Hey @nithin
Just wanted to know an approach to help traders get funded, as i am creating a paper trading platform for traders to evaluate themselves by achieving a specified target and they lose the evaluation fee upon losing a specified drawdown, while we charge them only to evaluate as a tutor company and provide knowledgeful insights, and register myself as a AP where we provide funds in form of loans at 0% interest for skilled traders where as a company we bare a specified drawdown set for the traders as loss upon completion of evaluation, POA signed by both mutual parties and money sent directly to broker account with the withdrawal option held by an AP where the broker and i(AP) have mutual understanding about the same, i connect them with my broker to earn brokerage as well as demat account opening fees, where as a sub broker i will not be charging a penny on the loan nor profit sharing from the trader because the regulation does not allow as i will be needed to take RIA registration if charge them,
my question is will i still be in the grey area while executing this business
do i need any kind of registration to be done apart from an AP because i am not provide any direct buy/sell to traders nor am i trading on their behalf, we are just providing a knowledgeful journal about their trading history
do i need to register as a NBFC if i do provide loan in the companies name
can we have an option for an AP where he can convince the broker to set a certain amount as margin call or have his client to stop trading after a certain percentage of loss reached in their account with broker
Dark grey.
You can’t get into this like that POA or block people from withdrawing money to their accounts. Lending money as an AP is also not allowed by SEBI.
You will need NBFC to lend, but NBFC can’t lend money for F&O, intraday trading, etc.
A customer could request the broker, but it is hard for a broker today to customize this. The risk management rules are set at the overall level, so will be hard to customize unless it is a very small broker.
Maybe you can check this thread.
Thank you so much for your knowledgeable insights it truly feels like SEBI has a strict and thin line to protect its investors, and its there for a reason, flexibility in Indian stock markets are really hard, would have to find a legal and effective way to help skillful traders with kick starting their trading journey with access to capital apart from joining a prop firm or PMS which is again a tedious process for application in India,
My last question was, is there any other way where traders can access capital apart from personal loans or any credit related facility, as it brings a psychological effect on traders to pay out the loan as well as make a profit for living, which can make them to take wrong decisions in the process, because i believe Retail traders with good intent, profitability and who run its as business deserve a good investor who could back them up in a long run for mutual benefit.
Thanks again @nithin that was a quickest response from a CEO that i have ever received, which truly shows your dedication towards what you do.
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Folks with capital can hire retail traders to work for them. This is really the only way someone can access higher capital, apart from starting a cat 3 AIF (hedge fund) which I have mentioned in the post shared earlier.
I wanna go all in to solve this issue, so here’s a point of view or set of questions to conclude if this is feasible.
- @nithin (please do not worry we are not going to act based on your words)as you said “Folks with capital can hire”, can i just be a evaluation based paper trading company that connects traders to individual investors(aggregation company) upon passing the evaluation and charge 0rs from the profits they make but service for the evaluation as a tuition fee and a fixed service charge from the investor.
- as i read the HBJ capital investors case, formed an LLP and also charged money from the clients which will lead them to register as a cat3 AIF, so would our company start as a partnership company that does not directly deals with the traders instead just acts as an aggregation company to serve traders upon evaluation or which type of company formation would you suggest us.
- There is a bigger problem that i am trying to solve for n number of investors in my circle who do have interest investing in the CAT 3 AIF but the entry barrier itself is at least 1cr and The minimum size to start a fund is Rs 20 crores, where i am trying to make a way to investors who are okay to invest 50lakhs at a drawdown of 8-10% trading their individual demats and expect a return that of a highly skilled trader gives in an AIF. so this is a win win situations for both the efficient traders as well as the large number of investors. let me know if this feasible.
Have you checked out https://fundseeder.com/? They had built a platform where traders could plugin their trading accounts, and the platform created analytics on the account that investment managers could use to hire traders. The platform charged a fixed fee to the investment manager. Think of it almost like how a recruiting firm would work.
You are allowed to charge a fee to train people. You can charge HR consultancy fees to any investor or investment manager who hires a trader from whom you have trained. I don’t see any grey areas unless you are misselling.
I think, you have to think of yourself as a recruitment firm. Like how there are recruitment firms that help companies hire.
To be brutally honest, I think it is a bad business idea. Finding a good professional trader is extremely hard and the good ones with long enough track records usually already would have found ways to scale the trading capital.