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That makes sense, thanks for sharing. For people new to futures, it creates a confusing mess. Separate data fees - all going to CME. Different "locations" - even though it is ultimately all CME in Chicago (exchange time for Crude is Eastern, but for mini S&P it is Central). Different settlement times for different exchanges, even though they all fall under CME umbrella.
You & I understand these nuances because we were around in the old days. But for new people, it can be frustrating for sure.
I’m fairly sure it has to do with the CME data policy for business. Currently there is a charge of $150/month no matter what the business is. A flower store opens up a trading account the CME charges $150 per month for data. To avoid this individuals do all kinds of account acrobatics. They put their business in a trust, now it’s free or they don’t sign up for data with their business account but sign up for data with an individual account.
I think it’s outrageous that the CME is allowed to charge 5x more for the same exact product. I’m also a non-pro 🍻. I’m not certain but I think the CME has their own definition of what is a professional trader. So basically it’s we don’t care what the IRS defines a professional trader (IRS is neutral) if you sweep the floor for the NYSE your a pro! FYI according to the IRS there’s no such thing as a professional trader. The qualifications are impossible to meet. Even if you think you meet one; you will be audited and you will lose.
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While I do agree with you, it's not just the CME. I work from home, and have my business registered to my home address. So I have people like AT&T and Comcast sending me personal offers, and offers for my business. They like the CME want to charge considerably more to the business for the same product. I'm sure there are other examples.
The CME's definition has nothing to do with the IRS's definition.
I'm not sure if this is what you mean by a professional trader but I have filed my taxes as a "Trader in Commodities" (which is basically the same as a "Trader in Securities") for over a decade. The first year I filed the IRS audited my expenses (but not my gains!) ~ I say audited, they requested additional documentation for every expense, which I could easily provide. Since then I've never heard from them again. The following is an excerpt from the notes at the end of my tax return
Taxpayer operated a trading business, in accordance with the definition below,
during tax year 2020. Considerable time spent every trading day, consistent and
frequent number of trades, and trading proceeds all support taxpayer's rising to the
level of conducting this activity as a business.
We excerpt IRS Publication 550, Chapter 4 - Special Rules for Traders Securities.
(See our added notes in parentheses).
Special rules apply if you are a trader in securities in the business of buying and
selling securities for your own account. To be engaged in business as a trader in
securities, you must meet all the following conditions. (Taxpayer met all the
following conditions for tax year 2020).
..You must seek to profit from daily market movements in the prices of securities
and not from dividends, interest, or capital appreciation.
..Your activity must be substantial.
..You must carry on the activity with continuity and regularity.
The following facts and circumstances should be considered in determining if your
activity is a securities trading business.
..Typical holding periods for securities bought and sold. (Taxpayer had very short
holding periods).
..The frequency and dollar amount of your trades during the year. (Taxpayer traded
frequently with lower dollar amounts - high turnover).
..The extent to which you pursue the activity to produce income for a livelihood.
(Taxpayer's intention is to earn a living from this trading business activity).
..The amount of time you devote to the activity. (Taxpayer spends a good part of
every day on this activity).
Yes, that’s exactly what I was referring to. I work from home trading as well. I asked my tax lawyer about write offs for professional status. What they told me I relayed back.
