How to Set Up a Stock Trading Company

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The main type of stock trading company that most people are familiar with is a hedge fund, where you take people's money and you invest it for them. These fell out of favor in 2008, when the credit crisis hit and many funds closed their doors. However, there will always be a need for people to have their money managed for them, so if you are considering opening up a fund, there are a few things you should know.

  • Register with a hedge fund start-up lawyer (see References). This will entail creating your legal business entity, creating a back office for accounting purposes, creating a marketing department and setting up a third-party to do due diligence on your stock-trading track record to make sure that there are no irregularities.

  • Establish a track record. This will require at least six months of detailed records of your trades being audited by a third party. Once you have established a winning record, you can then begin marketing to private investors.

  • Market the fund and recruit investors. Hedge funds are not allowed to market themselves to the general public. They are only allowed to market themselves in closed circles amongst accredited investors. An accredited investor is someone who has $1,000,000 in assets or has earned at least $200,000 a year for the past two years and expects to earn as much in the upcoming year. This means that a fund will usually need to hire a marketing department that has contacts in these circles.

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  • Photo Credit world trading image by Eray Haciosmanoglu from Fotolia.com
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