Imagine a race car driver driving a race car at high speeds with a broken speedometer. Nearly improbable in todayâ€™s world, but this is the day-to-day scenario at many of the Prop Trading Firms and Hedge Funds. Executions do happen at high frequency, but the actual accounting of various costs involved with a trade, especially profit/loss split between various parties within a trading firm are done in manual way, typically using a spreadsheet. They are very cumbersome, tough to track all the costs, there is generally a key man dependency when something goes wrong and often lead to discrepancies between trader and trading firm.
Many small to medium size trading firms typically spend anywhere from 1 to 3 months calculating their payout numbers. With each additional trader onboarding, the workloads get heavier for the accounting department. There are so many costs associated at various levels like per transaction charge including commission, CMTA charges for options, margin interest, short stock interest/rebate, etc., account level charges like profit sharing deals, net cap charges, etc., trader level charges like health insurance, seat charges, market data entitlement charges (aka below line expenses), etc.
For a firm setup in a hierarchical structure, which is the typical setup in many prop trading firms (like Trader, Trading Desk, Division, etc.) how does profit and loss flow from one level to another? To add to the complexity, some charges might be eaten up at one level or one can add a wig (like few basis points for margin interest on top of the clearing firm rate). These complexities begin to snowball making it tough/time consuming to deliver the payout details of trader on time.
Prime Plus automates the payout process with its elegant deal structures tied to various levels on a variety of data points to come up with the correct revenue and expense numbers. Prime Plus provides industry leading solution with Payout report ready on T+1 basis aggregated at various levels including Trader, Trading Desk, Division, Firm, etc. in user transparent way with drill down to details. With day-to-day view on their profit/loss, traders can focus on their trading rather than sending e-mails back and forth to the accounting department to finalize the payout. Firms/Trading Desks can analyze the pattern on revenue/cost identifying the rewarding resources while reducing the costs and make enlightened efforts to boost the firmâ€™s profitability.