the Bund is € 3,000 per lot initial margin (£ 2,047) that is a maximum intra day position of 2,442 lots divided by 20 traders. That is how it works.
I would like to hear of any Prop shops that do what you have indicated, if only to advise people not to go near them but as I have said the better the balance sheet and more proffessional the trading group then usually the more conservative and professional their attitude to risk.

 

[MJK]

where can i get such a balance sheet? are annual reports published anywhere? how to find out which arcade/shop is financially healthy or not? they all have professional office setups, bloombergs etc., but how to know if its a solid company with enough funds to survive the next years? thanks so far...

 

[Maverick74]

I have to agree with Parky here. I live in the US and run a regional office for my firm and being here in Chicago, the capital of prop shop land for futures, I can tell you no such deal exists. In fact, even if you do put up money and have a terrific 5 year track record, the odds of you trading size are still small.

This was not always the case. A few years back as money was rotating into futures and it became en vogue to prop trade futures, firms were bending over backwards to meet the demand. Unfortunately, the results were not good. Many of the prop shops folded with huge trading losses. Others quickly changed their tactics.

The ugly truth about it is, 90% to 95% of outright futures traders are never going to make a dime. The prop firms know this. Backing guys to trade with no edge is really the definition of insanity.

 

[cat eats pigeons]

how do you know ?

ypu dont BUT as a bit of a benchmark (for what its worth):-

look for stuff like

a) they are FSA regulated off their own back ;

b) they have been in existence for more than 24 months ;

c) they are members of exchanges ; so have an audit done ;

d) they dont mix client business with prop business ; also look out for the old hook ; deal is too good to be true .....i.e cost and massive splits ??? it just dont work , they fall by the wayside

e) they take time to get you in , not ask for a £15 K cheque as soon as you get out of the lift


Conclusion
I can only think of 3/4 firms like this ;

Kyte
Saxon Financials Ltd
Mac (now called marathon or something like that )

You can ask others ...........i am sure others can direct you ..........

 

[tommog]

A few observations from my experience

most arcades want their best traders to be doing decent size because this obviously makes them money. If you have proven yourself as a good trader plus you are going through a particularly good patch the company will give you rope. But if you aren't doing well or going through a bad time expect your trading sizes to be reduced until you find your feet. The trading sizes aren't black or white.

Also it depends on your style of trading, i know of people trading 50 lots thats are pulling in more money than guys trading '00 and '000 lots so consistency is far more valuable than big size.

Not sure how it works if you're an own account trader though

 

[Parky]

One other Very important factor, Balance sheet.
Don’t get blinded by segregation, segregation did not help traders at Griffin and that company was capitalised at over £ 4 million.
For the record, Segregation is designed to protect against parent failure i.e. a Barings scenario.
It does not help you if you are a trader and another trader, be it an individual or group, in the segregated pool blows up.
In that instance under the FSA rule the company has to make good the loss but can only do so to the balance sheet of the company after which you all loose money. (At Griffin I think the traders got £ 0.60 in the pound but only after the FSA spent 6 months sorting it out.) If the company you are with is not FSA registered they don’t even have to do that.
Imagine trying to go to another clearer and saying you will not have any money for six months and when you do you don’t know how much of your money you will get back?
If you are going to prop shop or trading room then ask about the balance sheet and ignore all diversions. If they say "ah yes but we are clearing Goldman’s/JP Morgan etc" that is good for them but offers you no real security. Your risk is with the outfit you join not the clearer they have signed up to.
Trading outfits with rubbish balance sheets (they appear to be a majority) will be the ones offering very low commission and/or very high leverage because they are desperate and are trying to cover up for the deficient balance sheet. Also by definition if they are offering high leverage they are taking high risk and so increasing the chances of a blow up.
To add to “Cats” list, STA and Xconnect are worth looking at.

 

[chinabean]

Its possible.....after time!

Do any of you get trader monthly? a few months back one of the guys at marex (you must of heard this) made about 700000 eur in about half and hour when he smashed the shatz during a trichet press conference. He hit it with his max size which was 25000 lots but I no doubt guess he has been there at least three of four years. I used to work for a prop firm in canary wharf and they used to give out reasonable size to traders that had been there for 3 years plus but not as big as that. I think the max size of the floor traders was about 8000 lots but and it is a big but, if you made it into the STIR room you got to trade decent size in euribor etc but these sizes are nothing really, I deal with one decent size hedge fund and just last week, two of their traders hit eurodollar with about 100000 lots between them plus also hit ssterling for about 20 each! but getting back to the point, if you prove you are good not just at making money but at making money with decent management of risk then most of it any firm with a decent balance sheet will back you to the hilt since, if you make money they make money too....its a simple equation. Agree with everyone else here though, you won't get massive size to begin with, it just won't happen since would you trust someone you didn't know with a significant amount of your own cash? just think even nick leeson had a 'seemingly' good track record before the earthquake that bent barings over backwards!!

 

[SCFX]

Do any of you get trader monthly? a few months back one of the guys at marex (you must of heard this) made about 700000 eur in about half and hour when he smashed the shatz during a trichet press conference. He hit it with his max size which was 25000 lots but I no doubt guess he has been there at least three of four years. I used to work for a prop firm in canary wharf and they used to give out reasonable size to traders that had been there for 3 years plus but not as big as that. I think the max size of the floor traders was about 8000 lots but and it is a big but, if you made it into the STIR room you got to trade decent size in euribor etc but these sizes are nothing really, I deal with one decent size hedge fund and just last week, two of their traders hit eurodollar with about 100000 lots between them plus also hit ssterling for about 20 each! but getting back to the point, if you prove you are good not just at making money but at making money with decent management of risk then most of it any firm with a decent balance sheet will back you to the hilt since, if you make money they make money too....its a simple equation. Agree with everyone else here though, you won't get massive size to begin with, it just won't happen since would you trust someone you didn't know with a significant amount of your own cash? just think even nick leeson had a 'seemingly' good track record before the earthquake that bent barings over backwards!!

Sorry for sounding petty, but N. Leeson was a donkey trader from day one to the VERY end. He was never profitable in his own words... amazing he ever got to where he was.

 

[chinabean]

Sorry for sounding petty, but N. Leeson was a donkey trader from day one to the VERY end. He was never profitable in his own words... amazing he ever got to where he was.

don't think you quite understood the meaning of 'seemingly'!!!!

 

[smccreedy]

Hi sorry if this is a little of topic but as there seems to be some knowledgable connected people around this thread I thought I'd but in.

I have just moved from spreadbet to direct access and have to say I've found it a lot easier to make money this way.

I trade purely near month FTSE Fut. I am trying to get a guage for how I'm doing as at some point I'd like to find an arcade or prop firm to approach.

Using 1 contract as the benchmark (£10pp on FTSE) how much would I have to make a week to be considered 'decent'.

Of course I know it's relative to drawdown etc but as a fairly low risk trader what would be considered 'good enough?'

My aim is to take 10 points per day off the FTSE and anything extra is a bonus.

This translates to around £470 per week profit after costs assuming around 15 trades a week to make this money.

This is on opening marging of £1138.

I know this is a very simplictic idea but am unsure what I should be aiming for.

Personally I want to make some steady money so £500 per week at the moment would be nice, when I feel I can handle the added ups and downs I'll double my size.

The reason I ask is that sometimes I read of traders making £1,000,000 in a year and then read they trade say 100 lots (£1000pp) and think to myself, so what? They took 20 points a week of the market, I could (and have) done that consistently over time.

In short I guess I am saying, if I can take 50 FTSE Fut points a week with low drawdown and a long track record would I be laughed at approaching a prop firm.

Many thanks for any input.

Stephen McCreedy