Earlier this week prop firm FundingPips shuttered its futures trading arm FundingTicks.
There has been a lot of chatter about why that happened, but no one really seems to know why. We can try to guess.
The obvious point is that you would only shut a firm like this if the money coming in is less than the money going out. FundingTicks must have been loss-making and so they scrapped the firm, which is normal. In that sense, I don’t get why people are mad? It’s good to try new things as a business if you can, and although it sucks, you have to scrap them if they aren’t making money.
Anyway, some people have suggested a few reasons why FundingTicks may have been scrapped. The first is that FundingTicks was doing “ultra high discounts bro”.
The problem with this argument is that, even if it’s true, lots of other prop firms are doing discounts as well. Right now Blueberry is offering a 60% discount on its futures products, for example.
In fact, the discounts conversation in the prop space reminds me a lot of the b-book discussion in the broker industry. Everyone does it and yet for some reason everyone also acts like it’s really outrageous and unethical that someone else is doing it.
PipFarm have said that something like 95% of their challenge sales are on discounts and I would imagine it’s the same story for most other people.
To give an example, you can see what fees and terms FundingTicks was charging compared to some other providers.
| Account size | Monthly fee | Activation fee | Profit target | Drawdown limit | Profit split | |
| FundingTicks | $50k | $125 | $0 | 6% | 3% | 90% |
| Tradeify | $50k | $139 | $0 | 6% | 4% | 90% |
| MyFundedFutures | $50k | $77 | $0 | 6% | 4% | 90% |
This data was from July and so it could be that there were significant changes along the way. Nonetheless, this to me suggests that, if anything, FundingTicks was more cautious than peers.
For example, a tighter drawdown limit would make it more difficult to pass. If you also compare account size to monthly fee, the price they were charging was not abnormal.
Other people have suggested it was because of no activation fees. I don’t think that’s true either as lots of companies don’t have activation fees, something you can see in the table above.
So what did happen?
My guess – and it is a guess – is four things.
Firstly, FundingTicks offered a ‘Zero’ account that was a one off fee, versus the normal monthly fee that futures props charge. It’s plausible that these became much heavier loss makers due to market data fees that you don’t get in a CFD account.
The other factor is that FundingTicks did not have a minimum position hold time for futures trading. Every other firm I’ve seen that offers futures does not allow ‘tick scalping’ and forces you to hold for a set amount of time.
If you look back to December when FundingTicks changed its rules and then got booted from Prop Firm Match, this was one of the big notable changes that the firm made. Incidentally, a lot of people complained about this – which I get – but this rule change was really not that unusual.
This also ties in to the main theme of the year so far – gold. I am a total noob but even I have had fun over the last couple of months buying gold, holding for a very short period of time, then closing again.
My assumption is this would be very easy to do on FundingTicks as well, because there was no minimum holding time.
To top that off, you have the long and ongoing rally in gold, so presumably there were also a lot of people who could have sat in positions, taken profit, and then done the same thing all over again.
The final point is that I imagine futures are just not logistically as easy to offer as CFDs. You have more annoying infrastructure and data costs to deal with, you can’t manage pricing like you can with CFDs, and the process of moving someone to something akin to a live account seems even harder than it would be with a regular CFD offering.
To top that off, I think of futures and CFDs as kind of like the bizarro Jerry episode of Seinfeld. They are very similar but not the same. If you’re used to one, it may not be easy to do the other. I wouldn’t be surprised if that’s part of the reason FundingTicks crash landed before it ever took off.
