Trading Arcades

[jersey10]

Reading in another thread i came across the term trading arcade. I have a few questions about trading arcades:

1. What are they?

2. How common are they? How many would exist throughout Australia?

3. Who would use them and why?

4. Why would someone set up a trading arcade? How would they make money from it?

 

[dead trader]

Investopedia says:
Trading Arcade

A slang term for an electronic trading facility where local investors can get together and trade for their own accounts. The arcade is often run by a member of a clearing organization, and has no physical trading area or pit.

The users of an arcade are referred to as "e-locals", because their trading activities are all electronically executed. Trading arcades are often large rooms with computer terminals and television sets everywhere, allowing traders to react quickly to news and enjoy the convenience of electronic trades.

 

[jersey10]

Investopedia says:
Trading Arcade

A slang term for an electronic trading facility where local investors can get together and trade for their own accounts. The arcade is often run by a member of a clearing organization, and has no physical trading area or pit.

The users of an arcade are referred to as "e-locals", because their trading activities are all electronically executed. Trading arcades are often large rooms with computer terminals and television sets everywhere, allowing traders to react quickly to news and enjoy the convenience of electronic trades.

Can anyone clarify

'a member of a clearing organisation' - who is this??

 

[korrupt_1]

Good questions jersey10. I'm also intrigued by this....

Is this like an internet cafe... but for trader geeks?

 

[MRC & Co]

This is a part of the trading world I am not completely familar with, as long as it is done, I am happy. Though I know some around here know this process very well.

They ensure transactions are cleared and settled. I.e. the conduct of traders, the contracts delivery and financing are all run according to plan.

Will ensure you have money in your account if you are up on the contract, or vice-versa if you are down. You won't have somebody default on you.

Look up a clearing house.

A member, no idea, somebody with legal qualifications to undertake the clearing process.

Can't imagine you would need to be a member to set up an arcade.

Basically, I believe (though I know of none personally), arcades are simply so a trader can be social, and bounce ideas etc off other traders. Costs you the desk fee to use that space. If you have the cash and are lonely, why not? Trading full-time can be fukced at times!

Yes, basically like a trader cafe.

 

[Nick Radge]

A trading arcade is quite different from a prop shop. A prop shop is looking for a return on capital and will allocate their funds across a portfolio of traders. They do not charge any fees to their traders nor do they make money from commissions.

An arcade is simply a facility allowing traders to access trading equipment. They are effectively acting as a broker that supplies desks, platforms, IT and research etc. They charge a monthly fee and also profit from commissions. They will usually not offer capital to traders and can dictate leverage levels according to experienced and capital injected.

Arcades are very popular on the US. There is one or two in Australia.

A clearing member is a member of an exchange who holds funds, administers trades with the exchange and their clients. Clearing firms in Australia tend to be larger operations but in the US smaller companies can clear a small amount of client business.

 

[MRC & Co]

Yeh, don't get prop confused with arcades.

I see though, a lot of US 'props' make their traders bring some of their own capital and charge them commissions..........

The line becoming hazy perhaps..........?

 

[James Austin]

for those interested in the prop shop concept,

http://link.brightcove.com/services/player/bcpid1488654888?bctid=1646075682

and this

http://www.smbtraining.com/

 

[RobinHood]

Thought I'd throw this question in. Can anyone confirm with me that Prop Shops are oriented towards short-term intra-day trading while IB prop desks are front running (other departments) and making longer-term macro calls?

 

[kenny]

Sorry about the Newbie question.

Does the term "prop" refer to "proprietary trading company"?

So are traders are employed to work the company's capital for a share of the profits?

Thanks,

Kenny

 

[RobinHood]

Does the term "prop" refer to "proprietary trading company"?

So are traders are employed to work the company's capital for a share of the profits?

Yes. That is the formal definition.

However, I find that in the US many "Proprietary" firms require you to put down an initial capital before trading and the line between arcade and proprietary gets blurry.

 

[rossw]

Thought I'd throw this question in. Can anyone confirm with me that Prop Shops are oriented towards short-term intra-day trading while IB prop desks are front running (other departments) and making longer-term macro calls?

all depends on the bank
they can day trade/position trade/whatever

front running is generally frowned upon by regulators (if caught)

 

[Naked shorts]

It seems like an interesting idea to get together with friends and trade in the same room.

10 eyes watching the market/news/chat rooms would be far more better then 2.

If an idea opened up, you wouldnt have to spend precious seconds typing it into a chat room. you would just yell at the top of your voice....

When the stock market closes you could all get drunk and smoke fine cigars..Am I being too optimistic?

 

[jersey10]

It seems like an interesting idea to get together with friends and trade in the same room.

10 eyes watching the market/news/chat rooms would be far more better then 2.

If an idea opened up, you wouldnt have to spend precious seconds typing it into a chat room. you would just yell at the top of your voice....

When the stock market closes you could all get drunk and smoke fine cigars..Am I being too optimistic?

NS,

Sounds great actually. If there was one in Brisbane i'd spend a bit of time there.

Out of interest, what would be the costs involved in setting up a trading arcade??

 

[MRC & Co]

NS,

Sounds great actually. If there was one in Brisbane i'd spend a bit of time there.

Out of interest, what would be the costs involved in setting up a trading arcade??

No idea costs. But to spend time there, you would need to pay the desk fee, which I would imagine, with the IT provided, would be quite expensive. Some of the great software is very very expensive for a small fish retail trader such as most of us. TT, CQG etc.

I imagine most would be trading different markets with different methods, sometimes guys long while other guys short even within the same market at the same time, so it's not like you would all be sitting around yellling out signals to eachother, though that does happen from what I have seen. lol, funny to watch.