Any firms/brokers work with CTA's here?

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futurestrader's picture
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My trading partner and I are considering growing our business into an official CTA firm (Commodity Trading Advisor). For those not familiar with the CTA, it is a license/designation that allows a trader to place trades directly into clients' futures accounts; for sake of discussion, it's similar to a mutual fund where everyone's money is grouped together for trading purposes, but with the CTA, the money remains in separate accounts.Anyways, I was just curious if anyone here has worked with CTA's before and how the experience went. I'm just brainstorming here, but this type of relationship can be very lucrative for all parties involved if you find a good CTA that knows how to trade. For example, my trading partner and I are considering a setup where we would add $2 commission to each trade and take 20-30% of profits. In the futures biz, that little 2 bucks can add up rather quickly, along with the profit sharing feature. As a registered CTA we would be able to then pay referrals for new business that is generated. If you like the idea of annuitizing your biz with mutual funds, you haven't seen anything yet. Don't get me wrong, there are risks involved in futures trading and it's not for everyone or every client. But for those high net worth clients that could easily part with $50k and not flinch and for you to be able to offer a highly specialized niche product, could this type of setup work?I think it could be a great setup for the right broker, client and traders involved. The beauty of the futures markets is that we don't need to go out and try to accumulate millions and millions in assets as you guys do. We could literally do quite a bit with a few hundred thousand initially.Just looking for some feedback, that's all.Thanks!!

troll's picture
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Thanks, but I'll pass. I've already gotten all of my mistakes out of the way and want to keep it that way.

AllREIT's picture
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futurestrader wrote:In the futures biz, that little 2 bucks can add up
rather quickly, along with the profit sharing feature. As a registered
CTA we would be able to then pay referrals for new business that is
generated. If you like the idea of annuitizing your biz with mutual
funds, you haven't seen anything yet.

Given that futures are a zero sum game, what makes you better than the person with the offsetting position?

futurestrader's picture
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AllREIT wrote:futurestrader wrote:In the futures biz, that little 2 bucks can add up
rather quickly, along with the profit sharing feature. As a registered
CTA we would be able to then pay referrals for new business that is
generated. If you like the idea of annuitizing your biz with mutual
funds, you haven't seen anything yet.

Given that futures are a zero sum game, what makes you better than the person with the offsetting position?
Zero sum does not mean everyone comes out the same. Zero sum simply means when you are in profit, you take it from another person/bot. So someone with the offsetting position is of no importance to me until I sell or buy back my position.

futurestrader's picture
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For the number guys, here's some food for thought...Today's trading resulted in approx 10 ES points gross. At $50/pt = $500 gross per contract traded. If a client were to trade 10 contracts, that would be $5000 gross. 10 contracts could be traded on a $50,000 account w/o a problem. A nice 10% return GROSS today. With a 30% incentive fee = $1500 incentive fee to our firm and a % of that to the referring broker for the DAY. Today's trading resulted in 12 trades. At a $2.00 rip on commissions (little Boiler Room for you) that is $24/contract. On a 10 contract account, that's an additional $240 today.End results:To our firm: $1740, with a negotiated % to the referring broker.To the client: $2780 net = 5.5% net return assuming a $50k account and 10 contracts traded.Anyways, there's some serious potential here for a few brokers that might want to consider it. I understand that many cannot consider due to employment restrictions.And the question that should be asked - why bother doing this if you are so good at trading, right? Good question, glad you asked. Reason is that our goal is to be able to trade 1000-2000 contracts at a time. That takes some serious money behind those trades, whether own funds or OPM. The sooner we can get to 1000 contracts a clip, the sooner we can take the trading to a serious level. It's similar to the funds and private management you sell - the fund managers could trade just their own, but there's more leverage and ability when using OPM.

AllREIT's picture
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futurestrader wrote:
AllREIT wrote:futurestrader wrote:In the futures biz, that little 2 bucks can add up
rather quickly, along with the profit sharing feature. As a registered
CTA we would be able to then pay referrals for new business that is
generated. If you like the idea of annuitizing your biz with mutual
funds, you haven't seen anything yet.

Given that futures are a zero sum game, what makes you better than the person with the offsetting position?
Zero
sum does not mean everyone comes out the same. Zero sum simply means
when you are in profit, you take it from another person/bot. So someone
with the offsetting position is of no importance to me until I sell or
buy back my position.

You didn't answer the question. What makes you better than the person on the other side of the trade?

blarmston's picture
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Joined: 2005-02-26

And..... If you were truly better than that other person, how long until you decide to actually buy an internet ad on this site promoting your little company???

futurestrader's picture
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Joined: 2007-04-15

AllREIT wrote:
futurestrader wrote:
AllREIT wrote:futurestrader wrote:In the futures biz, that little 2 bucks can add up
rather quickly, along with the profit sharing feature. As a registered
CTA we would be able to then pay referrals for new business that is
generated. If you like the idea of annuitizing your biz with mutual
funds, you haven't seen anything yet.

Given that futures are a zero sum game, what makes you better than the person with the offsetting position?
Zero
sum does not mean everyone comes out the same. Zero sum simply means
when you are in profit, you take it from another person/bot. So someone
with the offsetting position is of no importance to me until I sell or
buy back my position.

You didn't answer the question. What makes you better than the person on the other side of the trade?
Our analysis. We look for inefficiencies in the futures market to exploit it for a few minutes. Most trades are approx 5-10 min's long.

futurestrader's picture
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blarmston wrote:And..... If you were truly better than that other person, how long until you decide to actually buy an internet ad on this site promoting your little company???No need for those type of ads. I just wanted to see if there were any forward thinking firms/brokers that had worked directly with CTA's on this forum. They are out there, but are typically your higher, net-worth exclusive brokers. I wanted to see if there were any here willing to provide feedback. Once the CTA is established, we will simply report to Barclays and the other major tracking agencies. If things go as planned, attracting money should not be difficult. I was simply looking for a jumpstart with an aggressive broker or two as an idea.

blarmston's picture
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Good answer. The best of luck to you and your endeavors...

FreeLunch's picture
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Joined: 2007-06-16

HEY ALLREIT
WHAT IS IT THAT YOU EXPECT EVERYONE TO DO?
Write you a frieking essay and trying to convince you that they are specialized in there area?
LET ME ASK YOU A QUESTION?
What makes you worth a damn?  What makes you any better than the next guy??
FUTURESTRADER......If ALLREIT doesn't understand it, he doesn't believe you can be better.
Heres a thought for you ALLREIT.  "Nobody can teach you everything, but everyone can teach you something"
Take your Headphones off - YOU'RE YELLING!

futurestrader's picture
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Joined: 2007-04-15

You guys are funny. How I miss the banter on this site. I was a frequent visitor/contributor here when I was a broker and thought I'd see what kind of feedback I could get on a CTA biz.It's cool, I expected some to discount what I am doing here, but you never know unless you ask, right? Always Be Closing. Some things always stay with you, even if you leave the broker biz.I appreciate the feedback though and will try to visit every so often to see if there are other questions. Thanks guys and good selling!

ManagedMoney's picture
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futurestrader wrote:My trading partner and I are considering growing our business into an official CTA firm
I was a CTA for 12 years.  You sound as if you have no clue about anything involved in being a CTA...and that includes the actual trading of the markets and the fees charged.  For your information, no CTA is ever paid commissions.  CTAs charge fees only. (incentive fee and management fee)Furthermore, in order to be a CTA you have to have a Disclosure Document, and that document must include your actual and audited performance history.You also going to have to have a trading system that is NOT based on discretion.  Nobody in their right mind will ever give you a single penny to manage if you tell them that you trade based on your gut.Good luck.

ManagedMoney's picture
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AllREIT wrote:
Given that futures are a zero sum game, what makes you better than the person with the offsetting position?
It's incorrect to say that futures is a zero sum game, because there are lots of expenses associated with each trade.

futurestrader's picture
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ManagedMoney wrote:
futurestrader wrote:My trading partner and I are considering growing our business into an official CTA firm
I was a CTA for 12 years.  You sound as if you have no clue about anything involved in being a CTA...and that includes the actual trading of the markets and the fees charged.  For your information, no CTA is ever paid commissions.  CTAs charge fees only. (incentive fee and management fee)Furthermore, in order to be a CTA you have to have a Disclosure Document, and that document must include your actual and audited performance history.You also going to have to have a trading system that is NOT based on discretion.  Nobody in their right mind will ever give you a single penny to manage if you tell them that you trade based on your gut.Good luck.Well, I must say... your info may be a tad old. Not sure when you were a CTA, but here is current and correct info:

  • CTA's are allowed and able to charge a rip. This is how many make some nice income.
  • CTA's do not have to charge a management and/or incentive fee. We are considering just a profit sharing fee.
  • You can trade on discretion and as a matter of fact, many of the high performing CTA's reporting to Barclays are in fact discretionary.

So, like I said, no idea how long ago you were a CTA, but I am working with the NFA, CFTC and 2 of the larger clearing houses at the CME to get things setup properly.Thanks for the advice, but it is incorrect and outdated. Might want to go check those prospectuses you are handing out too!

futurestrader's picture
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ManagedMoney wrote:
AllREIT wrote:
Given that futures are a zero sum game, what makes you better than the person with the offsetting position?
It's incorrect to say that futures is a zero sum game, because there are lots of expenses associated with each trade.What are 'a lot' of expenses? 6 bucks round trip? A % of profits?Let's see... very low commissions and trader makes money as long as the client makes money. So, we are on the same team.... Unlike some of the products being sold at wirehouses every day.The hedge fund and CTA industry has the correct compensation model in place - you are paid if you make the client money. How many brokers would be out of business if they were paid this way?

FreeLunch's picture
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POKER IS A ZERO-SUM GAME.
I MEAN, WHAT MAKES THOSE GUYS ANY BETTER THAN ANYONE ELSE.
Doyle Brunson is wasting his time.....lol

FreeLunch's picture
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Hey Futures,
Just curious....that sounds really stressful.
Why do you want to do it?  You hooked & in love or what?

futurestrader's picture
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FreeLunch wrote:Hey Futures,
Just curious....that sounds really stressful.
Why do you want to do it?  You hooked & in love or what?You know, that's a great question Free.It is stressful, but I'm the kind of person that thrives on that. I'm very competitive and since futures are basically a human vs. human/bot game, I enjoy it. I enjoy the ability to make more money in a day than I did all month as a broker. When I resigned as a broker, I was averaging $20k net months and now that is nothing compared to the futures biz. Don't get me wrong, there's plenty of losing days, but it can be very rewarding financially for busting your ass. We are actually getting close to just trading the 9:15am EST - Noon EST hours as a full day can wear you down easily. I know that sounds nice - just 3 hours per day of work, but when you are popping 10-20 trades going for about 10 min's each trade, you have to be on your toes.There's stuff I miss about being a broker too, but I just got tired of selling mutual funds and annuities all day. It just wasn't rewarding for me anymore. I'll probably get tired of futures trading too, but each stop I just keep building that nest egg up. With futures trading though, I can trade as long as I have an internet connection. That is nice. As a broker, once you are out, you are out unless you want to come back at square one for some ungodly reason.

ManagedMoney's picture
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futurestrader wrote: Well, I must say... your info may be a tad old. Not sure when you were a CTA, but here is current and correct info:

  • CTA's are allowed and able to charge a rip. This is how many make some nice income.
  • CTA's do not have to charge a management and/or incentive fee. We are considering just a profit sharing fee.
  • You can trade on discretion and as a matter of fact, many of the high performing CTA's reporting to Barclays are in fact discretionary.

So, like I said, no idea how long ago you were a CTA, but I am working with the NFA, CFTC and 2 of the larger clearing houses at the CME to get things setup properly.Thanks for the advice, but it is incorrect and outdated. Might want to go check those prospectuses you are handing out too! CTAs don't hand out prospectuses.  They hand out Disclosure Documents.  Do you know the difference?I wasn't speaking about what was "allowed."  I was speaking about what actual professional CTAs do.Any CTA that has to make its money from commissions is a joke.  If you need the commissions, you would be a broker, not a CTA.  By charging commissions you have now created a huge conflict of interest, and you are subjecting yourself to big time risks of claims of churning. Any CTA that trades simply based on discretion is also a joke. I promise you that you will never have any serious money placed with you, if all you do is trade based on your gut.You also will never make money trading 5-10 minute moves.  Whatever profits you might make will be eaten up by slippage and commissions.  If you do not have a actual audited track record of trading serious money for at least 5 years, using a systematic approach, you're talking nothing but amateur hour.

futurestrader's picture
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ManagedMoney wrote:
futurestrader wrote: Well, I must say... your info may be a tad old. Not sure when you were a CTA, but here is current and correct info:

  • CTA's are allowed and able to charge a rip. This is how many make some nice income.
  • CTA's do not have to charge a management and/or incentive fee. We are considering just a profit sharing fee.
  • You can trade on discretion and as a matter of fact, many of the high performing CTA's reporting to Barclays are in fact discretionary.

So, like I said, no idea how long ago you were a CTA, but I am working with the NFA, CFTC and 2 of the larger clearing houses at the CME to get things setup properly.Thanks for the advice, but it is incorrect and outdated. Might want to go check those prospectuses you are handing out too! CTAs don't hand out prospectuses.  They hand out Disclosure Documents.  Do you know the difference?I wasn't speaking about what was "allowed."  I was speaking about what actual professional CTAs do.Any CTA that has to make its money from commissions is a joke.  If you need the commissions, you would be a broker, not a CTA.  By charging commissions you have now created a huge conflict of interest, and you are subjecting yourself to big time risks of claims of churning. Any CTA that trades simply based on discretion is also a joke. I promise you that you will never have any serious money placed with you, if all you do is trade based on your gut.You also will never make money trading 5-10 minute moves.  Whatever profits you might make will be eaten up by slippage and commissions.  If you do not have a actual audited track record of trading serious money for at least 5 years, using a systematic approach, you're talking nothing but amateur hour.Wow, hit a nerve with this guy I guess. I'd love to know how you just know that every 'professional' CTA out there does not charge a commission rip. Please share. Sorry you feel that a CTA that exercises discretion is a joke. You know what's a joke? Black boxes that always end up failing. I never said that I trade based on my gut either, you said that. We have very specific rules in place that are very difficult to code into computer code. But what's odd (and you failed to comment on) is why a good majority of the top performing CTA's classify themselves as DISCRETIONARY.... How does that work? Discretionary (which is open to interpretation to smarty) seems to be doing well over at Barclays.I won't make money taking trades for 5-10 mins? Ut oh, I better let my bank know that the money I have generated the past 2 years is not really mine apparently. SLIPPAGE ON THE ES? ARE YOU FREAKIN KIDDING ME? You obviously have NO CLUE how the ES trades. Come on now, give me something to work with here. Geeze. And commission concerns? I'm paying $2.92 ROUND TRIP for personal biz and we are looking at $6 ROUND TRIP for managed... Since ONE lousy tick on the ES is $12.50, you do the math. Do you even watch the US index futures? I mean really, your comments are totally off based, especially when talking about the most liquid US index e-mini futures contract - the S&P!Let me ask this almighty CTA - go ahead and post your website and link to the Barclays tracking index. I'd love to see how great and wonderful your performance is since obviously you know everything there is to know about CTA trading. Go ahead... I'll wait patiently. No excuses either, let's see the real deal show the amateur how it works.Anyways, it's been fun but off to bed here. I did not come here looking for advice on how to run my CTA biz, but thanks anyways misinformed. I appreciate the misinformation. Great chatting.

ManagedMoney's picture
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futurestrader wrote:Anyways, it's been fun but off to bed here. I did not come here looking for advice on how to run my CTA biz, ....um.....you don't have a CTA biz.  Remember?

ManagedMoney's picture
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futurestrader wrote:
And commission concerns? I'm paying $2.92 ROUND TRIP for personal biz and we are looking at $6 ROUND TRIP for managed... Since ONE lousy tick on the ES is $12.50, you do the math. Do you even watch the US index futures? I mean really, your comments are totally off based, especially when talking about the most liquid US index e-mini futures contract - the S&P!Yes, I watched every tick in real time of the S&P (and later, the E-mini after it was created) for 15 years....and yes...since your trading is going to be based on attempting to scalp 5-10 moves, then you're going to be a net loser after factoring in your commissions.You sound like just another self proclaimed hot shot kid, who thinks it's a big deal to try to scalp pennies out of the market.

futurestrader's picture
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Managed - well, thanks for ignoring my other questions. I see you just ignore the request to post a link to your CTA biz.You obviously are not getting this - I've traded futures full-time now for over 2 years. Most, as you know, blow out in months. We make money. Hence the reason for considering the CTA.I did not wake up last week and decide to trade futures for people. Are you that obtuse to understand this? I don't know how many more times I can try to explain this to you.The CTA biz is a new thing.Trading futures for profit is NOT.Just b/c you cannot trade futures and make money, does not mean others can't. Just b/c you think you know it all, does not mean you do. Again, let me see your results - give me your CTA website and link to the Barclays rankings for your CTA biz. If you are tearing it up, I will concede. It's that simple - just show me how good the multi-year, seasoned pro is doing. Hell, you might get some interest from guys here!Go ahead... I'll wait for the links so we can all have a look. If you ignore this request again, that's all I needed to know (along with everyone else here). You can talk a great game on an anonymous message board and now you've been called out - put up or shut up.

AllREIT's picture
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futurestrader wrote:Managed - well, thanks for ignoring my other
questions. I see you just ignore the request to post a link to your CTA
biz.You
obviously are not getting this - I've traded futures full-time now for
over 2 years. Most, as you know, blow out in months. We make money.
Hence the reason for considering the CTA.

http://en.wikipedia.org/wiki/Survival_analysis

Just because you made it this far, doesn't mean you won't blow up tommorow.
Quote:I did not wake up last week and decide to trade futures for
people. Are you that obtuse to understand this? I don't know how many
more times I can try to explain this to you.The CTA biz is a new thing.Trading futures for profit is NOT.Just b/c you cannot trade futures and make money, does not mean others can't.

What if he isn't as lucky as you are?

Quote:If you are tearing it up, I will concede. It's that simple -
just show me how good the multi-year, seasoned pro is doing. Hell, you
might get some interest from guys here!

http://en.wikipedia.org/wiki/Survivorship_bias

What ever happened to the records of those who failed and left the business?

Quote:If you ignore this request again, that's all I needed to know (along with everyone else here). You can talk a great game on an anonymous message board and now you've been called out - put up or shut up.

http://en.wikipedia.org/wiki/Overconfidence_effect

futurestrader's picture
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All - you are funny guy. Seriously, spend less time over at wiki and get on the phone and sell something.Everything you said can be said of just about ANY profession, incl brokers. Anyone can fail at any time, even after success initially. That's part of owning a biz.Now get on those phones already. Someone needs to watch your internet usage at work!

ManagedMoney's picture
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futurestrader wrote:You obviously are not getting this - I've traded futures full-time now for over 2 years. Most, as you know, blow out in months. We make money. Hence the reason for considering the CTA.
You've made money (I won't even bother to ask how much money) for two years and you think that's a big deal?  You're still dripping wet behind your ears.  You don't have a long enough real time track record to even qualify for a Disclosure Document.Ask any pro if they would be impressed with someone who claims to have been profitable after two years of trading, and see what their reaction would be.Tell you what....let m know how you've done AFTER you've completely blown up (and come back) at least twice....then I might take notice.

FreeLunch's picture
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HEY FUTURESTRADER.
I've been following these guys bashing your ideas.
Their opinions and criticism are completely irrelevant.  They do not understand the biz, and cannot truly understand how making money IS POSSIBLE.
That is why "Managed Money" lets other people manage it.
That is why AllReit trolls around trying to ask questions like "what makes you better, what seperates you, what makes YOu think you can do it."
By ALL MEANS futurestrader, if you can sling it, sling it.  The second you lose faith and conviction you need to jump ship as Conviction in a trade is 50%. 
But with all do respect, how valueable of feedback do you think you'll get talking with a bunch of Brokers?
I'm smelling what you're stepping in, but quit feeding their OCD.

FreeLunch's picture
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ManagedMoney wrote: You've made money (I won't even bother to ask how much money) for two years and you think that's a big deal?  You're still dripping wet behind your ears.  You don't have a long enough real time track record to even qualify for a Disclosure Document.Ask any pro if they would be impressed with someone who claims to have been profitable after two years of trading, and see what their reaction would be.Tell you what....let m know how you've done AFTER you've completely blown up (and come back) at least twice....then I might take notice.
Hey ManagedMoney,
last time I checked, If he can sell somebody on it then he can do it.  I feel sorry for you if you SPEND all your energy selling on returns.
You are making yourself look ridiculous.  Do you even have confidence in your own abilities?  Or do you wear a mask during appointments.

AllREIT's picture
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futurestrader wrote:All - you are funny guy. Seriously, spend less time over at wiki and get on the phone and sell something.Everything
you said can be said of just about ANY profession, incl brokers. Anyone
can fail at any time, even after success initially. That's part of
owning a biz.

There's a big difference between the risk of failure of a CTA and just about any other profession.

Look at whats happening to the mortgage desk at BSC. 40 quarters of
profitability for the Basic Credit strategies fund, one bad quarter
(20% drawdown) and they are out on thier asses.

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