System Trading Blog

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Proprietary Companies in System Trading

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The fund to invest in system trading is not available yet (we are working to set up one later this year) and a DIY solution is too labor intensive to be practical.  A go-between is a proprietary trading company.

In many aspects proprietary trading company works as a fund. It pools investments from several investors and is managed pretty much the same way as any investment fund. However, it usually lacks custodian and corporate side of it gets managed more like an ordinary business company.

The advantages of proprietary trading company are apparent cost-effectiveness as compared to a fund structure while ensuring professional management.

Any established jurisdiction is suitable for incorporation of a proprietary trading company although registering the company offshore has the advantage of zero tax rate and low maintenance cost.  Malta, Jersey, Gibraltar, Singapore, Cayman Islands, BVI, U.S. Delaware are just a few to mention suitable domiciles for proprietary trading companies.

The cost of incorporation usually does not exceed USD 5000-10000 (compared to at least USD 50´000 for a fund launch). As well, the annual maintenance cost for a regulated fund may be as high as EUR 300´000. Proprietary trading company can achieve, effectively, the same goals at at fraction of cost (usually not exceeding EUR 25´000 per annum).

The procedure to launch the proprietary trading company is straightforward:

  1. Preparation of Private Placement Offering and incorporation documents.
  2. Incorportation of the Company.
  3. Opening of bank accounts.
  4. Opening of brokerage accounts.
  5. Start of operation.

The whole procedure may take take as little as a couple of weeks.

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Written by A.S.

February 1, 2011 at 3:21 pm

Posted in Uncategorized

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