AI Magazine Issue 3 2017

44 Acquisition International - March 2017 Proprietary trading is making a comeback and Maverick Trading is leading the way according to the staff of Maverick Trading in a special article. Maverick Trading recently achieved the status of the Most Outstanding Proprietary Trading Firm, as part of the 2016 Global Excellence Awards. roprietary trading saw its pinnacle in the late 1990s, logically coinciding with that decade’s dot.com boom. Back then, the side-hustle du jour was to collect a little capital, open an online brokerage account, and trade during down time at a day job with visions of early retirement and champagne-fueled vacations. Everyone was making money. How hard could it be? Proprietary trading firms (or prop firms in the parlance) sprang up in all corners. Small and mid- size brokers who were previously struggling to attract high net worth clients in traditional brokerage relationships were re-branding themselves as prop firms, attracting retail traders with a modicum of capital and offering leverage and execution speed. Commission revenue poured in as day trading took off. Everyone was making money. Sadly, as with every bubble from tulip bulbs to flipping houses, the dot.com bust brutalised both the concept of a retail trader as well as the prop firms that built their business models on those traders. By some estimates, well over 90% of prop firms in operation in 2000 either closed their doors or transitioned back to boutique brokerage services. The concept of an everyman retail trader with a shot at beating the market returns was replaced with despair, ennui, and a return to traditional mutual fund investing. Not so with Maverick Trading. Indeed, Maverick Trading has not only survived, but thrived. Founded in 1997, the past 20 years has seen the firm grow from a local prop firm in Salt Lake City, Utah, with less than 10 traders, into a recognised powerhouse within the prop trading industry. As all its traders are remote, Maverick Trading has Company: Maverick Trading Name: Jon Frohlich Email: support@ mavericktrading.com Web: www.mavericktrading.com www.maverickfx.com Maverick Trading: The TopWinner in a Brutal Industry P 1703AI106 a global footprint with traders on all six populated continents. This allows the firm to source talent without geographic constraint and without the unnecessary expenses of brick-and-mortar locations. Maverick’s success and growth is directly attributable to its business model. Unlike traditional prop firms, Maverick Trading is not a broker-dealer. At first glance, this difference shouldn’t appear to be the driving force behind the firm’s success, but it directly drives the firm’s focus and structure. With cursory investigation, this difference in business model provides stark contrast between Maverick Trading and other prop firms. The reason that the vast majority of prop firms outside of Maverick are broker-dealers is that these firms receive commission rebates from the exchanges. The mere act of a trader at one of these firms executing a trade is a profit center. Consequently, the firms are motivated to force their traders to trade often and in volume. As the traditional firms are motivated by the revenue stream from commissions, this forces their traders to trade every day, often through mandated exchanges and in mandated companies. This immediately puts the traders at a disadvantage as some trading days are not conducive to a particular issue making a tradable move. When viewed from this aspect, an individual trader’s profitability takes a backseat to the commissions generated. Profits from the trade itself become a wholly secondary concern to the prop firm. In addition to business disadvantages traders endure at traditional prop firms, because the firms themselves are broker-dealers or hold seats on exchanges, traders are often required to undergo testing for either FINRA Series 7 or Series 56 licensure. One trader interviewed under the condition of anonymity stated bluntly, “This is solely a function of my firm being a broker. Let’s face it: a Series 7 is designed to keep a broker out of jail. Passing the Seven doesn’t make someone a good trader.” Maverick Trading stood the traditional business model on its head. By eschewing commission “We routinely get traders from other firms who come to us and are blown over by the extent of the training and support they receive.”