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PROFESSIONAL or NON-PROFESSIONAL
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PROFESSIONAL or NON-PROFESSIONAL

  #1 (permalink)
Trading Apprentice
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PROFESSIONAL or NON-PROFESSIONAL

I want to ask - if you trade from home by Proprietary trading firm then PROFESSIONAL trader right? Or NON-PROFESSIONAL trader?

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  #2 (permalink)
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  #3 (permalink)
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Many ways to consider that..


but I think the best way is...Does this current position or role that I am in require registration with a self regulating organization or exchange? Is there a qualifying exam for those in my specific role? If yes, that is professional if no that is non-professional.

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  #4 (permalink)
Market Wizard
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Definition of professional and non-pro is different market to market but normally depends upon exchange membership. CME though recently changed their data fees and their definition of pro/non-pro as follows.
In order to qualify for Non-Professional status, all of the following criteria must be met by the Subscriber.
1) Existing industry standards
NON-PROFESSIONAL SUBSCRIBER - Any natural person whom a market data Distributor has
determined qualifies as a "Non-Professional Subscriber" and who is not:
(a) Registered or qualified with: the Securities and Exchange Commission, the Commodities
Futures Trading Commission, any state securities agency, any securities exchange or
association, or any commodities or futures contract market or association, nor
(b) Engaged as an "investment advisor" as that term is defined in Section 201(11) of the
Investment Advisor's Act of 1940 (whether or not registered or qualified under that Act),
nor
(c) Employed by a bank or another organization that is exempt from registration under
Federal and/or state securities laws to perform functions that would require him or her to
be so registered or qualified if he or she were to perform such functions for an
organization not so exempt.
2) Subscriber must be viewing the data via a device capable of routing orders to CME Globex and
have an active/capitalized futures account.
3) Subscriber must NOT hold or lease any type of membership at any of CME Groupís DCMs.
4) Any person who does meet the above criteria (1, 2 & 3) is considered a Professional Subscriber.
http://www.cmegroup.com/market-data/distributor/files/market-data-policy-changes-2014.pdf

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My understanding is that in order to qualify as a Non-Pro one must, among other things, be using the data to trade ones own individual funds for ones own individual trading account, going to criterion #2. Neither would be true for a prop trader, however, exchanges leave the final interpretation of Pro/Non-Pro questions to the (natural ) persons answering them and my understanding could be flawed.

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SMCJB View Post
Definition of professional and non-pro is different market to market but normally depends upon exchange membership. CME though recently changed their data fees and their definition of pro/non-pro as follows.
In order to qualify for Non-Professional status, all of the following criteria must be met by the Subscriber.
1) Existing industry standards
NON-PROFESSIONAL SUBSCRIBER - Any natural person whom a market data Distributor has
determined qualifies as a "Non-Professional Subscriber" and who is not:
(a) Registered or qualified with: the Securities and Exchange Commission, the Commodities
Futures Trading Commission, any state securities agency, any securities exchange or
association, or any commodities or futures contract market or association, nor
(b) Engaged as an "investment advisor" as that term is defined in Section 201(11) of the
Investment Advisor's Act of 1940 (whether or not registered or qualified under that Act),
nor
(c) Employed by a bank or another organization that is exempt from registration under
Federal and/or state securities laws to perform functions that would require him or her to
be so registered or qualified if he or she were to perform such functions for an
organization not so exempt.

2) Subscriber must be viewing the data via a device capable of routing orders to CME Globex and
have an active/capitalized futures account.
3) Subscriber must NOT hold or lease any type of membership at any of CME Groupís DCMs.
4) Any person who does meet the above criteria (1, 2 & 3) is considered a Professional Subscriber.
http://www.cmegroup.com/market-data/distributor/files/market-data-policy-changes-2014.pdf

Wondering if anyone has had any experience with the bolded section...

I work for a fund management company, i.e. the company is regulated outside of the US. Our company has delegated the investment management function of the funds to another investment manager. My function within the company pertains to operations, i.e. accounting, financial management, compliance, etc. I trade my own account and do not trade any OPM nor do I intend to do so.

As can be seen from the above, my work functions are not related to the managing of investments at all, and our prospectus clearly states that investment management is performed by a third party. The way I read the bolded section is that if I was performing investment management via the firm, and due to the firm being regulated I did not need to register with a regulatory authority due to the fact that the firm is registered then I would be a professional. Therefore a janitor working for a financial institution would be non-pro, but a fund manager would be pro.

Now, a while back I got a call from eSignal and was informed that I should be regarded as a professional since I work for a regulated financial firm and therefore pay professional fees. During that discussion eSignal was adamant that my work function does not matter, merely the fact that I work for the regulated firm. However, both Interactive Brokers and IQ Feed consider me as non-pro and of course I agree with them.

I am wondering whether anyone else encountered this issue and whether or not it was correctly resolved?

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  #7 (permalink)
Trading Apprentice
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Question on question

I would like to have a clear answer to this question as well.
For example if a trade gets funded through Top Step trader are they considered a professional? How would that affect the ability to get personal brokerage accounts in the future? How soon after a trader stopped trading funded money could they go back to "Non professional" status?
Great question it seems tricky to fully understand to me

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  #8 (permalink)
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CamNel View Post
I would like to have a clear answer to this question as well.
For example if a trade gets funded through Top Step trader are they considered a professional? How would that affect the ability to get personal brokerage accounts in the future? How soon after a trader stopped trading funded money could they go back to "Non professional" status?
Great question it seems tricky to fully understand to me

I am not a lawyer so I could very well be missing something...

With regards to being funded by TopStepTrader - if you are trading OPM you would generally be regarded as a professional. I would guess trading through TST means the same as trading OPM.

If you are a professional then it applies to all of your accounts (even personal brokerage accounts), since the NASDAQ rulebook (rule 7023 NASDAQ Stock Market) determines whether a person is professional or non-professional and not the accounts associated with that person.

I could find no mention of a "cooling-off period", thus I would assume that from the moment you no longer trade TST money, you are no longer professional.

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  #9 (permalink)
Market Wizard
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grausch View Post
You are right - a trader is either pro or non-pro. There is no distinction between personal or business accounts. NASDAQ rule 7023 (specifically 3(A)) applies in this case - http://nasdaq.cchwallstreet.com/nasdaq/main/nasdaq-equityrules/chp_1_1/chp_1_1_4...1_1_4_6_5_13/default.asp

Some further info with comments from a DTN rep can be found here: https://futures.io/elite-circle/30240-professional-vs-non-professional-trader.html and https://futures.io/traders-hideout/30300-professional-non-professional.html.

Just continuing this on a separate thread so as not to pollute too much @michaelleemoore's thread.

I don't think NASDAQ rules apply to the CME. As @SMCJB pointed out each exchange has its own definition.


Last edited by xplorer; September 16th, 2016 at 07:54 AM. Reason: correction
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  #10 (permalink)
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xplorer View Post
Just continuing this on a separate thread so as not to pollute too much @michaelleemoore's thread.

I don't think NASDAQ rules apply to the CME. As @SMCJB pointed out each exchange has its own definition.

Yeah, good idea. MLM's thread is used as a general conversation place, but this does tend to veer very off-topic. @bobwest, no wish to beat a dead horse and this will be my final post on the subject, but I believe that it is not as vague or ambiguous as discussed, but I agree with your conclusions - your broker or data provider will push to have you as a professional if there is any doubt on their side. They do get audited, but I am not sure what implications incorrect classification would have for them.

I used NASDAQ, since that it what I needed to contest in the past, however, the rules between the exchanges are not that different. CME rules can be found here - https://www.cmegroup.com/market-data/distributor/files/exhibit-a-to-schedule-4-non-pro-self-cert-form.pdf. To determine whether an individual is a professional, the following 3 areas are highlighted and they are essentially the same for the US exchanges:
  1. Registration with an exchange - in this case you are professional
  2. Managing OPM either as investment advisor or manager - you are a professional. Unless TST offers employment contracts to its traders, this will most likely mean that you are managing OPM and there an investment professional
  3. Working for a financial institution performing a function that would require you to be registered if you did this as an individual - Here the wording is quite different, but the idea behind this is that a professional trader / investment manager should not be able to hide his professional status by being employed by an institution. The CME wording may be different, and for a personal account, the subscriber would not "be acting on behalf of an institution", but I believe it would be argued that the person is a professional investor / trader and therefore does not meet the non-pro requirements.

Just my opinion, but I doubt that it would be possible to be professional for one exchange and not another, or have professional fees for one account and not another. These rules are aimed at the individual and not the use of the account - a professional golfer remains a professional golfer even if he plays tournaments with no payout. Thus, I believe that if you trade with TST, you are caught under point 2 above (unless TST offers you an employment contract or power of attorney, in which case point 3 applies). Since the individual is deemed a professional all of their subscriptions would be deemed professional.

In any case, when I was researching the NASDAQ rules in earnest, there was guidance around all of these issues, so I am assuming that the NASDAQ themselves are receiving a lot of queries on the matter.

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