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Commission shopping w/brokerages

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  #31 (permalink)
NYC + NY / USA
 
Experience: Advanced
Platform: "I trade, therefore, I AM!"; Theme Song: "Atomic Dog!"
Trading: EMD, 6J, ZB
 
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Posts: 798 since Oct 2009


sixtyseven View Post
This grade school student needs more help to understand.

Assume a $50,000 total trading pot, with 1% risk ($500) on NQ with a 5 point SL. That requires $2,500 total margin @$500 per contract (minimum account balance of $2,500), and requires $10,000 @$2,000 per contract (minimum account balance of $10,000). Ok, I need to hold more funds in each broker account, and I could probably only fund 3 separate broker accounts, rather than say 15. But with $50k, that's probably ok.

With a $10k account balance I could get 5 contracts @$2,000 margin. With a $10k account balance I could get 20 contracts @$500 margin. But my total risk has gone from 1% ($500 per trade total risk) to 4% ($2,000 per trade total risk). This is what you are saying? Isn't that just poor risk mgmt?

perhaps someone closer to where you're at can properly explain what I shared,
what conclusions you drew were never suggested, nor implied,

do you have a trading group near you?, perhaps they can help, I certainly will not.

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  #32 (permalink)
NYC + NY / USA
 
Experience: Advanced
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kronie's Avatar
 
Posts: 798 since Oct 2009

what made and makes Mirus unique, is their use of technology to help manage system risk (read broker responsibility and obligations to the licensing authorities and their clearing agent)

what makes Mirus unique is their ability to offer competitive, technology driven risk management within their risk tolerances, hence the overall value that they offered in comparison to the other high margin (high expense / commission) brokers.

while I am not a representative of them, I have noticed that the interview process with the other firms mentioned on this and other threads, after this stupid Zenfire fiasco, were either way behind the curve and offered unattractive combinations (of rates and margins) or steep opening balances. When a firm requires steep balances, high margins and high commissions they are no longer competitive and seek a certain client / customer that is both low maintenance, low reward, low yielding and highly likely to being "porked" (stick a fork in them, they're done).

the broker / customer relationship is at odds with risk management. a little too much and you have excessive firm risk. a little too little and you have high margins, expenses and balances. a little too right and you have a competitive mix that allows for high yield (heavily traded) customer accounts with reasonable risk oversight (from the firm's management perspective).

being on the side of the business, a brokerage has to decide where on the scale their offering will place relative to their financial backing and ability to manage risk, lawsuits, failed customer accounts (and the necessary restitution process) and corporate obligations (financial statements of net worth and risk assets required by the exchange to be in business).

choose wisely.....because you too have to decide where on that scale you fit in...

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  #33 (permalink)
Market Wizard
Florida
 
Experience: Advanced
Platform: NinjaTrader 8
Trading: ES, NQ, CL
 
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Kronie - i get what your saying, but your still looking at this from the perspective of what you want from a broker. Your ideal broker will do XYZ, and it sounds like the way Mirus managed client risk best fit what you need from what is available in the marketplace.

Mirus day margin in ES was $500 or 12% of the overnight full margin rate ($4100)

AMP day margin for ES is $400 or 9.7% of full margin.

Several brokers spoke with last week were quoting 20% day margin rates, or around $1,000 for the ES

So is this the core issue, the 20% rate being imposed by many brokers ?

If you think about it, if your going to impose a 20% rate to dampen down client risk on your side (as a broker), then your going to have to ramp up the account balance to compensate in order to enable the client to trade more than 1 contract. So there is a mathematical relationship there between the three components (margin rate, account balance and contracts per trade). So from the brokers perspective its a min/max problem, they want to minimize their exposure to client risk (by imposing higher margin requirements) and at the same time want to maximize contracts traded by that client. On the other side of the table, the average retail client has a limited amount of working capital available to fund an account, so the broker must then balance their need / desire to minimize their risk against driving customers away and into the waiting arms of a more accommodative competitor.

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  #34 (permalink)
Legendary Market Wizard
Houston, TX
 
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Broker: Primary Advantage Futures. Also ED&F and Tradestation
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Clearing Brokers have to show capital reserves equal to an NFA mandated 8% of margin posted. So the greater the margin you have open, the greater the capital the broker needs to support your account. This is definitely calculated on an overnight basis but I don't know about an intra-day basis. This is why I have said before that a trader that carries no overnight risk should have lower commissions than a trader that trades the exact same volume but does have open positions overnight.

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  #35 (permalink)
New Zealand
 
 
Posts: 92 since Jun 2013
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I read somewhere on this forum that you are able to cut out the broker and go straight to the FCM to lower your commissions. I think someone posted that he was getting $1.00 RT all in cost with Dorman FCM?

Is this possible for a retail trader?

Thanks.

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  #36 (permalink)
NYC + NY / USA
 
Experience: Advanced
Platform: "I trade, therefore, I AM!"; Theme Song: "Atomic Dog!"
Trading: EMD, 6J, ZB
 
kronie's Avatar
 
Posts: 798 since Oct 2009


;385582
I read somewhere on this forum that you are able to cut out the broker and go straight to the FCM to lower your commissions. I think someone posted that he was getting $1.00 RT all in cost with Dorman FCM?

Is this possible for a retail trader?

Thanks.

just off the cuff @nourozi, in general, not everything offered domestic US, is available non-domestic US (i.e. overseas) accounts

in specific, you would have to be a corporation (again, speaking from the perspective of a US domestic entity), first, and then registered as a professional of some kind, in order for such direct access to a clearing merchant. the terms and conditions and legal staff required, both compliance officers of the corporation and other designated persons in an official capacity would have to be declared, licensed and provided to the FCM, upon application.

clearly, we are describing a business, not retail, relationship.

an alternative is to look into the CME non-floor access, Electronic (limited) member enrollment process. Upon achieving that status, (again, as a corporate US entity), you can present that / those credentials to your IB / FCM and receive all the benefits to which they're entitled (such as significant reduction in clearance costs).

tread carefully, there are significant costs involved in both, and they have nothing to do with per trade commissions.

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  #37 (permalink)
London, UK
 
Experience: Advanced
Platform: TT, CQG, esignal, TWS
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Hi Guys

In the UK most pro traders clear via 2 routes Marex or Kyte. You normally need around 25k deposit. Round trips start at 1 euro all in Eurex or $1.50ish CME. They typically charge a 250pm remote connection fee. >5000 RTs per month gets you lower rates.

Hope that helps someone.

Londonkid

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  #38 (permalink)
NYC + NY / USA
 
Experience: Advanced
Platform: "I trade, therefore, I AM!"; Theme Song: "Atomic Dog!"
Trading: EMD, 6J, ZB
 
kronie's Avatar
 
Posts: 798 since Oct 2009


londonkid View Post
Hi Guys

In the UK most pro traders clear via 2 routes Marex or Kyte. You normally need around 25k deposit. Round trips start at 1 euro all in Eurex or $1.50ish CME. They typically charge a 250pm remote connection fee. >5000 RTs per month gets you lower rates.

Hope that helps someone.

Londonkid

@londonkid

I buddy described the rates, terms and account types he had access to overseas, when he was stationed there. We both surmised that such favorable terms and account types were made as inducements to trade and increase of participation and broadening the base of potential and realized customers of these exchange products. So, yes, you will have access to things we in the states could only dream of....

hope you over trade your account!!!!!

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  #39 (permalink)
Sherman Oaks, CA / USA
 
 
Posts: 46 since Dec 2013
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Hi @nourozi,

This couldn't be possible because the exchange fees for each market is usually well over $1.00. You can find how much exchange fees actually costs on the CME website. For example I found that the mini S&P exchange fees alone are around $2.32. It would be impossible to be quoted $1.00 RT all in unless he's getting some kind of CME discount, which I doubt would even be reduced to $1.00RT. I'm sure if you call Dorman to ask and I wouldn't because I'd probably like to save face and not get laughed at, is if they offer commissions $1.00 ALL In including all fees. Please let me know if they do!


nourozi View Post
I read somewhere on this forum that you are able to cut out the broker and go straight to the FCM to lower your commissions. I think someone posted that he was getting $1.00 RT all in cost with Dorman FCM?

Is this possible for a retail trader?

Thanks.


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  #40 (permalink)
desert CA
 
Experience: Intermediate
Platform: NT7, TOS, CQG-trader
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