Some like the one that contacted me with $500 margins for e-mini S&P as thier hook may have been around for awhile (or not) but do not have infrastructure.

I think some FCMs use other FCMs for clearing as well just to make it more confusing.

This one relied on third party software, offered limited documentation (which is why I bothered them so much), and limited customer support.

But my main concern the whole time was... this company is going to go bust with my money!

Again, sorry about your experiences. But there are some points to clarify. I'm not doing this to pick on you -- people new to futures trading often do not understand the ins and outs of the firms and their relationship to their customers, and this is an opportunity to help make some of the situation more clear to traders who aren't sure about what they are getting into.



Margins are up to the FCM, not the IB. In essence, an FCM is your broker and processes all your transactions and holds your money. An IB just finds customers for an FCM. Sometimes they provide additional services that the FCM does not. Generalizations are, as always, risky. Don't do business with someone you don't know anything about.

I am also sorry to tell you, but $500 margins, generally speaking, are insane, and a cause of customer losses because of the higher risk. IB's may push them, but they don't provide them. If they are pushing them, they're pushing the FCM's margins. Many FCM's offer them because of customer demand from new traders who don't understand risk. You may have been lured into starting an account by the IB based on the margins, but if you had contacted the FCM directly, they would have told you about the same margins, since they are the ones who set them.



Not exactly. It's a little complicated, but has no actual direct relevance to you as a trader.

There is a group of firms formally called "clearing firms," but you as a trader will never deal with them. Every FCM has a clearing broker and a few also are clearing brokers themselves. The clearing brokers are part of the basic infrastructure of the futures market. The term "clearing" is often used loosely (sometimes by FCM's or IB's). But it's a very specific function. https://www.cmegroup.com/company/membership/clearing/cme.html

A very few FCM's are also clearing brokers, but the roles are different. Here is a list of the clearing firms, and your FCM has a relationship to one of them, if they aren't one themselves. But you as a trader will never know or care: https://www.cmegroup.com/clearing/financial-and-regulatory-surveillance/clearing-firms.html

Yes, it's confusing.



Most FCM's use third party software (software development is a separate business and is not that easy), and most IB's just get you access to the software the FCM provides.



This may have been a legitimate concern based on your experience, but the IB never had your money in the first place. It was always with the FCM.

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This could go on and on. Bottom line: an IB's business is to get customers for one or more FCM's they represent. They get paid for it, which is built into the commission you pay, based on their deal with the FCM. An account opened directly with an FCM may or may not have different commissions.

If they provide something of value to you, that's great, and you should know about that going in, because it's basically the only reason you should have them open an account for you in the first place. Most FCM's will happily open the account directly, although not all of them will. Some FCM's are not that into providing customer service and some are. Some IB's are and some are not, either.

Although it is all confusing when you're new to it, it's actually pretty simple once you know a few basics.

Sorry to have gone on so long, but maybe some of this will help someone understand all this a little better.

Bob.

my advice to you is : try to read about risk management before trading.

Thanks for all the responses, but not sure I really got an answer. I am reading that I don't really need an IB unless they are offering something I need. I would love a few specifics of what that may be. I don't feel like I need a whole lot more than a basic charting system, a DOM and a feed. Tutorials are good, but I don't need an IB for that. I don't use a whole lot of signals on my charts other than the basics and I won't usually ask a broker for input on my trades, so I am kinda getting the feeling that I don't need an IB. Unless they can offer something else I am not seeing, hence the reason for the original question.

Thanks for all the responses, but not sure I really got an answer. I am reading that I don't really need an IB unless they are offering something I need. I would love a few specifics of what that may be. I don't feel like I need a whole lot more than a basic charting system, a DOM and a feed. Tutorials are good, but I don't need an IB for that. I don't use a whole lot of signals on my charts other than the basics and I won't usually ask a broker for input on my trades, so I am kinda getting the feeling that I don't need an IB. Unless they can offer something else I am not seeing, hence the reason for the original question.