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Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,051 since Dec 2013
Thanks Given: 4,391
Thanks Received: 10,208
I know this is a very old thread, but I would like to add something to the 6 year old conversation.
I agree with the statement and would reiterate that there is a difference between exchange fees and clearing fees. I would also agree with the statement that in almost all cases member (exchange) rates are lower than non-member rates. There are a few very rare possible exceptions to that, but in reality the people who would qualify for the rare exceptions in almost all cases would be members!
So what are the exceptions? In certain circumstances you can negotiate a deal with the exchange to pay lower exchange fees. This is not easy to do, normally involves massive volumes and/or market making obligations. There are also times when the exchange will pay rebates on certain trades, normally when they are launching a new product. I gather that there are times when the rebate can be more than exchange fee, and as such you are effectively being paid to trade the product.
Transactions of at least 150,000 contracts per day would place a trader in the top tier, eligible for $0.45 rebates from the standard $0.55-per-contract member trading fee. Top rebates could exceed $16m annually, assuming a normal trading calendar.
Does using CME Direct for trading with a leased/purchased seat make any difference in order fills and slippage? I am trading on Tradestation currently and was wondering if I'd get faster fills and less slippage if I were trading on CME Direct with a leased seat.
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,051 since Dec 2013
Thanks Given: 4,391
Thanks Received: 10,208
Leasing a seat makes no difference to your execution, just your fees. Your orders are routed the same way.
With regards to CME Direct versus Tradestation I'm not sure. It's all about how your order is routed. I believe with Tradestation that your order goes to Florida for a credit check before going to Chicago. No idea with CME Direct. Either way your talking about milliseconds. I gather that CME Direct (aka "I wanna be WebICE") has become so popular that they are only rolling it out to institution/corporate clients and not retail traders.
There is a number of contracts per month one can easily compute where the tradeoff begins to make sense between the additional expense of the lease vs the per-trade cost savings. I think often times the subject is over complicated.
Actually leasing a seat can improve your execution especially once you start doing a lot of turns.
Your FCM will respect the hell out of you as well as anyone else you deal with in trading. I know quite a few seat holders from
back in the pits to when they shafted the pit traders. My point is that your FCM has multiple layers of servers and once a member you can
complain to the exchange about the fcm practices if you feel like you are being slowed down the exchange takes care of its members.
Now you can once you get to a certain level request what server your orders rest on or are sent to the book you can also work with them on risk checking etc
once you are a member and margins can be reduced as well now there was a lawsuit years ago that said seat hodlers do not have to pay for data so as a profesissional that
saves you some bucks per month and also they were told when the seats were going electronic that no one and i mean no one would have faster access than them! google it. now some have sued saying this was a lie but most of them just lost money faster so it was really a moot point but you will notice that a lot of your HFT firms were founed originally by seat owners and holders hmmm.
imagine that back door deals for speed for providing liquidity.. say it aint so citadel!! PENNY KENNY runs that shit.
You can never get rates as cheap as your exchange members however rates are absolutely negotiable as far as the commission.
Now one thing that most RETAIL traders in futures do not understand is that the expensive clearing fees vary by fcm so and many
brokers get a kick back from these clearing fees. see CME clearing member fees to understand what an actual clearing member pays to the exchange and you
can start to see the mark up on your clearing fees.
the clearing firm obvioulsy deserves to get paid for technology etc and covering risk properly hopefully but the most ridiculous costs are the exchange fees themselves especially
when we the traders make up the data they are selling and technology is DEFLATIONARY!! why every february are the fees going up!!! at the CME.
YOU can if you do enough volume and i mean a minimum of say 2500 turns or 5000 sides a month at 1 exchange aka cme, nymex, cbot all separate you can ask for
reduced fees from your clearing firm. but they will fight you on it of course and these are not deals that you publicise. if you get an amazing
rate then keep it to yourself and just state the online internet rate for your commissions.
You can ask your FCM for a special server or to have your own protocals reduced so your trades are fatr but again you will need to do a lot of trades to make it worth their while and they will ask for data aka your trade records because they want to make sure that if you are a risk that they get paid more. this does not mean you need to be a winning trader or have a great track record it just means you do a lot of trades and if you debit or go negative that you pay your fees.
Lastly, the commissions and fees in the MICROS are exorbitant but let me spin some truth. Before the micros you couldnt learn how to trade in futures!! hell i burned thru 60 K in a year trading the mini nasdaq and oil and i was still clueless! the mini contracts have an OK fee stucture.. just ok.. you can usually scratch with a tick and move on but not in the damn minis.. i pay more in fees and commissions than anythign else but let me spin some more knowledge to you.
SHow me a business where you do not have expenses?
if i said to you .. come trade with my firm.. i will charge you 2 dollars per trade but you will make 1 million dollars NET PROFIT and in the process you will pay me 2 million
then you actually had sales of 3 million dollars but you paid out 66% in fees and commissions so your NET take home was 1 million dollars.
If fees and commissions make the differencce between you being profitable and not then you are a scalper period!! so you are not day trading you are miro scalping!
when the range in the nasdaq daily is roughly 200 dollars or 100 points and you cannot live with a 1.50 commission then something is not right. I used to pay 25 bucks a lot over the phone!!! plus fees.. and terrible slippage and the time for the phones to ring hell they traded based on the sounds of the ringing phones thats all they knew what was up by how many phones were ringing!! ha ha
anyway sure you want to do well and reduce fees but all in good time. we all need to walk before we can run now a true story
i was over trading and doing badly in a sense that every penny and then some went to commissions n fees. my broker called me and said i have an idea for you
i said ok what.. he said i know this sounds crazy but i am going to raise your commissions.. i said are you nuts.. he said try it for a month and lets see how you do?
no joke.. i became patient i started picking my spots are started thinking about how much each trade was gonna cost i had to exit etc..where as before i was like well
i have a super low fee i will just trade my way out of this watch this members!! bam boom bam bomo oh by i just paid 15 dollars on 25 lots ! im winning nope..
i lost and lost and lost.. the higher fees slowed me down in a good way.
I DO NOT ADVOCATE HIGHER FEES but dont think lower fees wont make you trade less they will make you trade more!!! maybe a happy balance is just what YOU NEED.
Good night.
oh yeah one thing i also forgot to mention.
once you are a member and if you want to set up a server at the exchange guess what they give you? guess what the CME gives you!!!!!
access to the CME network engineers and wait for it.. access to the trade engine engineers so you can ask questions and see if you can particular order types and do certan things without it being illegal.. not kidding if you know the architecture of the cme well enough then that alone is enough to be hella profiatable from what i ahve been told.
it truly a speed race and it is a stacked deck against us all!!!
I HAVE ZERO SPECIAL PRIVILEDGES at any exchange all i have is my superior trading ability at times and luck and then other times
i have my superior ability to suck at trading so go figure.
2 steps forward 1 step back!!
ABI=always be improving.
p.s. how did i learn all this stuff?
I WENT TO THE CME website and read all of it it is all public knowledge you just have to really want to be better than your competition.. aka me and you are competitiors