Are prop firms just crap?

[random12345]

The headline article for me today (not sure if it's random per person or not) was this:

Trading Arcades

The timing of this piece was absolutely priceless given what happened to Refco less than 30 days later....

And the other prop firm in the article doesn't even exist any more. I hadn't heard of it to be honest.

If you're looking for a prop firm to work at, prepare to work for toads and/or extremely poor going concerns. Can anyone actually name a London based prop that anyone would dream of working for....? I'm happy to be contradicted here, however I can only name First New York and they don't even function as a traditional prop any more unless you've got about 50 million to buy in with. Their recruitment policy is the same as a top tier bank now.

Go to fkin school and qualify for top tier. Yeah you'll be wrapping fixed income shi*e for HSBC, but at least you'll have some money after 10 years.

 

[Liquid validity]

I doubt if you asked him today he would say the same thing.
Not really sure if its a good idea for T2W to be recycling time sensitive
articles from 8 years ago...

Even discounting what happened to Refco, prop shops
are going to have changed in 8 years.
Not that I'm talking from any personal experience.
Based on what you recently said about the accounts of that other shop
in another thread, they can't be the only ones in a similar position.

If you google it, he doesn't appear to be a prop trader anymore.

 

[random12345]

I doubt if you asked him today he would say the same thing.
Not really sure if its a good idea for T2W to be recycling time sensitive
articles from 8 years ago...

Even discounting what happened to Refco, prop shops
are going to have changed in 8 years.
Not that I'm talking from any personal experience.
Based on what you recently said about the accounts of that other shop
in another thread, they can't be the only ones in a similar position.

If you google it, he doesn't appear to be a prop trader anymore.

I'm just trying to establish whether prop firm's profit seeking motive is purely fantasy from a probability point of view. To me it seems like betting against the trend given their history.

I just can't name many - we know that Futex still exist, their accounts aren't in the public domain so I'm not sure how well they do. It seems like trading isn't just something of a pipe dream sham at retail level, but pretty much is at mid cap level too.... as far as I can tell.

I remain, inspirational.

 

[Liquid validity]

I'm just trying to establish whether prop firm's profit seeking motive is purely fantasy from a probability point of view. To me it seems like betting against the trend given their history.

I just can't name many - we know that Futex still exist, their accounts aren't in the public domain so I'm not sure how well they do. It seems like trading isn't just something of a pipe dream sham at retail level, but pretty much is at mid cap level too.... as far as I can tell.

I remain, inspirational.

The fact that the bloke who wrote that article
is no longer prop, and both firms he worked for went bust says a lot
in favour of what you say

 

[rsh01]

If you're looking for a prop firm to work at, prepare to work for toads and/or extremely poor going concerns.

surely to make that statement you either must have worked at ALL prop firms or know ppl who have worked at ALL prop firms.....


so do you?


the one i worked at was high vol rebate driven firm who cared more about your number of round turns than your profit.

there are others eg futex, apparently....which actually try & improve your skills. i cannot comment though cos i have never traded at futex.

you clearly know it all though.

 

[random12345]

surely to make that statement you either must have worked at ALL prop firms or know ppl who have worked at ALL prop firms.....


so do you?


the one i worked at was high vol rebate driven firm who cared more about your number of round turns than your profit.

there are others eg futex, apparently....which actually try & improve your skills. i cannot comment though cos i have never traded at futex.

you clearly know it all though.

By 'that' statement I assume you refer to the title, which was more of a question and I have asked to be found incorrect.

No I worked in IB and I know a few people from FNY. That's the sum of my exposure.

I am just wondering if people can name successful London based prop firms that turn both good desk fees and host profitable traders. That's all. It would be for the good of this particular board if I could be proven wrong no? I don't mind if I am... I just spent some time looking today and I couldn't find any. Maybe I was looking in the wrong places.

Is Futex the only one...?

 

[DionysusToast]

From what I know prop firms seem to have:

- lots of interns
- a fair amount of people keeping their heads above water
- a small amount of big hitters

That seems to be the model. I'm not sure if there's anything that could be done to increase the percentage of big hitters.

 

[Joules MM1]

I'm not sure if there's anything that could be done to increase the percentage of big hitters.

many have such about Lionel Messi ....it's the art-end of trading

 

[random12345]

From what I know prop firms seem to have:

- lots of interns
- a fair amount of people keeping their heads above water
- a small amount of big hitters

That seems to be the model. I'm not sure if there's anything that could be done to increase the percentage of big hitters.

Well that's what I thought, but then I considered the number of people I knew who had done well from props, the number of people who posted that their prop was doing well, any exposure in the likes of City AM and then other information I had to hand. I perhaps phrased my original post a little harshly, but having viewed Marex's accounts and then considered the overall success rate and longevity of prop firms in London, I don't think my hypothesis was unfair.

Now, considering Futex has a total exemption from audited accounts for all of their registered names, being a small company, what is happening to all these millions they're getting to dip into?

This is as far as I can tell of course, perhaps they have a holding company called something bizarre, except this isn't disclosed on their website no matter how hard I look, unfortunate because that's not technically abiding by the Companies Act 2006, but they're hardly alone on this.

 

[DionysusToast]

Most of these are small private firms.

Some of them are style specific and need traders pretty much just to execute, although we all know that this still takes a reasonable amount of skill. I'd imagine they have a higher hit-rate and that the payback for traders isn't as good. For sure, you will not hear much about what these operations are doing and some will last only as long as their methods hold.

Shops like Futex/Propex are a bit more generic and flexible in how their traders operate. Payback you would presume would be higher but as I never asked the split of the former, I can't really say.

 

[cablemonster]

one of the reasons prop firms are not doing so well is that barriers to entry have come down. Getting cheap round turns has been made possible by membership becoming much much cheaper. Just took at the cost of buying or leasing a seat on the CME and how it has fallen. Was chatting to an ex floor CME trader he was saying one of the reasons the seats are so much cheaper is that any floor edge has almost diminished away. In the 90's you would pay several 100 grand for a seat because it was a license to print money, much less so now.

 

[rawrschach]

Arguing that a firm has gone out of business means nothing.

Half the banks on the planet with a decent desk would be out of business today if it wasn't for QE.

Prop firms are crap if you're a crap trader, in which case a bank would be good for you cuz you get paid for being a tard.

 

[random12345]

Arguing that a firm has gone out of business means nothing.

Half the banks on the planet with a decent desk would be out of business today if it wasn't for QE.

Prop firms are crap if you're a crap trader, in which case a bank would be good for you cuz you get paid for being a tard.

You're mean

So you had an illustrious prop career or you're talking generally? Who with? As I said I'm trying to establish who is doing well these days outside of their brokerage services.

 

[rawrschach]

As far as prop firms themselves making money, the question isn't really relevant. As with banks, the people running the firm will make money regardless of whether the company makes money so once again going bust doesn't mean anything.

A trader could be knocking out 10s of millions a year but with a 90:10 split the firm isn't seeing much of it. They live on desk fees and commissions. They're glorified brokers that will give you a large amount of leverage and excellent execution at low cost.

 

[random12345]

As far as prop firms themselves making money, the question isn't really relevant. As with banks, the people running the firm will make money regardless of whether the company makes money so once again going bust doesn't mean anything.

A trader could be knocking out 10s of millions a year but with a 90:10 split the firm isn't seeing much of it. They live on desk fees and commissions. They're glorified brokers that will give you a large amount of leverage and excellent execution at low cost.

I disagree because say you did have 90:10 for top performing individuals (and less kind terms for the rest) who are earning millions (IGNORING all other sources of income, which is of course nonsense), you should easily hit 6.5 million in turnover and fail to get companies house exemptions as seemed liberally applied to the props I could search.

My point is basically that the prop sector in London is depressingly underwhelming and does that say anything about the difficulty of discretionary trading even more so than a few thousand busted retail accounts?

 

[tar]

FYI , take a look at these statements :

http://www.trade2win.com/boards/first-steps/166016-95-lose-6.html#post2068914

a quick google, the stats for Tuco were

206 traders

33 were profitable (16% of total)

7 had accounts > $50k in profits (3% of total)


So 26 people of those 33 were profitable, but not enough to make >50K a year, how many of those 26 would have eventually called it quits? i reckon most would have eventually found a better paying line of work..

 

[oshunt]

FYI , take a look at these statements :

http://www.trade2win.com/boards/first-steps/166016-95-lose-6.html#post2068914

that study was done in 2007, so its not 100% reliable, it does show however the good professional traders vs the traders who were just riding the bull. just saying.

 

[tar]

that study was done in 2007, so its not 100% reliable, it does show however the good professional traders vs the traders who were just riding the bull. just saying.

It just shows you that most traders lose including prop traders , i'm sure winners % will not change dramatically from 2007 to 2013 it even could be lower now because of low volatility ....

 

[cablemonster]

It just shows you that most traders lose including prop traders , i'm sure winners % will not change dramatically from 2007 to 2013 it even could be lower now because of low volatility ....

do you not think there is a touch of confirmation and/or survivorship bias when looking at the accounts of a prop firm that went into receivership?

just sayin