Hello again, friends. The summer doldrums are soon coming to a close and markets will be back in full swing in a few weeks.
I was curious just how much volume drops during the summer months – not quite curious enough to do an intensive study, but still curious enough to take a quick peek at some numbers. I looked at NASDAQ volume and found that US equity volume dropped 23% from June to July this year, and 36% last year. That’s a pretty significant drop!
What does this mean? Nothing really, but to me it’s a reminder that the market – as vast and mechanical as it may seem – is indeed comprised of individuals.
Real people. People who need to recharge. People who go on vacation. People who probably choose all-inclusive resorts in Tulum, overindulge on nachos rather than real Mexican food, and don’t apply enough sunscreen. That’s the “omnipotent market” – thousands of these fallible, sunburned people.I’m smarter than these people – on the right day. And so are you! We can beat “the market.” Let’s go!
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Topstep is once again open for new traders!
Topstep has worked through their waiting list! That’s not surprising considering they’ve got the best customer service in the business. What is surprising is that they’ve kept prices at their insanely discounted levels – more than 75% off! This can’t last, so sign up with Topstep ASAP.
Prop trading and regulation
Regulatory intervention in the prop trading world is in the news recently due to comments by Trading Pit Cyprus CEO Daniela Egli. She told Finance Magnates, “we expect that at some point regulators will want to somehow impose some restrictions” on prop trading firms.
I think this topic is going to come up more and more as the prop trading universe is absolutely exploding. Every week there’s new prop firms in my inbox asking me to try them out – it seems like it’s getting out of hand. And as too many of us know, there’s a lot of bad actors in the prop trading world, especially amongst these newcomers..
The below board prop trading firms could certainly draw the attention of regulators, but technically there’s not a whole lot governments can do according to current financial laws.
For those who don’t know, prop trading firms are not regulated because, by definition, proprietary trading firms are trading their own money, not soliciting money from others. Most financial regulation is focused on firms that collect money from the public and then invest it or act as brokers. Since prop firms don’t do that, they can escape the oversight imposed on other market participants like mutual funds, brokerages, and banks.
That’s how the prop firms that actually provide real capital to their traders avoid regulation. And those firms like FTMO that keep their traders on demo accounts are technically just education companies, since they are not participating in the real market.
SInce prop firms operate in this gray area, it seems clear then that any regulation would have to spring from new laws that very specifically target this industry. So far I’ve heard of no such laws in the works, so any regulation would probably be several years down the line if not later.
That doesn’t mean regulators can’t have an impact on prop trading firms. Two recently failed prop firms met their demise after first encountering problems with regulators. Both Funding Talent and BluFX had issues with regulators that didn’t seem to understand the gray area that prop firms inhibit.
In BluFX’s case, the FCA – the UK’s financial regulatory agency – issued a very vague statement saying that BluFX “may be providing financial services or products in the UK without our authorisation.” As far as I know they weren’t operating any differently than other prop firms, but when you’re operating without clear guidelines, sometimes regulators push their way into the gray area and exact their will.
I think most prop firms that operate with integrity would welcome some common sense regulation to keep out the exploitative prop firms. But common sense isn’t always government’s forte.
Update on SurgeTrader
If you missed last week’s newsletter, I talked a lot about SurgeTrader. They’ve done some good things of late – charitable contributions, great giveaways, etc. – but a cynic might say it’s all smokescreen to drown out the allegations that the CEO’s husband was involved in a $35 million ponzi scheme.
The key question for those of us in the prop trading world is how those allegations and the fines paid out by CEO Jana Seaman and VALO Holdings – a “partner of SurgeTrader” – impact operations at SurgeTrader itself.
So far the answer is, not at all. All traders – at least those commenting in SurgeTrader’s discord channel – seemed to have received due payouts. Promotions, giveaways, contests, etc. are all happening as scheduled.
I opined last week that SurgeTrader probably just wanted this whole thing to quietly fade away, so they wouldn’t address the allegations directly. I wasn’t completely right. Although their socials have been silent on the matter, SurgeTrader did respond to questions on their Discord. Chris, from SurgeTrader’s customer service desk, said point blank, “SurgeTrader is not affected by any of the allegations and day to day operations are not affected.”
I still haven’t seen any direct responses from CEO Jana Seaman, and for better or worse she’s gone back to posting glamorous lifestyle reels on her instagram – diamonds, yachts and bikinis, which yield comments such as: “So prestigious them cheeks though (clap emoji).”
On the surface it seems like all is well and SurgeTrader has weathered the storm. We’ll know for sure in the coming weeks.
We can learn a lot from looking at prop firms that have failed in the past, such as Funding Talent. If SurgeTrader starts making drastic rule changes, eliminating some tradable assets, lagging in customer service responses, missing payouts, or suddenly having significant server issues, they might be in trouble.
So far, it’s been clear sailing. Stay tuned.
Another pretty quiet week, although there’s a Fed meeting with remarks by Fed Chairman Powell on Friday. There’s also new home sales being announced on Tuesday, plus jobless claims and durable goods data coming out on Thursday.
It will probably a pretty quiet week – maybe not such a bad week to get some sun and feast on some nachos in Tulum.
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