whether a proprietary trading firm needs be regulated by FCA in the UK or not?

icekb

Newbie
5 0
I am looking to setup a proprietary trading firm in London. anyone knows whether a proprietary trading firm needs FCA regulation in the UK or not?

And is the company allowed to recive any invests from the outside? For instance, my friend wants to invest my company (he's willing to buy my company's shares).

So many thanks, everyone. (y)
 

highbury fx

Well-known member
338 114
I am looking to setup a proprietary trading firm in London. anyone knows whether a proprietary trading firm needs FCA regulation in the UK or not?

And is the company allowed to recive any invests from the outside? For instance, my friend wants to invest my company (he's willing to buy my company's shares).

So many thanks, everyone. (y)

Hi Ice

If you are trading money that is invested in to your managed account program then you are carrying on a regulated activity and you will therefore need to be regulated.

You don't have to go to the FCA and apply for your own license, you can find a company that already has the permissions you require and ask them to 'umbrella' you.

Don't try and get Authorised Representative cover as the AR permission will not allow you to trade on a discretionary basis.

Brokers in the UK and the EU should not knowingly pay rebates to any unregulated introducer that is carrying out a regulated activity.

It's not difficult to get what you need although it isn't cheap either. Expect to pay around £1,000 to £2,000 per month for the FCA permissions from the umbrealla company and possibly a percentage of your broker rebate also (somewhere around 10% - 15% is normal)
 

icekb

Newbie
5 0
Hi Ice

If you are trading money that is invested in to your managed account program then you are carrying on a regulated activity and you will therefore need to be regulated.

You don't have to go to the FCA and apply for your own license, you can find a company that already has the permissions you require and ask them to 'umbrella' you.

Don't try and get Authorised Representative cover as the AR permission will not allow you to trade on a discretionary basis.

Brokers in the UK and the EU should not knowingly pay rebates to any unregulated introducer that is carrying out a regulated activity.

It's not difficult to get what you need although it isn't cheap either. Expect to pay around £1,000 to £2,000 per month for the FCA permissions from the umbrealla company and possibly a percentage of your broker rebate also (somewhere around 10% - 15% is normal)

Hi highbury,

So many thanks. Yes, it needs the FCA permissions to manage other people's money. But can I just set up a company with my investors (we are all the shareholders of that company) to trade without needing the permission?

Also if I need a umbrealla company, is there any information can help me to find one? So many many thanks.
 

highbury fx

Well-known member
338 114
Hi highbury,

So many thanks. Yes, it needs the FCA permissions to manage other people's money. But can I just set up a company with my investors (we are all the shareholders of that company) to trade without needing the permission?

Also if I need a umbrealla company, is there any information can help me to find one? So many many thanks.

you can set up a corporate account at any brokerage. They will want details of any person with a shareholding above 10%.

you will also need to supply your incorporation certificate, a company summary, mems and arts, and an authorised traders list.

They will also want details of the funding bank account. Your corporate trading account will only be able to be funded from a bank account with the same name. Withdrawals (should you ever make any!) will also need to go back to this account.

I don't really ever want to recommend anybody on T2W but if you PM me I'll point you in the right direction should you decide you do want to attract other peoples money and therefore require a regulators permission.
 

icekb

Newbie
5 0
you can set up a corporate account at any brokerage. They will want details of any person with a shareholding above 10%.

you will also need to supply your incorporation certificate, a company summary, mems and arts, and an authorised traders list.

They will also want details of the funding bank account. Your corporate trading account will only be able to be funded from a bank account with the same name. Withdrawals (should you ever make any!) will also need to go back to this account.

I don't really ever want to recommend anybody on T2W but if you PM me I'll point you in the right direction should you decide you do want to attract other peoples money and therefore require a regulators permission.

So many thanks, highbury. you are a star. I've PMed you. :)
 

Aston1st

Well-known member
271 35
Hi Ice

If you are trading money that is invested in to your managed account program then you are carrying on a regulated activity and you will therefore need to be regulated.

You don't have to go to the FCA and apply for your own license, you can find a company that already has the permissions you require and ask them to 'umbrella' you.

Don't try and get Authorised Representative cover as the AR permission will not allow you to trade on a discretionary basis.

Brokers in the UK and the EU should not knowingly pay rebates to any unregulated introducer that is carrying out a regulated activity.

It's not difficult to get what you need although it isn't cheap either. Expect to pay around £1,000 to £2,000 per month for the FCA permissions from the umbrealla company and possibly a percentage of your broker rebate also (somewhere around 10% - 15% is normal)

From what I read doing my regulation and financial conduct exams and reading the FCA website, I was under the impression that if I as an individual want to trade my own money then I do not need to be regulated. Like wise if I as a "Legal Person" i.e a company I as long as I set up a corporate account one doe'snt not require to be FCA regulated, as you are trading your own company's capital.

Like wise the rules on a joint partnership are not black and white, as provided they are trading their own capital it's purely proprietary.

Proprietary trading is technically exempt in most cases. Although I know in some cases such as Banks it is not.

I am open to stand corrected on this but would very much like to be pointed in the relevant paragraph and clause that refutes my understanding of the rules. Otherwise we are saying that to trading one's own account one must be regulated, whether one is an individual person, a partnership or limited company seeking to trade their capital only and not outside money.

Answers on a postcard please!
 

Aston1st

Well-known member
271 35
Reading from the FCA text the operative sentences for me would be :

" is that a person must hold himself out as making a market in the relevant specified investments or as being in the business of dealing in them, or he must regularly solicit members of the public with the purpose of inducing them to deal."

Then:

" Entering into a transaction relating to a contractually based investment is not regulated if the transaction is entered into by an unauthorised person and it takes place in either of the following circumstances (a transaction entered into by an authorised person would be caught). The first set of circumstances is where the person with whom the unauthorised person deals is either an authorised person or an exempt person who is acting in the course of a business comprising a regulated activity in relation to which he is exempt."

My understanding of the text is essentially, provided that one is not a Market maker or dealing in the regulated/specified activity on behalf of anyone else one is okay to trade as principle as long as it is with an authorised person.

May just give them a call though for belt and braces confirmation.
 
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Memento

Newbie
1 0
Did you manage to get an answer from them?
 

Trading Spaces

Well-known member
375 17
Start off with an Interactive Brokers friends and family account. You can link 15 sub accounts to it and trade them without having to be registered.
 

hhiusa

Senior member
2,687 139
Aren't there capital requirements? You have to have a certain amount of money before you are forced to file and be regulated. In the US, I believe it is $10,000,000.
 

Aston1st

Well-known member
271 35
Capital requirements are for companies that are holding clients money. If one is trading an account held with a regulated company authorised to hold client money the trader\Broker would not require it, although liability insurance would be needed.

I am happy to be corrected on this.
 

hhiusa

Senior member
2,687 139
Capital requirements are for companies that are holding clients money. If one is trading an account held with a regulated company authorised to hold client money the trader\Broker would not require it, although liability insurance would be needed.

I am happy to be corrected on this.

They require a large trader reporting form. I imagine it must be quite different in the UK. Nevermind then.
 

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ballsofgold

Junior member
27 0
there is too much misinfo on this thread

u dont need to register with fca for proprietary trading. if your friend wants to buy shares into the company then he is an owner like yourself

if you solicit funds for managed accounts, the investor still owns the managed account. putting trades into the managed account is an investment activity but the requirement to get registered as a regulated activity will depend on whether or not you are dealing with retail or sophisiticated clients. if you are tradihg funds from joe public, then yes. if you are trading a managed account for a sophisticated investor, then the threshold and requirements are less stringent. but then this is not proprietary trading.

dealing as a principle means you area dealer in the sense you are market making or taking the side of other peoples trades on your own account..this is not prop trading in the way you are asking. registration for dealing depends on the situation but in most cases will require registration

lastly, if you are prop trading and allocating company funds to other traders then yo u probably dont need to be registered...lbut if you are accepting deposits then you need to get registered....

it all depends.....
 
 
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