Comparing Proprietary Day Trading Firms

By: Matt Mc Dermott
If you are considering day trading stocks with a proprietary trading firm then you need to know some numbers before selecting a firm. Having these figures will help you evaluate what is the best firm for you in the big picture.
Regulatory and exam fees: Will you pay for these? If so, which licenses are required? If you need to acquire additional licenses, factor in how much time you need to spend studying in order to obtain the necessary licenses. Add a value of the amount of trading revenues you will not be able to gain due to studying and having to wait for all of the paperwork to be completed.
Daily minimums: Do you have to make a minimum number of trades per day/month? Or do you have to trade a minimum number of shares per day/month?
Percentage payout: What is the payout that you will get? Is the payout percentage after commissions and fees, or will fees be subtracted after your percentage?
Software fees: Do you have to pay for software fees? Or are your software fees waived with a minimum number of trades/shares per month?
Commissions, ECN fees, and borrowing fees: What is the commission rate you will be charged? Are ECN fees absorbed or charged/rebated? Will you be assessed any borrowing fees for leverage?
With these figures create a spreadsheet listing these values.

List the figures for each firm you are considering, and create some hypothetical scenarios for: Number of trades for the month Average number of shares per trade Number of trades/shares per day Average gross profit per day
Run the analysis and derive what would be your "most likely" scenario for take-home pay after all fees and percentage payouts are accounted. Then factor in the "intangibles" such as a mentoring program, success rates of current traders at the firm, geographic proximity, and which clearing firm(s) the firm uses. You might be surprised at which firms make the grade and which do not! Again, choose those firms which best suit your particular overall situation.

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