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To trade electronically at your own discretion in a centrally cleared market (I'm going to exclude OTC), you must have at least these 3 components:
(1) Clearing and settlement
(2) Order execution
(3) Data feed
Clearing and settlement: Only clearing members can clear a trade in a venue or its affiliated clearinghouse. However, it's expensive to become a clearing member. So, to access a clearinghouse, a trader usually has to have a client account agreement with a clearing member like directly or indirectly. A firm like GS or JPM is a clearing member, so if you have a futures client account with them, they can clear directly for you. There's also brokers who aren't clearing members, so they can clear for you through an arrangement they have with a clearing member.
Order execution: To place orders electronically at your own discretion, you would want your broker or clearing firm in the step above to provide you with direct market access. Most brokers provide this. But there's many different sub-categories of "direct market access". All retail brokers (that I know of) give a restricted form of direct market access where they carry out margin control and risk checks inline for their retail clients.
However, it's expensive for your broker provide the infrastructure for direct market access themselves. You need to host physical servers, manage network connections, monitor and manage risk checks, write software pass exchange-side testing requirements and so on. A 2-3 person introducing broker shop certainly won't have the software engineers to do this - generally, they outsource this to the clearing firm who may outsource it to someone else! And even a large broker like UBS may not have internal software expertise for this. On the other hand, there are smaller brokers like Lime Brokerage that provide their own infrastructure here.
So, many brokers like to outsource the order execution infrastructure to a vendor that writes order execution software - TT, Rithmic etc. are common examples of software providers whom brokers outsource their market access infrastructure to.
This gets even messier because it's also expensive for the order execution software provider to write their own market access infrastructure! Behind the scenes, a software provider like TT may outsource parts of their infrastructure to other vendors like Informatica, B2Bits or TIBCO and put the pieces together in whole white-labeled package.
Data feed: Just as a bank may provide both lending and checking services, a software provider may provide order execution, or market data, or both. If your broker does not provide their own order execution, chances are that they don't provide their own market data either...
To recap:
- There are companies that strictly provide market data only, like IQFeed.
- There are also companies that provide both order execution and market data, like Rithmic or TT.
- There are brokers that partner with a clearing firm like Dorman Trading, who further outsource to a firm like TT to provide market access infrastructure.
- There are brokers that are clearing members that also provide both order execution and market data, like Interactive Brokers.
This brings me to an unmentioned 4th piece, that is not absolutely necessary for direct electronic access, but most retail traders nevertheless require:
Interface: This is whatever you use to point-and-click (for discretionary traders) or write a program (for automated traders) against to place orders and receive market data. The interface may be bundled with the vendor that develops the data feed or order execution infrastructure, like Rithmic's R Trader, IB's TWS, or it may be a "vendor-neutral" (poor choice of word here, because it actually doesn't just hook up to every possible vendor - it just hooks up to a predetermined group of vendors) platform like Sierra Chart or NinjaTrader.
A retail trader may mix-and-match the above for his needs: NinjaTrader because he's used to its charting and point-and-click interface and TT for order execution because that's what his clearing firm provides, but also IQFeed for market data because there may be historical data needs that TT doesn't provide.
I try to figure out the post, but I still confuse about it.
I wish someone can lead me clear on this picture again.
I like to your help and guide for 2 examples as Market Delta platform and Ninjatrader platform.
Market Delta platform
1) At first, I shall own the broker which is under CQG partner and recognize by MarketDelta. For example, Philip capital.
2) After I open an account under broker Philip capital, I can subscribe MarketDelta platform (USD199/month) directly, is it?
3) On this case, my broker already owns their exchange market and data feed (CQG), thus I have no extra cost to subscribe any data feed, is it?
Please correct me, if I am wrong.
Thus, it should be broker Philip Capital (include exchange market and data feed) => Market Delta platform?
However, I face another question on Ninjatrader platform.
1) I saw Ninjatrader recommended Kinetick as data provider.
2) Can I know, does it mean I still have to go thru extra 1 more data provider as Kinetick? Or,
3) If I need only charting purpose, data analysis instead trade/execute in Ninjatrader platform, I can just buy Ninjatrader platform without broker but only subscribe Kinetick as my data provider, will do?
Please correct me, If I am wrong?
Or, it should be also own broker as Philip capital => Kinetick => Ninjatrader platform?
Please teach me
Thank you so much
Brokers do not act as data vendors, so data fees apply in most cases. However, I believe that MarketDelta Desktop does cover the CME fees in their subscription via CQG. I hope this helps.
Matt Z
Optimus Futures
There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.
Trading futures and options involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results. You may lose more than your initial investment. All posts are opinions and do not claim to be facts. Please conduct your own due diligence. Use only Risk capital when trading Futures.
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