So are the days of prop. leverage numbered and are all day trading accounts going to require 25K in them? Including those with B/D big time prop. firms. Securities traders need $25,000 on deposit in a retail broker dealer to be classified as a "pattern day trader" (PDT) account; which affords them leverage of 4/1 versus the default 2/1. Prop traders in BDs also need $25,000 to join these firms. Traders who lack $25,000 capital are enticed with offerings from sub-LLC prop trading firms (non-BDs); many of whom ask for deposits of $2,000 or $5,000. Notice the wording about this concept in the SEC enforcement action against Tuco below. SEC excerpt: "The defendants enticed traders with services unavailable at a registered broker-dealer. As alleged in the complaint, they allowed traders to day-trade without meeting the $25,000 minimum equity requirement under NASD regulations for such trading. The SEC's complaint also alleges that for each $1 in the trader's sub-account, Tuco and Frederick allowed the traders at Tuco to use up to $20 of Tuco's equity, which has been invested by other traders, to purchase securities (20:1 buying power). NASD and NYSE regulations, however, only allow a day-trader to have 4:1 buying power. " We have been pointing out for years that we felt that prop trading firms were trying to violate the 4/1 and 2/1 leverage rules of Reg T. See below.
Pray your wrong .... 90% of prop traders would not survive retail commissions, fee's, platforms etc etc... That would translate to the exchanges losing 30% of it's daily volume AND liquidity. Do you really think that's going to happen ? Especially in this economy where the fed is doing everything under the sun to keep the markets up.
Get your 7, if this is your profession it pays to have it, even if you choose not to use it. Bright, Echo, and the other registered firms are playing within the rules and are not going anywhere. As the SEC has repeatedly said, the unregistered firms are in their sights, as they should be. Been pretty obvious to the people that have been in the business a long time that they are circumventing the rules. Robert Green has been saying the sky is falling since like 2001, and when they made some rule change to how capital is treated in 2003 or whenever it was he was all over the place saying even B/D firms were done, and yet nothing at all changed. Not sure what his angle is saying all that, never looked into what he is selling, but so far Don Bright has been right and Green wrong, so I'm buying Don's take on it. Get your 7, stick to the licensed firms, and play within the rules if you are a full-time professional in this business and you will be fine.
On a side note: This whole situation pisses me off beyond belief. Fucking government telling me what I can and can not do with my $2000, $5000, $10,000, $25,000, $100,000 or even $1,000,000 MONEY. The US is getting fucking worse then socialist fucking Canada (where I live).
Anybody else having problems at another llc besides tuco. The one I'm with seems fine for now. I am just wondering if this action was specifically directed at tuco or is the sec about to drop the ball on all prop firms. Its a fact that these prop firms account for over 10% of total daily exchange volume. I just can't see the sec taking down everyone.
And if you can't do that (for various reasons) should you be denied a living ? It's all a crock of crap and just government sticking it's nose into private business. They are telling you it's for your own protection ... nonsense ! If they want to protect me what's next requiring a licence to gamble at a Casino?
did you read the summary in the complaint? they claim 10% of the funds were misplaced. (which i seriously doubt) so if you have a deposit of $5000 that is a hefty $500. now think about missing 5 trading days... what does that cost? ohh.. but they have to be protected.... from being enticed to make a good living. un........fkn........... real.
this is what i am wondering?? What is the right thing to do for a person that has been trading prop. Will prop trading as we know it be around in a year from now...or is it time to go retail??
After continued conversation with legal counsel, it is very obvious there is no way around this. LLC's are in clear voilation of these rules for broker dealers. I actually understand what is going on now. Capital deposits are no good. I would suggest getting your license and going going to work for Bright or a registered firm. This is not legal advice, just my opinion.