Prop Shops in Australia

[CanOz]

How much capital would it take to open a Prop Trading Firm? Aside from any regulatory costs which may be country specific...

So you'd need some office furniture and hardware - 100k
A rental contract - 50k
Recruitment - 20K
A few months worth of expenses - 20k
Trading capital - 100k per trader

Obviously a business plan would be needed but i am interested in any thoughts here from those with experience or ideas?

 

[Trembling Hand]

and just in general what instruments does Propex mostly trade or allow/teach to trade for that matter.. equities, futures, forex, currency futures, indexes, bonds? i remember someone mentioned that you can choose any instrument you want, does that mean they allow and can teach you any of them?

thanks in advance

You would have to trade the FX futures not the spot market. They have no infrastructure for that. And their training program is based around bonds.

How much capital would it take to open a Prop Trading Firm? Aside from any regulatory costs which may be country specific...

So you'd need some office furniture and hardware - 100k
A rental contract - 50k
Recruitment - 20K
A few months worth of expenses - 20k
Trading capital - 100k per trader

Obviously a business plan would be needed but i am interested in any thoughts here from those with experience or ideas?

Nah you would need way more than that to do it properly. What happens when you have 10 traders and 4 of them go into a 30g drawdown each and still want to trade the same size? Cut them back to 5 lots and they all walk. Your two top traders want to move 40-50 lots (there is a mil capital just to cover them) and go on a 90/10 split so even though they are killing it you are only getting the crumbs. You could probably bring in some money in ways that help out but when your traders are taking most of the profit its hard to sell the remaining return with all the risk to investors. (though I do have some ideas)

How you going to pay the office manager, risk guys and IT their wages for the first 9 years that you don't make money?

If you are going to go down the line of proper risk infrastructure with TT/CQG you are looking at way more $'s for set up.

You are probably going to have to chew a fair amount in legals setup as well, depending on what country you are doing it in.

 

[CanOz]

You would have to trade the FX futures not the spot market. They have no infrastructure for that. And their training program is based around bonds.



Nah you would need way more than that to do it properly. What happens when you have 10 traders and 4 of them go into a 30g drawdown each and still want to trade the same size? Cut them back to 5 lots and they all walk. Your two top traders want to move 40-50 lots (there is a mil capital just to cover them) and go on a 90/10 split so even though they are killing it you are only getting the crumbs. You could probably bring in some money in ways that help out but when your traders are taking most of the profit its hard to sell the remaining return with all the risk to investors. (though I do have some ideas)

How you going to pay the office manager, risk guys and IT their wages for the first 9 years that you don't make money?

If you are going to go down the line of proper risk infrastructure with TT/CQG you are looking at way more $'s for set up.

You are probably going to have to chew a fair amount in legals setup as well, depending on what country you are doing it in.

Well I had to ask didn't i!

So seriously, what would be the time that it takes to get profitable? 9 years is unacceptable. If you can't get profitable in three to four years then no one would ever try this.

So how Does one find partners that are interested in this?

Is this usually a thing that a few trading mates finally get around to doing after years of success themselves?

 

[TheUnknown]

9 years lol thats funny and 90/10 is a joke.

 

[Trembling Hand]

So seriously, what would be the time that it takes to get profitable? 9 years is unacceptable. If you can't get profitable in three to four years then no one would ever try this.

I'm just guessing but you could probably run it the same way you get stats on any system. Whats the Max drawdown and how long. Remember Prop shops trade traders as a system just like traders trade trades. For survival its basically the same.

So how Does one find partners that are interested in this?

Is this usually a thing that a few trading mates finally get around to doing after years of success themselves?

I think that's how most start. As to how to get OPM for a prop shop that's a discussion for off line.

90/10 is a joke.

Is it?

 

[TheUnknown]

I'm just guessing but you could probably run it the same way you get stats on any system. Whats the Max drawdown and how long. Remember Prop shops trade traders as a system just like traders trade trades. For survival its basically the same.



I think that's how most start. As to how to get OPM for a prop shop that's a discussion for off line.



Is it?

Well if i had a prop shop and trader wanted to gamble my money for a return of 10% while he keeps 90% i would tell em to jump.

 

[Trembling Hand]

Well if i had a prop shop and trader wanted to gamble my money for a return of 10% while he keeps 90% i would tell em to jump.

And you would end up with all the really really really good traders doing just that - jumping ship. You would lose your month in, month out, year after year profitable traders and be left with the cr@p. Where would that leave your biz?

 

[CanOz]

It's really all risk and return again. The most reliable less risky traders are going to return the least but most consistent profits. The most risky traders may return higher profits or higher losses but either way they're going to be less consistent until they become good enough to demand more of the share. I suspect that somewhere in the middle there will be traders that are developing and returning good profits before you give them more split. I'm starting to see the essence of managing the traders so you keep the best, get rid of the worst and make sure everyone gets paid fair but not too early.....very interesting.

Would there be some advantage in developing your own traders from scratch and binding then into a contract that optimises this progression towards less risk, less reward?

 

[TheUnknown]

And you would end up with all the really really really good traders doing just that - jumping ship. You would lose your month in, month out, year after year profitable traders and be left with the cr@p. Where would that leave your biz?

The way i see it is a good trader wouldn't even bother with a prop shop. whoever is going 90/10 is nuts IMO.

70/30
60/40

Sounds reasonable and thats for a REAL PRO that is consistant.

 

[CanOz]

The way i see it is a good trader wouldn't even bother with a prop shop. whoever is going 90/10 is nuts IMO.

70/30
60/40

Sounds reasonable and thats for a REAL PRO that is consistant.

The way I see it your lucky that a prop trader is even responding to your posts.

I'm trying to have a decent discussion with an experienced prop trader about a serious and very probable proposal and yet you keep interjecting with your uninformed opinions. Sit back, relax and learn something.

CanOz

 

[TheUnknown]

The way I see it your lucky that a prop trader is even responding to your posts.

I'm trying to have a decent discussion with an experienced prop trader about a serious and very probable proposal and yet you keep interjecting with your uninformed opinions. Sit back, relax and learn something.

CanOz

LOL

 

[CanOz]

I'm assuming allot of what the prop shops do to manage risk is also around determining what markets are traded. Perhaps it's less risky to have the new traders spreading bonds or trading equities. Use the gun traders directionally trading indices....when recruiting focus on x amount of trainees for spreading and hiring guns with track records for the stable. It may not look exactly like that but the strategy would have to consider these elements.

 

[Trembling Hand]

The way i see it is a good trader wouldn't even bother with a prop shop.

Yeah there is zero advantage we are all just crappy losers hoping one day to be a retail trader.

 

[skyQuake]

...hoping one day to be a retail trader.

LOL

Reaching for the stars I see

 

[fuzzz]

I don't think Propex has anyone trading FX, although I could be wrong as I don't work in the office and trade in my own little equity bubble. The main instruments are bonds and futures (indexes and commodities). And I think their new trader development courses would be centric around those. It would be surprising if they are able to teach you ANY instrument you choose... that seems impossible in terms of having the expertise available. However, if you are joining as an experienced trader and can over time demonstrate that you know what you are doing, they will probably let you trade most things.

All equity traders as far as I am aware trade on the ASX. I think there may be a guy or two doing ADR arbs etc.

Let see if aussiefx will respond to you more assuredly. Otherwise, take nothing from what I am saying and just email them yourself to find out.

Thanks for your reply SKC. And thanks to everyone who made this informative thread a great read that it is!

Just have a couple of more general questions if you don't mind..

When you started with them and were an already existing retail equities trader and i assume wanted to stick to the instrument you knew best, is that kind of what you did and just got a hold of them and told them of your preference and they just let you continue on with the equities, instead of trying to teach you commodities and indexes futures?

And also, through their system/broker, are you able to short ASX equities in your regular trading? Reason i ask is because my ozzy broker for ASX equities doesn't let me short and as far as i know a lot of them don't provide that service, unlike in US for example where its very common to short stocks.

 

[skc]

When you started with them and were an already existing retail equities trader and i assume wanted to stick to the instrument you knew best, is that kind of what you did and just got a hold of them and told them of your preference and they just let you continue on with the equities, instead of trying to teach you commodities and indexes futures?

Equities is a separate desk and there's no mixing between the two as far as I know. If you say you want to join as experienced equities trader, that's what you'd be trading. They'd give me some SPI limit to do the occassional hedging if I need it but that's as close to futrues as I'd get.

And also, through their system/broker, are you able to short ASX equities in your regular trading? Reason i ask is because my ozzy broker for ASX equities doesn't let me short and as far as i know a lot of them don't provide that service, unlike in US for example where its very common to short stocks.

Plenty of shorts available. It would not be a very good prop shop if you can't short. Aussie retail brokers are pretty limited in general, but things do improve on the insto side.

 

[fuzzz]

Thanks skc.. i am planning on getting a hold of them at the start of next year, just have some other commitments at the moment and want to build my trading record a bit more... will post and share my experience on here as i go along

 

[rb250660]

Here's an open ended question for you guys.

How much capital do they give new traders, say from beginner to experienced? Ball park...

 

[skc]

Here's an open ended question for you guys.

How much capital do they give new traders, say from beginner to experienced? Ball park...

https://www.aussiestockforums.com/f...=11988&page=13&p=787079&viewfull=1#post787079

 

[fiftyeight]

I am just learning/fluffing around at the moment, but IF I was to get serious and IF I was to be any good, what do Props look for in trading experience?

R:R
P&L
% Return
Draw down
X amount of years trading
Etc, etc .......

I assume a combination of all of the above, but is there anything more important and what kind of time frame will they be looking at, 6 months, 1 year, 2 years, 5 years of history?